According to a recent poll by Manulife, millennials in Singapore dream of spending their retirement travelling, spending quality time with friends and family, and pursuing their hobbies.
Unfortunately, the same survey showed that their financial habits are not aligned with what they wish to achieve in the future. Some 55 per cent of them prioritise saving for short-term goals rather than preparing for retirement.
While there is nothing wrong with pursuing the things one desires for the immediate future, it is also helpful for young people to be more prudent and to realize that looking at the larger picture matters.
Instead of saving money to splurge on short-term milestones, the end goal should always be financial freedom—living one’s desired life without relying on a regular salary.
If you are a young adult living in Singapore, today is the best time to start financial planning so that you can achieve financial freedom sooner than later.
Remember that small well-informed decisions and concrete actions can build up and positively impact your future.
For resources on financial planning Singapore citizens can rely on, the government created MoneySense, the national financial education programme in the Lion City.
You can visit their website to discover actionable information and useful tools to help you manage your money well.
And if you are looking for financial planning pointers for young people like yourself, here are several tips to help you get started.
1. Create a Budget and Stick to It
Before you can manage your finances, you need to know how much money is coming in and how much you are spending regularly. Make a list of all your monthly income, and track your expenses to have a better idea of your money flow.
Once you have evaluated your finances, you should create a detailed budget to prevent overspending and keep you in control of your finances.
Download free online apps, such as Household Account Book, Spendee, or Zenmoney, to make budgeting and tracking your expenses hassle-free, fun, and motivating.
Make sure to stick to your spending plan. Otherwise, all the trouble will be for nothing.
2. Pay Yourself First
Make sure to include savings in your budget. Keep in mind that you are working not only for today but also for your future.
If you fail to make saving money a priority, you may end up in debt or deep financial trouble when you get sick, lose a job, or go through similar emergencies.
Try putting your savings money in an account that isn’t readily accessible to prevent temptation. Act as if you do not have the said account so that it will remain untouched unless necessary.
More importantly, look for a bank that offers the highest interest rate to grow your funds even more.
3. Avoid Incurring Credit Card Debt
A recent Financial Wellness survey by OCBC revealed that nearly 40 per cent of millennials in Singapore only pay the minimum amount due on their credit cards. If you tend to do the same, it is time to avoid this bad habit.
Besides carrying the balance for an extended period, you will end up paying an incredibly high-interest rate of at least 20 per cent a year. As such, you should ensure that you pay your balance in full and on time each month.
Unless you can make full and timely payments, it is best to pay in cash for your purchases instead of credit cards.
Apart from avoiding falling into debt, you can also prevent overspending when you pay in cash, as one research found that consumers tend to spend more when using credit cards.
4. Create Separate Savings for Short-Term and Long-Term Goals
Avoid splurging all your savings to buy a car, to travel to Europe, or to achieve other short-term goals by creating a separate fund for your retirement. Consider employing different financial instruments that can help achieve your plans.
For instance, you can keep your short-term savings in fixed deposit accounts so you can earn more interest while keeping your funds liquid.
For your long-term savings, you may want to consider an insurance savings plan since they offer stable and relatively high financial returns depending on how long you are willing to commit.
You can also opt for investment opportunities like unit trusts or mutual funds to grow your wealth.
5. Secure Health and Life Insurance Plans as Early as Possible
Part of wise financial planning is making sure that you are financially protected should you go through unfortunate circumstances, like sickness or disability.
Before you dismiss the idea of buying insurance plans because you are still young, consider the advantages of securing the right insurance policies as early as possible.
For one, you can secure them at lower premiums since you are still young and healthy. Secondly, you are more likely to receive full coverage because there is a greater chance that you have fewer pre-existing medical conditions now.
More importantly, getting insurance offers peace of mind since you no longer have to worry about finances if you suddenly fall ill or get into an accident.
Although the road toward financial freedom seems to be too distant, the chance of reaching this goal is greater if you start managing your finances as early as now.
Start by considering the financial planning tips above and by continuously finding ways to improve your financial literacy so that you can manage your money better. Remember that small, consistent steps can make a huge difference in ensuring that you get to live the life you want in the years to come.