How To Save For Retirement As A Young Adult

Time is of the essence. Crippled with all the uncertainties brought by the pandemic, having reserved funds can help cushion the blow of unforeseen events such as pay cuts and layoffs. Saving money is important, especially when your finances are limited. Consider saving money to grow your emergency and retirement fund.

Retirement may seem like a long walk ahead for someone in his or her 20s or 30s. However, it is best to start saving for retirement before you hit 35 years old because your priorities will change at that time. Financial priorities such as spending for a wedding, an education loan, house loan, and other major transitions may occur once you hit your 30s. Typically, you spend more money on yourself during your 20s. Why not consider spending more money for your future?

In your early 20s, you may save at least 5% of your income or sign up for your employer’s Retirement Plan. Avoid debt as much as possible and get educated about your finances. Widen your financial knowledge by reading financial books on investments and business opportunities. Pay off your debt, if necessary. It makes sense to pay off your debts or at least your high-interest debts before you save for your retirement. Not all debts are created the same. Pay off your high-interest debts first followed by the lower-interest debts.

The next step is to set up a budget. Systematically allocate your income onto distinct categories and stick to that budget. Do not spend beyond what your budget is for that month. This allows you to save regularly rather than arbitrarily. Make critical decisions about your expenses and cut down the unnecessary, especially when you hit your late-30s. Ideally, this is when you hit maximum savings. By this time you should have at least S$50,000 to your Retirement Savings.

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The third step is to seek for an employer that supports your goals. If your employer offers Retirement or Pension Plan then embrace this company benefit. As a young adult, you may also invest your money in accordance to your financial goals.

Lastly, you are saving money for your retirement to prepare for the unexpected. Contemplate and reconsider the realistic measures that are suited for you and your lifestyle. Seek the financial experts’ help as much as possible. Then, plan your exit with joy because you are well prepared for it.

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Splurges That Turn Out To Be Wise Savings

Having money allows you to live the life you desire to live, if you spend it wisely. You have to weigh whether an item is an essential (need) or a non-essential (want) expense. In some cases, you have to spend more at the moment to save more in the long run.

Certain items are worth splurging on to help you earn more money or experiences in the future. Here are just some splurges that are actually wise savings:

#1: PURCHASING AN INVESTMENT FOR YOUR CAREER

Purchases that help you advance in your field are good investments. Know which tool you cannot work without and list them down. For instance, you must invest on a high quality camera and a reliable laptop as a photographer. There are also online classes and software programs that a photographer can benefit from on a daily basis. If an item supplements your future growth, it could be a smart move to spend extra cash on it.

#2: PURCHASING ITEMS THAT YOU USE A LOT

Before spending your hard-earned money on a product or a service, think of how long you are likely to use it. Then, breakdown the price using these factors (e.g., cost per wear). You may realize that the iPad you have been eyeing for so long may only cost you S$1 per day due to your current academic needs.

Home appliances and cookware are just some of the items that we use frequently. You can save so much money by cooking at home. Splurging on quality kitchen items such as knives and refrigerator can make a difference. It is recommended to invest more money on home appliances and cookware that you will use heavily because you will only end up spending more on repairs with low-quality appliances.

#3: PURCHASING ITEMS THAT YOU WILL CONSUME

Now more than ever, it is important to consume items that can strengthen our immune system. You really are what you eat! So, do not feel guilty about spending more money on fresh produce and healthier food items. What you spend on these items may help reduce your hospital bills.

Along with grocery shopping comes the ability to save more time. You may get your groceries delivered to your doorstep instead of going to the store. This will minimize your contact with the crowded places and will enable you to have more time to enjoy your day.

#4: PURCHASING SOMETHING YOU HAVE SAVED UP FOR

It is alright to splurge on an item that you have strategically saved up for in advance. For instance, you may have kept a portion of your monthly salary to splurge on a good laptop or a luxury bag at the end of the year. Some non-essential items are worth spending money on as long as you have saved enough funds to cover your significant expenses. Furthermore, it is a rewarding and a joyful experience to see the fruits of your labor.

