Planning and Achieving Financial Fitness in Singapore

With the increase in financial awareness, more and more financial adviser representatives are being recruited in Singapore. In fact, it is said there are more financial adviser representatives than doctors in Singapore. Yet, despite the increase in expertise, adults in Singapore are still confused over how financial planning works or even where to begin.

The complex nature of financial planning means that everyone would require a financial plan tailor-made to suit their unique financial positions and circumstances. While it is impossible to do so with an article, we can give you the next best thing – an overview of the steps taken to become financially fit.

Step 1: Settling Debts

Financial planning is always complicated, so allow me to tell you a story to simplify this subject.

Once upon a time, there was a guy named Jack. Jack lived in a condo in Singapore and decided to lend $1,000,000 to his friend, Jill, for 10 years in exchange for 1% interest per annum. Jill accepted the agreement and had to pay an additional $10,000 to Jack every year. At the end of the 10-year period, Jill had paid a total of $1,100,000 to Jack, which was $100,000 more than the amount she originally borrowed!

Most bank loans in Singapore are made on a ‘per annum’ basis. This means that a percentage of the original amount owed – the principal – will be charged as interest at the end of each year. The good news is that some loans allow partial redemptions in which you pay off bigger chunks of the loan along the way when you get your bonus or receive windfalls. This way, it is possible to reduce the principal owed more quickly, which would then result in a reduction in interest charged. Do check with your lending bank(s) if the loans in question allow partial redemptions without penalty, and if any lock-in periods apply.

Let’s take Jack and Jill’s case as an example.

The original amount Jill borrowed from Jack is $1,000,000. Therefore, the principal Jill owed was $1,000,000. Let’s assume that Jill’s business took off and she made a profit of $710,000 one year later. Jill decided to set aside $510,000 to repay Jack. In this scenario, $10,000 of her money would be used to settle the one-year interest she owed Jack. The rest of the money – $500,000 – would be used to settle part of the principal Jill owed Jack.

As such, the principal Jill owed Jack would reduce from $1,000,000 to $500,000 ($1,000,000 – $500,000) and her interest payable per year was reduced to $5,000 (1% of $500,000).

The same applies to your bank loans. The quicker you settle your debt, the less interest you have to pay. Hence, the first step of financial planning should always be to settle all debts as soon as possible so that you can start building and accumulating wealth.

By the same token, avoid rolling over your credit card balance and avoid using unsecured credit lines. Many people unwittingly bleed financially from their over-reliance of easy credit.

Step 2: Build a Safety Net

One of the reasons why financial planning is so complicated is because life is a series of wild cards.

Car breakdowns, theft, layoffs, fire, flood, hospitalisation – there are a number of events that could hinder your plans to grow your wealth, for example, if you are planning to invest in fixed deposits or invest in real estate.These avenues are less flexible and you may not be able to access the funds locked up in them in the event of an emergency. Even if you are able to unlock them,you’d have to incur some form of financial penalty(or loss if, say, the property market is not in your favour).

And that brings me back to the second step of planning for financial fitness – building a safety net.

A safety net is a sum of readily available fund that is set aside specifically to cushion emergencies. As such, you should steer clear from using that fund, regardless of how much you want that new phone or what discounts the Great Singapore Sale is offering. Note that you may set aside another sum of money for entertainment purposes or for occasional splurging, but your safety net should be separated from these other funds.

Health insurance is another safety net you need to consider. Medical bills are not getting any cheaper, and huge unforeseen medical bills have been known to wipe out entire savings, so do prepare, I mean, insure yourself adequately.

Another issue you may wish to take note when planning for this step is that the amount needed for a safety net differs across individuals and families. Due to the fact that there are many incidents – such as layoffs, major illnesses or accidents – that halt your income, some financial experts state that your safety net should be able to cover your expenses for at least 6 months. Others, however, claim having a safety net that covers 2 months of expenses is plenty.

