Whenever his mother plays mahjong with her friends, the conversation invariably turns to what their children are doing, Mr. Paul Lee (not his real name) said.
It’s not that this bothers him because he also wants to know how his peers are doing, especially their professional trajectories, who is dating someone or who is about to get married, or just who is having a lot of fun. .
One aspect of the conversation that Mr. Lee, who will turn 32, enjoys hearing about the various investments that friends and their children are making and how they are doing.
After all, he’s also been investing since he was in school, using his hongbao money, and wondering if he made the right decisions.
What Lee should do – in addition to benchmarking his investment strategy to his peers – is instill discipline in his decisions.
It doesn’t need to be too rigorous as that will make investing time-consuming, but taking stock of your financial situation and understanding your short and long term goals isn’t a bad start.
Some people find it difficult to take stock of their financial situation because they fear finding out that they are spending more money than they have and they feel pressured to reduce their pleasure.
Start with a personal budget. Find out how much money is left at the end of each month and aim to increase savings by a modest amount, say $ 50 to an additional $ 100.
The idea is that the surplus being buried is long lasting: it should not inflict any pain, otherwise, you will give up. One solution is to set a realistic and achievable goal, such as ending the year with more money in your savings account, regardless of the amount, compared to 12 months ago.
Harnessing technology to keep track
Use a digital personal finance tool or app that can automatically sort your money in and out into categories like transportation, restaurant meals, shopping, and more.
Mr. Barry Tan (not his real name), a recent graduate, started using the DBS NAV Planner as he was looking for a financial planning app to track his expenses. Like most Singaporean men, he has a POSB / DBS account and was once prompted by the bank about the planner.
âI like that they automatically categorize the purchases you make, which makes it really easy to keep track of everything. I’ve found that other apps generally allow you to manually enter your purchases and categories, âMr. Tan said.
He also likes that it’s easy to budget for specific categories and see how his spending for them has varied over the past few months.
Mr Tan, who will be going to London in September for his masters, said it would be nice if they could also link foreign bank accounts to the app.
âCareful and careful financial planning should be a way of life for everyone in the future,â said Ms. Evy Wee, head of financial planning and personal investments at DBS Bank.
Since its launch in April 2020, 2.4 million customers have started using the DBS NAV planner, she said. “We want to help a million of our clients invest and insure by 2023.”
With the release of the Singapore Financial Data Exchange, or SGFinDex, in December of last year, planning your finances has become even easier as the platform can seamlessly aggregate all financial information, including accounts held. in other banks as well as the Central Provident Fund. (CPF), Housing Board (HDB) and Singapore’s Inland Revenue Authority – for a consolidated view.
According to Ms. Lorna Tan, head of financial planning training at DBS Bank, some common pitfalls in financial planning include not getting the big picture, not taking any risks, or trying to time the market.
âThe money management conversation typically centers around the investments and flavor of the month,â Ms. Tan said.
âA comprehensive financial plan includes budgeting, credit management, insurance, investing, home planning, retirement and estate planning. In other words, it is about your financial situation as a whole.
No risk is perhaps the biggest risk, she said. âTaking no investment risk poses a risk because your purchasing power with the same dollar decreases over time. Anytime your savings don’t keep pace with inflation, you’re losing money.
âThis is very real considering that interest on savings is practically zero right now. Some retail investors see financial security as synonymous with the absence of volatility or price fluctuations. However, in seeking security, they overlook the danger of outliving their savings due to longevity and inflation.
Synchronizing the market is difficult, even for experts, Ms. Tan said.
Market timing is the strategy of making buy / sell decisions by trying to predict future movements in market prices.
Instead of trying to time the market, adopt the average dollar cost strategy – where you regularly invest a fixed amount in the same investment choice over a period of time. This way you accumulate more units when prices are low and fewer units when prices are high.
Losing sight of long-term goals is another pitfall, Ms. Tan said.
âThe earlier you start, the longer the time horizon for your funds to accumulate and grow over time. This helps give you a long-term investment perspective while you aim for short- and medium-term goals like buying your first home, annual vacation, and children’s education. At all times, don’t lose sight of your long-term financial needs, âshe said.
Additionally, knowing that you have time in the market increases your confidence in your ability to weather the volatility of the investment environment.
âYou can ignore market noise and minimize unwanted gut reactions,â Ms. Tan said.
Take action, take control
Don’t forget to take advantage of government plans like the CPF and the Supplementary Retirement System (SRS). Maximize your nest egg or that of your loved ones by funding CPF accounts to take advantage of attractive interest rates and capitalization.
You can also use the SRS to defer taxes and stretch your money by investing the money.
First-time investors, including Mr. Lee and his girlfriend, have found the DBS digiPortfolio to be an easy way to invest more.
While the minimum is $ 1,000, subsequent amounts are only $ 10. It’s been a year since they started with digiPortfolio, and the returns are in double digits.
âThis is the best return of all my investments,â said Mr. Lee’s girlfriend, who typically puts her savings in fully government-backed Singapore Savings Bonds (SSBs). The average yield of the SSB over 10 years is 1.5%.
Developing a financial plan is not that difficult. You may already be on the right track without realizing it. Having help structuring your finances could free up more money, which is always helpful.
One of the most important considerations before you even start investing is self-awareness: understand your risk appetite.
If you are conservative by nature, stick with that and don’t be swayed by the successes of others.
Often times you only hear the winners because most people don’t talk about their losses. Even well-known fund managers make mistakes.
The writer, a former Business Times reporter, finds budgeting to be one of life’s challenges.
This is the second in a seven-part series in partnership with DBS