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It is more than fine to get spend your hard-earned money on the finer things in life as long as you are smart about your purchases. Consider the points that were previously discussed above.

Sources: 1 & 2

 

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Financial Planning In The Wake Of COVID-19

Financial planning has never been an easy task, but the pandemic has made it even more difficult. Finance professionals are used to consistency and accuracy. They are not trained to plan for unclear economic conditions. No one is! The five-year plan that we are supposed to send to our supervisors is now completely out of the window.

How can you plan for your finances, if you do not know what is going to happen in the future?

#1: HAVE A ROBUST PLAN

You can better understand your financial resources such as investments and cash flows, if there is a robust financial plan in place. A comprehensive plan covers the ares of budgeting, investment, insurance, retirement, credit, and estate planning. When these areas are well covered in a sound financial plan, you have a greater clarity on how each financial decision affects another.

Specifically, the financial-planning team should focus on the following five steps: getting a clear view of the company’s position, building a fact base, aligning the financial plan to a concrete direction, determining the best moves, and identifying the trigger points that prompt businesses to adjust.

#2: KNOW WHERE TO START

Companies and individuals must know where to start. To get this, you need the support of experts. Together, you can see the historical and current financial trends. The January 2020 financial plan can be a good place to anchor on. This can help you to establish any assumptions that will need to change as a result of the pandemic.

#3: ENSURE THAT YOU HAVE POSITIVE CASH FLOW

Set up a realistic budget, which indicates your money inflows and outflows. Having an emergency fund that covers you for three months can ensure that you have enough liquidity to tide you and your dependents during financially difficult times. Doing so will give you some peace of mind even if you suffer temporary setbacks such as losing a job or are unable to make a living because you must be quarantined

#4: GET INSURANCE COVERAGE

Insurance is a means to cushion against financial losses and unexpected events. Find a suitable hospitalization and life insurance plan to cover your hospital bills and critical illnesses. There are also insurance plans that are related to growing your savings like endowment plans and investment-linked insurance plans.

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Focus on what you can control. Set up a sound financial plan, carve a realistic budget, get insurance protection, diversify your investments, and commit to a long-term strategy to achieve our life goals.

Sources: 1 & 2

 

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Telltale Signs That You’re Financially Unstable

Your sense of stability will be at its peak at the age of 40. During this phase, you will get more control on your finances and your family plans. You may prioritize your child’s education and sustain the needs of 3 people in your household. On the flip-side, being financially stable in your 20s is a rare sight!

It is terrifying to navigate through the adult world while being confused with will happen next. Sometimes, you think you have plenty of money to spare. The next minute, you feel that you need to call your mom or dad for help. This stage of instability can last up to your 30s.

Relax. You are not alone. For a friendly warning and healthy awareness, here are the telltale signs that you are not doing financially well.

999. WHAT’S YOUR EMERGENCY?

It comes as no surprise that you will borrow a small amount of money while you are applying for a job. Sometimes, you may ask for a little help too. However, if you have your parents on speed dial as your financial helpline, you are in a sticky situation.

Your parents may not be able to support your financial needs all they time as they are going through another phase of their lives – retirement. It is seemingly embarrassing to rely on your parents when you have no cash left as an adult. Hence, you need to do your best not to be an added weight to your parents.

YOU BETTER HAVE MY MONEY!

With red markings on your calendar, you saw that #PAYDAY is two days down the line. You keep on waiting for this day to come. You have not gotten your salary yet, but you have numerous plans on how to spend your money. Do you want to hangout with your friends at the pub? Do you want to purchase the designer bag online? You have no worries! You got plenty of money. At least, that was what you thought.

Seven days after your payday, you are already regretting most of the things that you have done. Why didn’t you spend your money wisely? You should have kept some of your money in your investment portfolio. Now, you are wondering how you will get through the week with only S$50 on your pocket.

PAY ME WHAT YOU OWE ME!

It is your creditor’s phone operator again. The operator is calling to remind you about your unpaid credit card bills. You think you are responsible just by carrying a credit card? You think you will only use it for emergencies? Think again!