Planning your finances with the help of a financial consultant can help you determine the amount you need to set aside for your safety net. While you’re talking to your financial consultant, you can also have them get you the appropriate life insurance or medical insurance to protect yourself and reduce your exposure to large medical bills.

Step 3: Invest 10% to 20% of your income

Naturally, investment plays an instrumental role in financial fitness in Singapore. Inclusive of their CPF contributions, readers from Singapore should consider investing a total of 10% to 20% of their monthly income to build their wealth.


The Canadian millionaire, Kevin O’Leary, said it best.

“Here’s how I think of my money – as soldiers – I send them out to war every day. I want them to take prisoners and come home, so there are more of them.”
- Kevin O’Leary, Founder of SoftKey

Unless you have already retired, you’d have a constant stream of income after settling your debts and creating your safety net. Keeping that constant stream of income in your bank would be like grounding your soldiers in your camp. While this strategy keeps your soldiers safe and prevents them from dying in the battlefield (I.e – losing money due to poor investment choices), it also restricts their ability to capture prisoners (I.e – earning money from good investment choices).

So what do you do if you are not familiar with investment strategies? How do you differentiate between a good investment choice and a poor one?

You can always attend financial seminars in Singapore to educate yourself about investments and financial planning. Alternatively, you can engage an independent financial advisory firm to have key aspects of your wealth managed.

“If I engage financial experts in Singapore to manage my investment portfolio, should I invest ALL of my income to maximise my profit?”


Financial planning is important but life is more than just protecting your future self. It is also about living in the moment and enjoying life as it is. Investing all of your income, even after you paid for all your expenses, will deprive you of the joy of living in the present. As such, as a ballpark figure, investing 10% to 20% of your income might help keep you balanced while you build a fund to savour later. Nonetheless, to better identify a reasonable percentage specific to your situation, do contact your financial consultant to advise you.

And that’s the gist of it.

I wish you – my reader – good luck on your journey to financial fitness.

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs.

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Why HR Is Going to Save America’s Financial Future

t’s Up to HR to Save America’s Financial Future

It’s no secret that most Americans are struggling financially, even those with good jobs. The question is, what do we do about it? Obviously the status-quo isn’t the answer, because that’s how we got here.

The American workforce is in trouble financially, and it affects way more than the dream of a comfortable retirement. The current financial tools available to the average American aren’t designed to help with the basic first steps people need to take towards financial health. It’s not that the existing institutions are thoughtless, but it’s difficult to make any money encouraging people to do things that are free (like setting a budget or opening a free checking account).

In order for the problem to be fixed, a Hero needs to be found: a Hero who has it in their interest to help the American workforce, a Hero who has the tools to provide benefits to hardworking Americans, a Hero who has been overlooked in their capacity to help. That Hero is HR.

The Current Financial Crisis

Despite improvements in the economy and a decrease in the unemployment rate, 76% of workers are living paycheck to paycheck.1 Some of this results from stagnant wages against a backdrop of rising cost of living, but overspending also plays an important role. Most of us are programmed to spend up to our means, and with credit card and home equity lines of credit, it’s not hard to spend past your means.

Today’s workers are not putting funds aside for emergencies, which means that they are not prepared for expenses such as unexpected medical bills or car problems (63 percent of Americans say they’re unable to handle a $500 car repair or a $1,000 emergency room bill).2 Financial insecurity leads to significant personal stress, which impacts worker productivity. What’s really telling is this: The individuals who expressed concern about their financial health included those on the higher end of the income spectrum.3 This isn’t just a low-pay problem; it affects those who make larger wages. Remember that thing about people spending up to their means? Even if someone makes more money, they just tend to spend more.

