Tips on how to be Money Sensible
I take charge of my personal finances by
- Keeping my living expense low and tracked.
- Making sure a portion of my income goes to my parent well fare because it is our duty as a son to take care of them.
- Automating a portion of the balance to a saving account that is not easily accessible. We should not spend and Save. Rather, we should Save then spend.
- Paying up good debt as soon as possible. Example. Property Loan. I do not want the power of compounding to work with debt on me. In addition, use all the CPF Housing Grants that is available.
- Upgrading myself using SKILLFUTURES (saving again) to get promotion and raise in INCOME so I can save more and Gain More from CPF contribution from Employer. With the Saving, I will use the power of compounding on my side. Example. Rule of 72.
- Making Voluntary Contribution from Extra Income by giving Tuition, to my CPF Special Account to compound my way up to the projected minimum sum of my 55 year old age. Note that point 4 and 5 is helping me too. The reason is to get a Good Sum of Money by age 55 when I can withdraw the excess from Minimum Sum. My choice to retire will start from Age 55 from the excess sum withdrawal which stretch to Age 65 when CPF life takes over by the monthly payment to me. Please note, CPF is just one of the retirement vehicle. SRS account is also a good vehicle if you know how to invest the money properly for growth and take note SRS withdrawal starts from the statutory retirement age. You will need to know this in your retirement planning.
- Using my Medisave to pay for my Hospitalization and Surgical Insurance.
- Buying term payment insurance WITHIN MY MEANS that give me SUFFICIENT protection for Life but only pay for 25 years with Critical illness rider (CI) which I projected for lose of income for 5 years treatment and total permanent disability/death benefit that can benefit my dependents after my departure. Please Note: Some CI coverage stop covering from Age 64 and CI is for loss of income not Hospital Bill. You can refer to the proper channel to get the most detail information on your own policies. Point 7 should cover all Pre and Post hospitalization bills.
- Utilizing my saving to get passive income by buying into business that deal with my daily expenses. Example is to buy a Good Transport business and my transport fee is return to me by dividend and/or compounding back the dividend to grow my passive income for my choice of retirement by age 55. Suppose to work together with Point 6. Only Invest within your means and only AFTER all the basic needs and protection of your family are fulfilled. Never risk something you need for something you want.
- Preparing a WILL after marriage (because a marriage will void a WILL) so that my estate will go to the people I love and the amount will be according to their needs. Please note that doing a WILL will save a lot of time and cost for the people you love. You do not want them to suffer more after our departure. Also you get to choose the right person to be the Executor of the WILL to avoid complication and more pain.
- Making sure my CPF Nomination is up to date for the same reason as Point 10. Please note A will does not cover the distribution of CPF savings after death. You will need to make a CPF nomination if you wish to distribute your CPF savings according to your wishes.
- Appointing a donee using Lasting Power of Attorney to make decisions and act on my behalf as my proxy decision maker if I should lose mental capacity one day. Please note this is important so that people who care for me won’t suffer MORE because of my lose of mental capacity and they can use my Savings and/or Passive Income to take care of me. I do not wish that my loved one have to suffer while I am still alive and only a WILL which needs me to departure then my personal saving and passive income is release to them.
- Staying Fit and Healthy (Example, by training for IPPT and try to score Gold for extra income $500) and to avoid Medical Bills from GP that cannot be claim and which can be avoided.
- Last but not least, all the planning should work towards retirement planning in each stage (age) of our life and reach financial independent before reaching financial freedom. That means we can still choose to work (to stay active) even when we reach retirement age and have a good retirement income.
by Jason Koh