As you get comfortable with swiping your expenses on your plastic card, you will be able to widen the scope of your shopping categories. After two to three months, you will notice that you will feel safe to swipe your card when purchasing new clothes and when eating out. Online shopping? It is easy with a credit card!

Your bill arrives and you feel horrific! You are wondering where you can borrow money to pay for all your bills.

WHAT SAVINGS?

You are in a financially unstable place if you do not have a savings account. A payroll account does not count! It is essential for working adults to have a separate savings account to create an emergency fund.

People typically see the value of a savings account after being caught in a financial mess with no emergency funds or no one else to run to. Taking loans or cash advances can incur more debt in the future.

THE FUTURE IS NOT NEAR

You are not thinking about your retirement. Retirement? Yes. You are too young for this. You have your lives ahead of you. But, time is in your hands. Use its power to create a wealthy retirement fund.

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You do not want to beg people for money 30 to 40 years down the road. Being financially stable is a lot of hard work, but you can achieve that by planning and spending wisely. Reach your financial goals in a slow and steady pace.

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Creating A Budget During Extraordinary Times

With non-essential establishments on closure and the economic crisis we are under, how can you employ a system to arrange your cash-flow better? The answer is strict BUDGETING.

A budget estimates your revenue and expenses over a period of time. By listing your sources of income beside your monthly expenditures, you will get an idea on where your money goes. This way, you can make smart financial choices and prioritize your obligations to reach your financial goals.

Creating a budget for the first time is like learning how to ride a bike. At first you are scared to ride the bike without training wheels. Eventually, you will be able to ride a bike on your own without qualms. Although you know cycling is healthy for you, you cannot just ride and go! You must learn about the basics of coordination and road safety. Creating a budget during a pandemic involves steps too. Here are the vital steps to create a working budget:

1. COLLECT YOUR DATA

Gather all the previous salary invoices, credit card statements, utility bills, bank statements, and receipts. Estimate how much you make and spend each month by using these necessary resources. Take note of the changes in the expenses due to the Circuit Breaker (CB) period and allow yourself to incorporate Government allowances too.

Start your budget by calculating your revenue since the CB. Add all your sources of income both from your part-time and full-time jobs (if any). Use your minimum monthly wage as a basis for your budget.

2. SET YOUR GOALS

Set S.M.A.R.T. goals and examine how you will be able to achieve each one. This acronym stands for Specific, Measurable, Attainable, Realistic, and Timely. I want to highlight that you must not make unrealistic and unattainable goals at this time. After satisfying S-R goals, you must budget according to your time-frame. List all your financial goals and divide them into short-term and long-term goals.

For goals to be specific and measurable, you must quantify what you want. For example, your goal is to increase the number of clients that will view your website. You may allot money to Facebook promotion or to hire a freelancer that will create your web design. I suggest that you focus on Marketing as it is more feasible given the limited physical movements that you can make during CB.

3. IDENTIFY YOUR FIXED EXPENSES

For many of us, lessors have postponed the payment of the April rent. You can only imagine the increase in your utility bills as you are mainly staying at home. These essential expenditures are called fixed expenses. Come May, you are looking at a wider range of fixed expenses.

Fixed expenses include rent, utility bill, and insurance. As they are stable each month, allocate a portion of your income to this category first.

4. ALLOT MONEY FOR EMERGENCIES

There should always be a budget for savings, especially for your emergency fund. Savings are your gateway to long-term financial goals and your safeguard against unforeseen events such as COVID-19. Set aside at a certain percentage of your revenue each month to help build a nice nest for your future. I personally recommend at least 10% but you have to give a percentage that you can maintain for the months to come.

5. USE A CLEAR SYSTEM

Help yourself navigate through the waves of budgeting by keeping a money journal or by downloading a digital budgeting tool. Supplement your budget with a calculator that enables you to know your cash-flow. It is called the Budget Calculator.

Then, download free apps that enable you to track your spending. Some of these apps are Mint and Spendee.

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No one knows how long this pandemic will last. Hence, you must be frugal with your expenses and eliminate unnecessary luxuries. Moreover, you may look for other ways to expand your income!

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