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

Saturday, 12 September 2015

Singapore Finance Minister on Personal Finance

On a recent rally speech, Singapore's Finance Minister Tharman Shanmugaratnam gave a talk about how important prudent budgeting is for the country.
We felt that his point was suitable not only for managing of the country's finance, but also for everyone's finance!
As such, we will be elaborating how it can be used for our personal benefits.

GE Effect on STI
Raising of Re-Employment Age to 67
Singapore Finance Minister on Personal Finance Part 2

First 3 Minutes of Video: Prudent Budgeting & Asset Management
Last 3 Minutes of Video: Explaining CPF (government retirement fund) returns
We will be talking about the First 3 Minutes in this post

In the video, the minister mentioned that in Singapore,
1) We've had more than 30 years of budget surplus being saved away in reserves
2) We sold land for money, and kept the money also in reserves
3) The reserves are then invested, which allows us to draw continuously on the reserves every year by using the income on reserves
4) Half the returns generated from the investments are used to spend for many different purposes (education, infrastructure, medical etc)
5) The other half is kept away in reserves, re-invested to create future cash in-flows

Translating this to personal level,
1) When we are working, we should always save away a portion of our income (budget surplus).
2) If we have additional income (ang baos, bonus, etc), try to save most of it also
3) Your savings, should be invested. Only then, will it be able to generate income every year, allowing you to draw on it continuously for many years
4) You can choose to spend half of your annual returns from investment on things you need or want (an overseas trip, a new laptop, renovating your house etc)
5) The other half of your annual returns should be saved and re-invested to generate even more income in the future

Our Views:
1) We think that if you are young, if and when possible, try to re-invest as much of your annual investment returns back and draw it when you are older/retired. Grow your future income while you still have a stable monthly income. Although this is rarely possible (it is always tempting to spend, I totally agree!), try to save and invest as much as you can.

2) Singapore saved vast reserves, invested them and thus have huge annual investment incomes that can be spent for many different purposes. You too can do that for your future generations. Save and Invest CONTINUOUSLY! IF you end up spending only your annual investment returns for retirement, you can pass your "vast reserves" to your kids. If they too follow this prudent budgeting, they can add their savings to your "reservers", benefiting them and their future generations even more!

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

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