Financial stress extends beyond immediate concerns related to living expenses. Most employees (61 percent) name retirement as a serious financial concern, and in Mercer’s 2015 survey, workers showed significant pessimism when it came to their opinions on how well their savings strategies are working: 39 percent said they expect to work at least part-time after retirement, and 35 percent are considering delaying their retirement due to financial concerns.4

401(k) Plans Aren’t the Answer

But wait, we have 401(k) plans, and they help people save for retirement! Although the 401(k) is a great tool with excellent intentions, the results of their almost 40 years in the workplace have been less than spectacular. Many employees simply aren’t ready or well-enough informed to take advantage of retirement programs. They can’t focus on retirement savings while monthly bills go unpaid. On top of that, the financial advice that comes with many 401(k) plans focuses on stocks, bonds, allocations, and annuities: completely missing the mark.

Many employees lack the personal financial knowledge to determine how much to save, how to properly use credit, how to get out of debt, and how to manage any remaining income. Advice on these topics is not usually offered as part of the 401(k) package, meaning the 401(k) doesn’t get used by many employees (31% of employees have $0 saved for retirement).5 After all, who can have a conversation about bond allocations when they can’t afford their rent or mortgage? The 401(k) plan is not the Hero we need.

We Won’t Be Saved by Standard Financial Services

There are many financial products and services in the marketplace. Unfortunately, because of the small margins that financial institutions make off of their services, people that don’t have large amounts of money to invest aren’t profitable for those institutions to focus on. Because of this, the current financial institutions are not incentivized to invest in creating and marketing solutions geared towards people on the lower end of the income spectrum. In addition, many of the services that people need (free checking accounts, budgeting tools, etc.) are very difficult to get any sort of revenue from. There’s just no profit in encouraging people to do free things.

Unfortunately, most profits derived from serving the under-banked tend to come from predatory products like high-interest pay-day loans and other detrimental products. These aren’t the tools that American workers need to improve their financial situations. In fact, they frequently make money problems worse for people. The existing financial services aren’t the Hero we need.

HR to the Rescue

HR professionals have a special interest in providing financial wellness to workers, because HR’s goals are furthered by the effects of good financial health in the workforce. Personal finances are a major driver of employee engagement. Employees that don’t have money troubles on the brain can focus on efficiency and productivity, while an employee worried about making this month’s rent is far less likely to be giving their all at work. Improving the financial wellness of employees results in lower overall expense to the organization through reduced absenteeism, presenteeism, and turnover.

HR has an extraordinary chance to change how the financial story ends for many Americans. By offering comprehensive, easy-to-use financial wellness programs, HR can help staff members improve their personal finances. Such programs provide guidance through every level of financial need, resulting in a workforce with fewer immediate financial worries, allowing them the ability to improve today as well as look forward to a well-funded retirement. HR and the company providing the financial wellness program stand to benefit from the results of a financially healthier workforce.

HR has frequently been thought of as an office that handles a few essential personnel functions, deals with compliance, and brings in new employees. It wasn’t clear before that HR has the keys to a solution that could impact the entire country. The solution comes through HR’s ability to provide benefits, HR’s need for happy and healthy employees, and HR’s impact on every worker in America.

Finally, we have it! We’ve found our Hero who has it in their direct interest to help the American workforce, our Hero who has the tools at their disposal to provide benefits to hardworking Americans, our Hero who has previously been overlooked! HR is our one great hope to get off the path we’ve been going down. The impact after just a few years of widespread adoption of financial wellness benefits at American corporations can mean the difference between a country that struggles to support its workers and retirees, and one that can boast strong finances for everyone. HR to the rescue!

Creating a Strong Financial Future

If current financial trends continue, the average American worker will continue to struggle with day to day expenses and a comfortable retirement will be more out of reach than ever before. Increased debt, leaner retirements, and continued financial stress are in our future.

An alternative is possible. HR has an opportunity to supply the tools needed to achieve financial security for millions of hard-working Americans. By offering relevant, personalized financial wellness solutions today, HR can create a better future in which employees enjoy less stressful financial situations and look forward to a comfortable retirement, thanks to better saving habits, lower debt, and well-funded retirement accounts.

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