Have you ever noticed how you only start worrying about your health when you face a health scare? The same can be said for finance. Financial planning isn’t taken seriously until money, or the lack of it rather, starts becoming a problem.
You never really think you have to plan your finances when you are young because the money you earn is enough for you to live comfortably. But it’s never too early to start. Just think about it. Today you are living a carefree life as a young professional; tomorrow you may want to buy a home, you probably will get married, have kids, and will have to think of their education and their future. Sounds daunting, doesn’t it?
Well, not to worry. Here’s a handy financial plan for all you young professionals out there:
Get familiar with finances
If you have just graduated from college and have joined the workforce, then like most of your peers you may be clueless when it comes to financing. Which is why the first step that you need to take is understanding personal finance. Take time to understand what your CPF contribution is, what the taxes that you have to pay are, and how to read and understand your payslip among others.
Having familiarised yourself with financial concepts, you probably understand how important your credit score is. If, however, you don’t have an education loan or a personal loan on which you are making regular payments, it’s hard to build a good credit score.
This is why you should get a credit card. Charging expenses to your card regularly and paying your bill in full and on time will help you build credit. Your card issuer will report this to the Credit Bureau and this will help you build a good credit score.
Your credit score will come in handy when you decide to take any other loan such as a home loan.
If you are of the school of thought that you will spend first and then save the amount that remains, then you won’t be saving anything. From the time you receive your first pay cheque, ensure that you put aside a small portion of your income into your bank account each month. The amount you save can increase as your salary increases. The interest you earn on your savings may be negligible, but you have the security of knowing that you have something you can dip into in case of a crisis.
Your day job need not be your only source of income. In fact, some of the wealthiest people in the world haven’t earned their status solely through their day jobs. All of them supplement their salary with income from their investments. And almost all of these investments were made when they were young.
Investments are also a way to plan for your future. For instance, if you decide to invest S$1,000 each month for the next 5 years at a return of 5% p.a., then at the end of this tenure you will receive around S$150,000.
Purchase health insurance
As a citizen or a Permanent Resident of Singapore, you already have basic health insurance coverage with MediShield, so you may think that buying health insurance would just be a waste of money. But it isn’t. While you may be in the prime of your health right now, you never know when a medical emergency may strike.
Purchasing additional coverage to supplement the coverage that MediShield provides is a good option. When you are young, you won’t face too many roadblocks when it comes to buying insurance. Moreover, the earlier you purchase health insurance, the lower the premium that you will end up paying.
Save for your wedding
Your wedding day won’t just be the happiest day of your life but it may also be the most expensive. Wedding expenses will include the ring, the photographer, and the wedding banquet. On an average, weddings in Singapore can cost you at least S$43,000. Plan for this expense by putting aside a little money every month so that when it is time for your big day, finances will not be adding to your stress.
Plan for a down-payment on your home
Buying a house is something that you should plan for in advance since this is a long-term investment. This may take more than just a few years’ of savings and investment. But if buying a house before you are 35 is on the top of your priority list, then you should start planning now. You can do this by ensuring that your CPF contributions and your employer’s contributions are in order.
Another way to save for a down payment is to invest in an endowment plan. These plans not only provide you with insurance coverage but they also pay out a lump sum after a certain period.
Plan child-related expenses
It’s never too early to start saving for your kids. Raising a child in Singapore is expensive, which is why you need to plan for expenses related to your child’s needs as a toddler which includes immunization expenses as well as planning for their schooling. On an average, raising a child up to the age of 21 can cost you around S$340,000.
Other than investing in endowment plans for your future children, you can also take advantage of the government’s Baby Bonus Scheme once you and your spouse decide to have a child. This scheme reduces the financial burden of raising a child since the government provides 1 Singapore Dollar (SGD) for every SGD that a parent contributes to their child’s Children Development Account. The plan also provides parents with tax rebates. The rebate amount increases with each child that you have.
Save for your retirement
In 2016, a Nielsen survey authorized by NTUC Income found that retirement planning was not crucial for those under 35 years. That, however, is slowly changing with more young professionals thinking about saving for their retirement years.
Start by setting short-term and long-term financial goals and create a savings plan for your retirement that is realistic. Keep in mind that your CPF contribution will kick in only when you turn 65 and the average retirement age in Singapore is 62. Planning your retirement at an early age also means that the amount you need to put aside each month is much lesser than what you would have to put aside if you decide to start saving at the age of 40.
The most important aspect when it comes to financial planning is that while making good financial decisions are important, don’t base every decision on finance. Money is just a means to an end. Follow these 9 steps and you will more or less be ensured that you remain financially healthy in the long-term.
Track Latest News Live on CEOWORLD magazine and get news updates from the United States and around the world. The views expressed are those of the author and are not necessarily those of the CEOWORLD magazine. Follow CEOWORLD magazine on Twitter and Facebook. For media queries, please contact: email@example.com