Want a healthier financial life but don’t know where to start? Here are our top 4 financial planning tips to use right now for better financial wellness at any age.
More and more women are taking charge of their financial lives, and we couldn't be happier!
But being in good financial health isn’t something that happens overnight. It takes knowledge, planning, and action to turn your financial goals into reality. So delay no more – here are our top financial planning tips which you can act on right now!
While these actions are best taken in your 20s to 30s to set a good foundation for future growth, it’s never too late to start – and it's always better to be late than to never get started.
Financial Planning Tip #1: Get Rid of Debt
It happens to the best of us. An unplanned spontaneous trip, a promised windfall that didn’t materialise, too many online shopping sprees – no matter the circumstance, you’ve somehow found yourself saddled with credit card balances that roll over month after month.
The problematic thing about debt is that it hurts us more in the long run, especially the longer we hold onto it (much like a bad relationship). Owing S$1,000 on a credit card debt may seem like a minor issue, but every day you hold on to that debt will only cause it to grow.
You may not notice this because most banks in Singapore stipulate a $50 minimum payment every month you have a balance. But at an average of 28% per annum, you’re incurring $23 in interest charges every month on your $1,000 balance. That means that out of the $50 you are paying, only $27 goes towards paying off your principal.
You can see how this can quickly be a massive drain on your finances, especially if you owe higher amounts across several credit cards.
The best thing to do here is to get rid of your debts as quickly as you can, so as to stop wasting money on bank interest charges. In this endeavour, you may find two common financial products useful – 0% balance transfers and low-interest personal instalment loans.
Read our guides for a detailed explanation of how to use these products to help you get rid of your debt once and for all, and then use our comparison tool to help you choose the most suitable plan.
Financial Planning Tip #2: Get Proper Insurance
Being a responsible adult also means being able to take care of your needs come rain or shine. Unless you’re an heiress, a trust fund baby, or any other sort of crazy rich Asian, this usually means getting the right insurance plans in place.
Now, don’t let your overzealous insurance agent friends scare you into spending all your disposable income on insurance, thereby turning you into a well-protected but unhappy girl. The key here is balance.
As a general rule, you can look to insurance to fulfil 3 key needs – protecting your earning potential, providing for your healthcare needs, and funding your retirement. As you can imagine, the first 2 are closely related: while you are in your financially active years, you don’t want unexpected illness or accidental injury to rob you of the opportunity to accrue more funds. The third need is self-explanatory.
Therefore, what you need to consider is a hospitalisation plan that covers the cost of medical care and hospitalisation, a health plan that pays out in case of accidents, critical illness, permanent disability and death, as well as some form of endowment or annuity plan to fund your retirement years.
What about a life plan? Well, to be blunt, a basic life plan pays out only upon your death, which means it’s more beneficial to your loved ones than to you. If leaving money behind for your loved ones is not an important priority, then a term life plan may be a more suitable option.
Having said that, many many insurers bundle life plans to include protection against illness, disability and other unfortunate circumstances. Talk to your insurance agent to find out if they can customise a plan for you.
One more thing, upgrade your Medishield Life basic plan so that you get an appropriate level of hospitalisation coverage. This is important because pregnancy can quickly exhaust your Medisave claim limits. With a Medishield Integrated Shield, you and your family can have more options. You should also consider using a pregnancy plan to take care of any emergencies or complications.
Financial Planning Tip #3: Start Investing
Here’s an important secret when it comes to growing your assets: How long you invest is more important than how much.
Consider the following example:
|Approximate returns on regular investment:|
$1,000 per year at 5% p.a.
|Investment period||Sum invested||Total with interest||Returns|
See how much more your returns increased in the last 10 years? That’s not magic – that's the power of compounding interest.
Investing needn’t mean playing the market or spending thousands of dollars at seminars trying to learn the secrets of top traders. With algorithms and machine learning, robo advisors have risen in popularity, and they make investing as simple as choosing a music playlist! Check out StashAway, AutoWealth, or OCBC RoboInvest for some of the more popular ones in the market. And of course, always remember to do your own due diligence.
Women tend to be intimidated by investing – even women who work in the financial industry and deal with personal finance on a daily basis. So if you feel the same way, know that you're not alone, and that there are tons of resources out there that can help you learn more about investing.
Never be afraid of taking the first step. Start small (StashAway allows you to invest from as low as S$100) and put aside a portion of your disposable income into the market every month. All you have to do next is let time do its magic – but be sure you have sufficient emergency funds set aside for rainy days first.
Financial Planning Tip #4: Build a Secondary Income Stream
If your salary is not growing as quickly as you like, or if you’re falling behind on your financial goals, building a secondary income stream may be your best choice.
With the gig economy getting ever more popular, it’s easier than ever to generate a secondary income stream. And you don’t even necessarily have to go out of your way to do it.
For example, did you know that content-starved companies are looking to pay for your Instagram shots? Travel blogs, for instance, are willing to pay photographers to curate and share photos of landmarks, popular holiday spots, and festivals. If you’re good at writing or graphic design, you may even be able to sell essays or infographics.
As long as your work is of a professional standard, you could land a steady contract that can help offset your travel and holiday expenses.
Besides travel or photography, there are plenty of other ways to start and build a side income. From swimming and personal training, to baking and cooking, to coding and web design, almost any skill can be parlayed into an income stream on your own terms.
Feel your skills aren’t up to scratch? Consider taking up an apprenticeship to learn or update your professional skills. Exposing yourself to the industry this way can help you build a network, which will make it easier for you to start landing clients of your own down the road.
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By Alevin Chan
A Certified Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.