Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Sunday, 27 September 2015

5 things that you need to start doing to improve your financials during your early 20s

Most people in the early 20s would think that they still have a long way before retirement and financial planning is too "kewl" for them. Contrary to that, early financial planning can go a long way. This is especially due to the power of compounding. Well, here are 5 things that you NEED to start doing to improve your financials during your early 20s.

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1. Tracking your expenses

This is one of the most important things that you should do as part of personal finance regime. Without tracking where your money is flowing to, you can never find excess money that is going to redundant spendings. It is also a good habit to have as when you are constantly tracking your expenses, it creates a conscious psychological mental note that you should be spending within your budget. You will also feel the pinch.

There are multiple expense manager apps out in the market which provides lots of functions such as visual display of your spending. It is also extremely convenient as you can just log an expense in it anytime. 

2. Using automated recurring transfer for savings

I was discussing the topic of savings with a friend and there were some interesting pointers that I wish to share. Initially, I was using a model where "Income - Expenses = Savings". My reasoning was to keep the savings as high as possible while maintaining expenses low. However, the other side of it is to maintain a fixed amount of savings. This is to ensure that there is a minimum amount kept for savings.

With technology, this is now increasingly easy. You can use Internet Banking to setup the automatic transfer at specific times of the month. So simple!

3. Making use of credit card rebates and various promotions

Many people seem to take credit cards as a finance taboo. It is one of the best tools that you can use to increase your savings and even earn rewards. However, this requires some discipline whereby you must pay the bills promptly at the end of the month or the interest when compounded could be hefty.

Based on your income and age group, there are several credit cards out there in the market which you can apply for. Anyway, this could be potentially a whole new topic on which credit card offers the best rewards, but for more information, here is a site which you can visit:

4. Reading up to increase your financial literacy

It is extremely important to increase your financial literacy. Heard of the saying that knowledge is omnipotent? It not only opens you up to the different tools which you can use for investment but you can also adjust it accordingly to suit your risk tolerance. Most importantly, you get to have choices.

As suggested previously, here are 2 books which we recommend you reading:


5. Get out of debt

As cliche as this might get, the fastest and fool-proof way to get returns on your money is to repay your debts and your returns will be the interest that is owing to your debt.

Debt management is critically important for financial success. Besides the cost of an education and a primary residence, if you can't pay cash don't make the purchase. As far as education and the home, pay off the education before you buy the home.

As for the home, do not stretch your budget. Buy what you can easily afford and pay it off. Luckily for Singaporeans, there is a robust system in place in terms of CPF and the housing loans are carefully structured. Source for one that suits you in terms of its repayment schedule and are within your payment means.

Bottom line

Having the right mindset and attitude is the most important. Once you have these, you will be well on your way to building a secure financial future. While the journey is long and the road not always easy, be sure to take the time to appreciate what you have. It is also crucial to savor the small victories which will help you stay on your long-term course. After all, you earned it.

Remember to offer your opinions for if you don't put your two cents in, how can you expect to get change?

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