In a recent study conducted by Nielsen, it was reported that nearly two-thirds of Singaporeans share the optimistic belief of achieving their financial goals in the future. However, we all know life would be a whole lot simpler if survey optimism was an indicator of our financial destiny. The financial expectations and needs of Singaporeans at each stage of their life are variable, and a pro-active approach to managing these goals via a healthy savings and investment portfolio is the singular key to financial survival. We have to remember the fact that one-third of Singaporean respondents still felt that their financial boats are going to hit turbulent waters in the future.
There is no foolproof master plan for financial security that applies to every consumer; however, there are certain milestones that act as common stepping stones to financial empowerment for us all. Before we dig deeper into identifying some of these vital financial goals, let us first understand the 3 primary types of investment and saving strategies that dictate our choices:
|Short-term goals||6-12 months||Paying off a small personal loan, savings for minimal expenditure like school uniforms, gym memberships, etc.|
|Medium-term goals||1-5 years||Savings for home downpayments, car loans, etc.|
|Long-term goals||5-15 years||Paying your child’s college fees, retirement plans, moving to new country, etc.|
It’s essential to set your financial priorities straight as early as possible and make your money mature a lot faster than your age so that you can enjoy a comfortable future. Here are the 10 most important financial milestones every Singaporean should accomplish in order to do so:
1. Total Financial Independence
According to the present financial scenario, the children of Singaporean parents with average household incomes should not have much difficulty attaining financial independence by the age of 30. By this age, you should be well-settled into your career with all student loan debts cleared and a reasonable amount of savings.
Securing a fulfilling job with a handsome pay package is the foremost financial asset to look for in order to achieve this milestone.
2. Clean Credit History
The race to financial supremacy has claimed the souls of thousands of Singaporeans in the struggle against the credit monster. Living within your means must not be misconstrued for living miserably, and abusing your credit score early on in your life can create a lot of financial chaos later on.
By paying your credit card bills and loan repayments on time and avoiding all penalties and steep interest fees, you can solidify your credit score on the Central Credit Reference Information System (CCRIS). This will not only lower your financial burden, but also allow you to negotiate lower interest rates for major purchases like a car or a house.
3. Purchase Property
Property continues to be the most powerful and evergreen financial asset in the arsenal of Singaporeans. However, the process of buying one is immensely complex and the commitment to stick with this investment must be bulletproof. Your 30s are the ripest period of your life to make this big financial push and double down on a property purchase. By this time, you should have saved enough money to make a loan downpayment for your property and have a stable and steadily growing income to bank on for making future payments.
4. Abide By a Budget
There are few tools in the life of competent financial planners that are as effective as a monthly and yearly budget plan to keep them on course towards attaining their financial milestones. Whether it’s laying out the budget for your wedding or saving enough money to buy a PlayStation 4, a budget can help us sort our financial priorities with complete clarity.
5. Active Investment Style
Opening a simple savings account is definitely not the secret to Warren Buffet’s investment wizardry. With a plethora of avenues like mutual funds, equity, precious metals, forex, and many more to choose from, the idea of letting your wealth sit idle decaying in value over time is simply too irrational to digest. Even with a basic investment amount of S$1,000, you can generate a healthy profit over time. Your portfolio potential is only limited by your imagination, and of course, analytical skills.
Apart from buying low and selling high, good investors consistently rebalance and readjust their investments as needs and trends shift over the years.
6. Manage Your Taxes
We all know nothing in life is as certain as death and taxes; therefore, running away from the latter is as redundant as running away from the former. What you can do to improve your financial standing is to thoroughly study the tax policies in Singapore to identify the tax slab you fall under and claim the rebates and exemptions that can plug that hole in your wallet as much as possible.
Although big business owners do need to leverage professional help for corporate taxes, everyone should at least be able to manage their own personal income taxes.
7. Adequate Insurance Coverage
As a responsible adult, your job is to not just protect yourself financially, but also the lives of those you love. Hence, there must be no compromise on your part when it comes to reasonable insurance coverage by purchasing good policies related to life insurance, medical coverage, mortgage insurance, etc.
8. Give Your Retirement Savings a Head-Start
It is speculated that Singaporeans hoping for a comfortable retirement to transition into should ideally be saving at least one-third of their monthly salary from the age of 25 and onwards. However, making retirement plans at 30 is not too late either, as long as you properly take inflation into account and make investments specifically for retirement income purposes.
You should have two-third of your last drawn income every month after retirement if you don’t want to downgrade your lifestyle post-employment. Start saving now and increase your contributions when your income rises or when you have achieved more of your short-term financial goals.
9. Emergency Fund Allocation
Insurance is not the only net we can rely on to pick up the pieces in dire times, and having a back-up source of income to fortify your financial milestones in case of unforeseen circumstances such as losing your job, is essential. This is where emergency funds can save the day. It is recommended to stash at least 6-12 months worth your monthly salary in an emergency fund
If you earn a monthly salary of S$5,000, then you should ideally set aside at least S$30,000 in your emergency fund.
10. Calculate Your Net Worth
The term net worth isn’t solely limited to defining the fortunes of multi-billionaire CEOs in Forbes magazine. We all have a specific net worth that can instantly give us a clear and present picture perspective on our financial health. It can easily be calculated by summing up your total assets and subtracting your liabilities from that amount.
If your net worth turns out to be a positive number by the age of 30, that means your prosperity curve is on a promising path.