Everyone wants to be financially independent. Youths like me, who are still finding our way in life as we approached the real deal of adulthood, hope that one day, we will be able to make enough money to sustain our living. We want to be able to earn enough to spend on the necessities that we need and the luxuries that we crave yet having enough money for rainy days and for retirement.
Despite having a national savings scheme in the form of CPF which covers your housing and health expenditures as well, we still need to be self-reliant when it comes to personal finance. Such financial literacy becomes all the more important when the cost of living in this island are getting higher each year.
According to a recent study done by local bank DBS, they found out that more than 50% of their customers aged 20 – 35 either do not plan or do not know how to plan financially. As for the remaining who plan for financial goals, the majority of them do not exactly know the estimated target amount needed to achieve each goal. To one’s relief, 3 in 5 young adults do want to manage their money better in order to help them achieve their future goals – be it buying a home, growing their money or for self-development.
So with that, we decided to just share with everyone 5 simple ways to plan for your future because being financially stable and independent is our future.
1. START SAVING, BIT BY BIT
I remembered watching this old MediaCorp Ch8 sitcom “Don’t Worry, Be Happy”. The uncle of the main character was being rather stingy at times but that’s because he lives by a financial motto: Sedikit-sedikit, lama-lama jadi bukit. Despite it being a Chinese show, it actually provided me with my favourite Malay phrase of all-time. The Malay proverb actually meant, “Bit by bit, and over time, it will accumulate into a mountain”.
Although that doesn’t mean you should be stingy with every penny. Instead, we should learn to set aside some money as our savings every month. For those who are working, whether as a part-timer or have already stepped right into the workforce, put aside a percentage of your income into your savings account. By the meaning of SAVINGS account, it means that you should not be touching the money inside at all unless it’s very emergency.
NOTE: Dying to buy a Hermes bag that’s at 60% off during this GSS season but you do not have a spare cash to spend on it is NOT an emergency.
I think we all do need some discipline when it comes to weighing between what is emergency spending and what’s not.
If you would like some tips on how to save money, do check out 5 Most Cheapskate Ways to Save Money.
Planning ahead means that you have to sit down with a pen and paper (or in front of your laptop/PC) and start to think ahead. Where do you want to be in 5 years time? How do you want to live your life in 10 years time?
It is inevitable that there are many uncertainties in life, but it is important to plan for at least 5 years ahead. It will give you the enough time to actually deliver what you’ve actually planned for yourself amidst all the uncertainties. There’s a reason why government plan always come in 5 years (remember a certain Stalin’s 5-Year plan for Soviet Russia back in the late 1920s and early 1930s?).
Plan backwards. Once you see where you want to be in 5 years, start planning backwards. Instead of an unachievable big leap forward towards your goal, break them into smaller steps. For instance, if you want to complete a full marathon in 5 years, and if you hadn’t been running, go for a 5km run in your first year. In the second year, upgrade and train for the 10KM. Maybe try running that distance for about 5-8 times at the pace you are comfortable in before moving on to the next milestone. Of course, you don’t run your half marathon straight, go for 12, 14, 16, and as long as you feel that you are comfortable with the distance already, move on, add another 1-2KM to your next run. By the third year, you are most likely ready for the half marathon. And you are half-way there already. The difficulty increases as you move beyond the 21KM, it becomes more tough and challenging. Yet, as long as you persevere, train right and take the right nutrition, your plan to compete your first ever full marathon can be fulfilled.
It’s the same as in life. Things eventually gets tough but you’ll always need to have that mental prepareness. That’s why planning ahead is so important. You give yourself and aim and the strategy to achieve it. Being clear of your goals and taking small steps towards it helps you make your life better.
3. DIVERSIFY YOUR INCOME
There is an old English proverb that goes “Do not put all your eggs in one basket.”
Indeed, imagine what happened if that basket dropped on the floor, you might just be left with no eggs at all. There is no secret that most major conglomerates actually venture into more than one industry. For instance, Berkshire Hathaway, led by Warren Buffett, currently has ventures in insurance (GEICO), retail (The Pampered Chef, Helzberg Diamonds, etc), media (Buffalo Evening News) and real estate (HomeServices of America) – just to mention a few.
Make investments, open a small company that is sustainable, write a blog, be a freelance, even picking up new skills at your own free time. These will actually help you receive money via several streams of income.
There are actually 3 types of income for your consideration.
a) Earned income: This is basically the money that you’ll be getting in the form of salary – something that you exchanged your time and effort with. It is one kind of fixed income. There is not much fluctuations, unless you receive a rise/drop in your paycheck or that you’ve decided to change your job.
b) Passive income: This is the money that you’ll get when you sell something more than it had cost you initially. It’s like selling things you’ve got on Taobao on Carousell or even opening your own business outside of your full-time work. You know, you can be the boss of a company yet you actually personally work for another company. As long as there’s no conflict of interest, I think this is a pretty good way to earn some extra money. Furthermore, it’s your own business.
c) Portfolio income: By portfolio, it means selling your investments at a higher price than you’ve initially made. Although it requires quite some time and effort to do the necessary research and gain credible knowledge about your investments, but the capital gains that you are going to receive from it might be more than what you’ve actually earn from your earned income or your passive income. But there’s always a risk to meddle with.
4. EXPERIENCE DIFFERENT JOB ENVIRONMENT
Planning for the future also means finding THAT industry that you are willing to stay in for for at least 10 years. You might change job but never change your industry too fast. Give yourself some time to gain enough experience so that once you change job, you can upgrade your salary as well – instead of changing career path.
Unless you are very sure about your passion, spend your teens or years as a student to experience the different job environments out there in the market. Be a retail sales person, work in the F&B industry, shut yourself within the four walls of the office doing admin/office work, run around perspiring or squeeze your creative juices at media companies or test your limits with kids in the education industry. You will meet different people while working in different environment, experience things that you’ll never get to experience before (not to be biased but I strongly think being in the media industry gets you the best exposure to almost everything).
Slowly, you will find where your real passion lies and you will understand that the industry that you eventually venture in would probably be the best for you. You won’t even want to think about leaving your industry because you’ve experience first-hand of how other industry is like and the reason why you didn’t venture there in the first place.
It will give you the mentality to push yourself in your industry. Passion will eventually turn to cash, as long as you stay rooted to it.
5. TALK TO A FINANCIAL ADVISOR
If you are still unsure of how to be financially independent for the future, you should speak to a financial advisor. I know many of you, me alike, do not really trust financial advisors or basically anyone when it comes to money. You might be that they might pressure you into some investments or insurance that you are totally not interested in. Same here.
However, at DBS’s NAV Hub, they offer young adults free personalised financial planning sessions with no financial products being sold. In other words, don’t be sceptical once you’ve stepped into the comfy shophouse because they are not going to sell you any financial packages that you are not ready to invest in under this new initiative by DBS.
No financial transactions, just helping customers to navigate through life changes, uncertainties and opportunities.
Through a roughly one-hour session, you can learn more about their current financial health, as well as understand their financial goals and how to achieve them. In addition, you can also obtain financial planning tips from the NAV online space and attend monthly financial planning classes at the “NAV Hub” conducted by industry experts to boost your financial literacy.
“NAV HUB” is housed at 45 Tras Street, just some 5-minute walk away from the nearest MRT station at Tanjong Pagar. Do make a booking of the available slots HERE before heading down.