When you stop learning, you stop living—quite literally in Singapore, actually, as you need to constantly learn and upgrade yourself in order to survive.
And let’s be honest, the vast majority of us still suffer from some gaps in our knowledge when it comes to personal finance. When you’ve just started out working, there are so many ways to spend your money. And no, that’s not actually a good thing, in case you are wondering.
It’s critical to make sure you start off on the right footing before debt potentially increases. Here are four ways you can educate yourself about money before the end of the year:
Understand how insurance works
Whether every single part of your body is insured for millions or you still have no idea what insurance you need or even why, if you don’t understand how insurance works, get yourself up to speed.
To make things simple, undertake to understand medical insurance first. This is a type of insurance most Singaporeans should consider. If you have kids or a non-working spouse, you will also want to find out how life insurance works.
There’s a wealth of information on insurance right here on MoneySmart. Check out our guides on insurance products right here. Spend an afternoon going through these articles and you’ll learn most of what you need to be able to compare insurance plans with an informed mind.
Learn how to invest in the STI ETF
Now, we can’t tell you for sure what is the best way to invest your money. That really depends on a whole lot of factors, including your age and risk appetite.
But if you have no idea to invest your money and are reasonably young, it would be beneficial to learn how to invest in ETFs or Exchange Traded Funds. For Singaporeans, that usually means the Straits Times Index Exchange Traded Fund or STI ETF.
This is a very simple way to invest your money for the long term. Instead of buying one stock, you are just buying a representation of the entire stock market, which means there’s no need to analyse individual stocks. You can then set aside a fixed sum of cash to invest every month using the dollar cost averaging method. This is not necessarily the most profitable way to invest, but it is one of the easiest.
The biggest challenge will be comparing the fees of various brokerage firms. Once you decide which one to use, the company should be able to guide you as to how to effect trades. An alternative is to buy into an investment plan (eg. POSB’s Invest Saver), which you generally join through a bank.
Learn basic retirement planning principles
Unless you intend to rely 100% on CPF when you retire, you absolutely need to learn how to plan for retirement, the earlier the better.
Luckily, it isn’t that hard. In a nutshell, planning for retirement entails figuring out how much money you’ll need to retire, taking into account inflation (since we never know, this is guesswork, but assuming a 3% annual inflation rate should be safe enough).
Then you figure out how you’re going to raise that cash, through saving and investing. Don’t forget to take into account the large expenses that can hamper your ability to save and invest, most notably the purchase of a home and raising kids, if any.
These are the basics. You’ll soon learn that it’s not quite so simple—if you start investing early, thanks to compounding interest, you could end up with a lot more retirement money than you envision. The reverse is also true if you start late, unfortunately.
Figure out your possible career trajectories
If you started working less than ten years ago, you belong to a generation that is a lot likely to experience more dramatic career changes than your parents did.
While we can’t predict the future, it would make a lot of sense now to figure out early on what your possible career trajectories are.
When we say “figure out”, we mean really going deep and taking an active role in speaking to people in your industry, trying to uncover cool new roles or paths that interest you. People who think outside the box are often people who just have more information on the various possibilities than the masses.
Which areas of personal finance would you like to learn more about? Tell us in the comments!
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