At hoolah, we are huge advocates of promoting financial literacy to the laypersons. From practicing simple personal finance habits to decluttering your own wallet (the KonMari way, of course!), there are several strategies one can employ to better manage his personal finance. This time, we have had the pleasure of roping in a financial consultant Rayner Ng from finexis advisory to weigh in his professional insights on some of the common personal finance myths here in sunny Singapore.
The following list sheds light on only a few of the many myths out there. Nevertheless, we hope to inspire you to be more financially literate and resolve any queries when it comes to your finances. If you happen to have more personal finance myths to share, join the conversation on our social media channels – Facebook & Instagram!
Financial planning starts only when I start working full-time
This statement makes absolute sense. As you enter the working world, you will start earning an income, learn the ropes of managing your budgets, and eventually afford goods (or necessities) at higher price points. You most certainly can afford to wait till you get a full-time job to plan your finances, right?
On the contrary, having such a mentality today is not ideal. Why? Firstly, there’s no fixed age to start planning your finances; in fact, financial planning should start as early as possible. And you can begin with reading up or consulting someone for help. Learning to differentiate between various types of insurances, the fundamentals of investing, as well as understanding different credit card perks (and cons) can help you in the long run.
As you juggle between freelance gigs or part-time jobs (or even allowances) throughout the year, you can attempt to apply what you have gleaned from to manage your money. That said, the rule of thumb is to have a goal in mind. Ask yourself the following question: “What do I really want to achieve by 30 years old, 50 years old, or maybe when I turn 60?”
You’d soon realised that at different stages of your life, you’d have different priorities. Learning and planning your finances early can set stronger foundations to your own financial portfolio. “The goal can be simple, such as to save an amount by a certain age or even owning a house, a car, or have a comfortable retirement,” says Rayner.
Finally, it is important to figure out what are your essential and non-essential items. If you find that you have trouble affording the things you need, you could opt for interest-free instalment payment plan, like hoolah, to offset your purchases.
You have to be rich to invest
Technology has been an enabler for many things. Investing happens to be one of them. Intriguingly, you don’t have to be rich or have huge sum of capital to invest; there are plenty of alternatives for beginners to dip their toes and learn the basics of investing.
From robo advisors (Endowus, Syfe, and StashAway) to online brokers (Tiger Brokers, moomoo, and Saxo Markets), the options to invest are aplenty. And you can start investing with as low as SGD$100. One disclaimer though: you might have to insert a fixed down payment before you can start investing as well as providing the relevant financial statements to prove that you have the funds to invest. We recommend doing your due diligence, such as figuring out the perks and cons of each platform and reading up on the basics of investing, before jumping on the bandwagon.
“There are various factors to consider before you start investing. Factors such as timeline, your personal goal of investing (e.g. to buy a house, car etc.), your risk appetite are important,” adds Rayner. “As every individual’s circumstance is unique and different so one man’s strategy may not work for the other.
CPF savings is enough for retirement
Image Credit: CPF Board Singapore
If you are employed full-time, you and your employer will have to contribute to your CPF monthly. The goal of having these mandatory CPF contributions is to help you build up your retirement nest egg! A small portion of your monthly income goes to your CPF Ordinary Account and it earns an interest of 2.5% p.a. You can even utilise it to purchase a home with your spouse too! It’s a genius scheme, but is it really enough?
According to Rayner, it depends on how the individual makes use of it. He says, “There are many things you can use with your CPF. In Singapore, it is common for newlyweds to use their CPF funds to pay off house mortgages. To that extent, CPF savings may not be enough for retirement in the future.”
On how to maximise one’s CPF savings, Rayner suggests seeking professional help, such as seeking a financial advisor, to effectively manage your CPF funds and how you can best use it for retirement.
– Check out the CPF interest rates here.
– To learn more about CPF and what it does, click here.
Financial Consultants, Advisors, and Insurance Agents cannot be trusted
When it comes to the topic of insurance agents and financial advisors, people do get sensitive and annoyed. There is a running joke of sorts when a friend, whom you have not met for a while, asks you out for a cup of kopi for a short get-together only to sell you his company’s policies.
The underlying consensus today is that many insurance agents and financial advisors are not to be trusted. After all, they just want to earn commissions by selling you their plans. But are they really that self-centred? Are financial advisors or insurance agents worth it?
We are all hustlers of the 21st century; time is the essence and we somehow struggle to make the most out of it. To properly manage your investment or financial portfolio, you need to have skills, time and effort. Finding time to thoroughly research through investment plans or insurance policies may be a luxury we struggle to afford. Which is why the right financial advisors and insurance agents can be our heroes.
While there are some black sheeps in the market, not all of them are out to get you. In fact, the friends, whom you are trying so hard to avoid, may in fact offer valuable advice instead. For starters, your agent ought to be:
– Someone you trust
– Someone with the right knowledge and expertise of the industry, service, or product
Time is money and there’s also a cost to delaying diversify your financial portfolio or seek help to manage your personal finance.
Putting money in the bank to save is the way to go
This is a no-brainer. With inflation in the midst, the money you put in your bank would probably dwindle in value. That said, there are several banks with good insurance rates to cushion the effect. However, keeping in mind that the current economic climate is affected by the pandemic, banks have reduced their interest rates. Which is why Rayner (and many others) think putting money in the bank is not the best way to grow your assets or bolster your financial portfolio.
One solution to increase your wealth over the years, according to Rayner, would be to diversify your financial portfolio. “One of the basics you can do is to invest in funds,” Rayner says. “But the most important thing is to be able to find someone who is able to help you diversify your portfolio according to your needs.”
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