In an inflationary climate with recession fears looming, it can sometimes feel a little like the world is coming to an end. Here are some ways to regain control, starting with your finances.
It’s a week after the Budget 2023 announcement, and despite the various grants, payouts, and vouchers, I couldn’t help feeling a tad concerned.
With prudence at the core of the budget planning, it looks like there’s going to be plenty of belt tightening.
After all, with global inflation at 9% at the end of 2022 and the IMF predicting that it is expected to fall to 6.6 percent in 2023 it is still a lot higher than pre-pandemic (2017–19) levels of about 3.5 percent.
With inflation bubbling at such heart stopping levels, needless to say practical money saving tips are in order.
1. Have regular money talks
Like physical health, financial wellness is something that most people have to work at, I imagine even for the wealthy.
Even if you’re on top of your finances, inflation and economic uncertainty are no doubt worrying, especially if you’re in the prime of your working years.
Looking back, I wished I had initiated more dinner conversations about money management, even if it isn’t exactly a hot topic in my family.
For instance, no one needs a health crisis to know how important health insurance can be.
Yet it wasn’t until a few years ago, when a family member started on dialysis, that I began to appreciate healthcare insurance. His policy covered almost entirely the costs of treatment, which easily ran into tens of thousands over the past few years.
In general, I find there are two camps when it comes to insurance - the under buyers and the over buyers. In a bid to understand why, some questions around my own insurance coverage came to my mind:
What are the core policies everyone should get?
Am I spending too much/too little on insurance?
How much should I be spending on insurance every month?
Are investment-linked plans (ILPs) necessary?
Tip: In case you're curious these are some of the questions that will be covered at this year’s Seedly Personal Finance Festival happening on 15 April 2023 at Suntec City Convention Centre. Hear from finance insiders at Singapore's largest personal finance festival and get all your burning questions answered!
Related to this topic:
Best Critical Illness Insurance Plans In Singapore (February 2023)
Money Confessions: 6 Singaporeans Share Just How Much Insurance Coverage They Have
2. Have a long-term plan for your savings
At the high rates of inflation we’re experiencing, surplus cash that is uninvested is by default, at risk of having its value eroded.
With companies look to “right-size”, setting aside a robust emergency fund of 6 months to a year’s worth of living expenses is prudent. Some folks, such as Steady Compounding founder Thomas Chua even go as far as setting two years’ worth.
If you’ve settled your emergency funds, well and good. The next question is usually where to park excess funds to make your cash work a wee bit (or a lot, depending on your risk appetite) harder.
Jamie Lee, Head of Financial Planning and Editorial, Endowus, reminds us that as we move into different phases of our lives, “the way we invest should be tailored to our changing financial needs and priorities – or what Endowus refers to as life-stage investing, or goals-based investing”.
"For example, individuals who are in their early 20s and 30s typically have lesser liabilities and have a longer runway when it comes to investing. They are, thus, at the perfect stage to think about long-term investments to kickstart their retirement planning and reap the benefits of compounding interest. They can tolerate riskier investments and maintain separate portfolios for their long and short term goals.
"At the mid-career stage, investors in their 40s-early 50s may be juggling responsibilities for their children and ageing parents. For them, it is important to build an emergency fund, while exploring options to fulfil short-term and long-term needs, such as mortgage, children’s education, and their retirement needs," Jamie says.
Related to this topic: Endowus 2023 Review: Investing Your Cash, CPF And SRS Money At Low Fees
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3. Get more from CDC vouchers
With $300 worth of CDC vouchers given out in 2023, you’ll be surprised that some people actually forgot to use the funds.
If you have trouble sticking to your budget, using only this stash of cash for your grocery run can be helpful. I find that it helps to create some buffer when I’ve forgotten to bring my credit or debit card out, or when I'm out during low-buy/no-buy days and needed to get something.
There are now seven supermarkets (up from five) that accept CDC vouchers:
Ang Mo Supermarket [NEW!]
U Stars Supermarket
More good news - if you’re carrying any of the grocery cards here, there are more savings in the form of cashback from your purchases.
Related to this topic: CDC Voucher Guide 2023: How to Redeem and Where To Use Your S$300 Vouchers
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Looking for the best credit cards to complement your spending patterns and expenditure in 2023? Check out our Ultimate Credit Card Guide that covers all things credit cards in Singapore – from choosing between a cashback, miles, or rewards credit card to planning your credit card strategy.
4. Start thinking about retirement
The thing about retirement is, it usually seems quite a distance away until it looms larger especially as we check off milestones like buying a home, getting married, having children etc.
Jamie says, “In retirement, investors should prioritise wealth preservation by focusing on lower-risk assets such as CPF savings, government bonds, and fixed deposits, while constantly reviewing their investments and recalibrating where necessary.”
With the popularity and ease of usage of roboadvisors and digital brokerages, DIY investing is unlikely to go away anytime soon. I wonder how many of us really keep track of our investments though? Unless you opted for an automated monthly RSP, there’s a chance that your investment portfolio may not have kept up with your needs.
If you have a fairly long investment horizon (more than 20 years), you may be curious about higher risk investment products, whether it’s ETFs, stocks, REITS, or even options. However, always be sure you fully understand the products before investing.
For those with a shorter investing horizon before retirement, it may be helpful to check if you need to rebalance your investment portfolio to accommodate your retirement needs.
5. Invest in yourself
Beyond upskilling yourself to stay relevant in your industry, if you believe in “health is wealth”, other forms of “investment” to make include:
Getting sufficient sleep
Scheduling self-care activities such as a massage or meditation
Catching up with your friends
Do something active for fun, such as a zumba class or a craft workshop
Plan a short getaway to recharge
Whatever your choice of activity, the point is to take a mental and physical break from your usual 9-6 routine. Despite the long hours we spend on and at work, our jobs aren’t everything.
Even if you enjoy your work and don't mind putting in the hours, pursuing a new activity can help to sharpen your focus. In author Cal Newport's Deep Work: Rules for Focused Success in a Distracted World, he studied accomplished individuals in various fields from creative industries to knowledge workers, and found that the time limit for producing deep, quality work was around four hours each day.
Something to think about the next time you're nodding off at your comp and still thinking of pulling another 18-hour work day...
Achieving your financial goals is an ongoing journey, and your goals will evolve as you progress through life stages. Setting up systems to help you stay consistent is one way to ensure you stay on track with your goals, but it’s important to remain flexible when things take longer to happen.
Start by building an emergency savings fund and get adequate protection against unforeseen developments such as illness or sudden job loss.
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