People often ask me how I became so financially literate and what I did to make myself financially stable. So, I thought I would share with you how I planned my finances in Singapore. First of all, I will say, I’m very lucky to have parents who taught me from a young age how to save and be frugal. But, moving to Singapore I realised I needed to do more than just save. So here’s how I did it.
Step One: Have an Emergency Fund
This first step was crucial, as you will see in my story later why. I saved 6 months’ salary in my bank account, as a buffer should anything happen. This meant that rent was never an issue, even with putting a deposit on a new rental and moving apartments. It also meant that I had less buyer’s remorse and I knew how much I could afford to spend on my days off.
Step Two: Spend Wisely
Pre-covid, I travelled a lot. A lot of people, particularly those back home, would often ask me how I did it. It was really quite simple; I often travelled to countries where the Singapore dollar went far. I booked cheap accommodation and ate local food. This kept my budget quite low.
Also, in Singapore I don’t tend to buy a lot of things. I mostly spend on going out for meals or activities with friends, which I find easier to manage, especially if the restaurants are cheap!
Step Three: Get Covered
Remember earlier I mentioned why an emergency fund is so important? Here’s why. In 2019 I found out I had to have an operation- it wasn’t a particularly big surgery, but it was a crucial one. My doctor had found a growth and was unsure if it was cancerous. It was causing me a lot of discomfort and affected my personal life greatly. I was told that the estimated bill would be roughly $19,000. Thankfully, I had health insurance. Even though foreigners have to pay the cost upfront, I managed to get every penny back through my hospital plan, even the doctor’s appointments leading up to the surgery. It was a massive relief. Luckily, I had the money upfront to pay, but can you imagine if I never got that back? Expats often see insurance as unimportant, maybe because healthcare is free back at home, but it’s a fact that Singapore is not a welfare state, so don’t treat it like one.
Step Four: Don’t Leave it Too Late
I went on to purchase critical illness coverage, as I knew deep down in the back of my head that having an operation at 25 (especially one where the C word comes up) is not normal. (I’m fine by the way, it wasn’t cancer.) So, I felt that it was best to be fully covered for critical illnesses. Hospital plans are not sufficient. Imagine if I were diagnosed with Cervical Cancer, and just had a hospital plan? It wouldn’t cover my change in lifestyle; having to take taxis everywhere; maybe hiring at home help; having to maybe order personalised meals. Not to mention the fact that I wouldn’t be able to work if I was going through chemo. A hospital plan definitely wouldn’t cover all of that.
Step Five: Invest
Ok so I had an emergency fund, I was protected and covered insurance-wise. Now what? How did I make my money grow quicker than leaving it in the bank? My current DBS account has an interest rate of 0.005%…. I’m not being funny but that’s rubbish. So, I took a portion of my savings and invested it in unit trusts. I purchased investment policies that contained a mixture of sub-funds that are managed by portfolio managers. I’m not one to sit and watch stocks and manage that by myself, so I’m very happy to let a professional do that for me. This will help me achieve my long-term goals of purchasing a property and having a very comfortable retirement.
I pride myself on not living paycheque to paycheque; I actually can’t remember the last time I did live like that! I always reflect on these five things and review how on-track I am with my financial goals. I hope this helps those who are confused on where to start. How do you plan your finances? If you feel that you have any questions or need any help, please do get in touch.