Financial Lies Young Singaporeans Should Learn
Because we don’t often talk about money with the younger Singaporeans they tend to grow up believing financial myths. In general we tell too little about finance to our children a tragedy they will have to deal with sooner or later. Many are times we miss giving these lessons or when we give them, we tell too little of what seems practical at the moment.
Below are financial lies that we suggest young Singaporeans should learn
- Debt is never good
The truth be told; Owing money is better than having no money at all. Taking up a loan from Credit Excel Capital Pte Ltd to pay off your loans in a rush to clear yourself may not be the best option. Most of the times this will only leave you broke and stuck in the cycle of poverty. Let’s give an example so you get what am talking about. Let’s say you owe you owe $10,000 in student bills and you only have $8000 as savings, and your wish is to clear the debt at once. With the urge to clear your debt you will spend the $8000 in your savings not considering the risks that follows. The truth still, the debt is not yet cleared, since you still owe an extra $2000, and you don’t have any money left. What happens if you are hit by an emergency?
It is important that you clear your debts but don’t drain all your savings. Even if you have to clear your debts ensure that you have at least 20% savings on your monthly income. This may mean you may take longer to clear your debts and maybe incur interest but it is better than having no safety money.
- Leave money in the bank to accumulate interest
Keeping money in a current account is not the best way of earning interest. You may go on and keep some savings this way for easier access in time of need, but don’t be under the impression that this will increase your money. In fact, it will be doing the opposite.
Most Current accounts only have an interest of about 0.125% per annul a rate which is not sufficient to cope with the rates of inflation ( the rate at which the cost of goods is on the rise). The inflation rate in Singapore is about 3% p.a. (per annul). This translates to the fact that even if your money is earning interest in the Current account it will be losing its purchasing power with time.
An alternative to having a current account would be a Fixed Deposit Account. But even with this interests are always below 1% per annul except with special deals or promotions.
You should only save up to a maximum of 6 months income in your bank account. Beyond that the money should be invested in a balanced and well-diversified portfolio. There are many financial products that could help your money keep up with inflation, example, endowment plans. Seek the help of a financial adviser to know where to invest your money.
- Building passive income should be your first priority
Give first priority to your current income stream and grow it as much as possible. You should only think about passive income when you have the capability to open businesses, invest in real estates or make other intensive capital investments. Unless you won a birth lottery, thus born rich, these may not appear to be easy dreams to achieve. Focus on your current job to ensure you get better salary. Ensure you are hard working at work, in looking for employment opportunities (or worthy contracts if self-employed) that raise your earnings and in negotiating for a fair salary.
Next focus on earning extra income or side income, although this will demand more of your hours. You may have to work during weekends, work extra hours at your office or opt to update your skills and certificates by going back to school to help get better qualifications for jobs with better pay.
When you have earned enough to step out of the median wage threshold level, which is about $4000 per month at the moment, you can then think of owning a second property to lease it out. Until then, shun weak dreams and focus on becoming better in whatever you do.
- Being money minded is being shallow minded and materialistic
Thinking about money is the noblest thing you can ever do. People who are broke become burdens to their friends and families. When you need help and have no money others closer to you have to carry this burden. For example, if you are to need urgent surgery, this bill will rest on your parents’ health insurance or on your sister while she is already struggling to give a life to her children. Your friend who works quite many hours per week to make a living or provide for his family may be pushed to give in something to pay your bills, which is not fair.
Thinking about money only becomes materialistic if all you can do with it is spend it unnecessarily and unreasonably. These are not the money thoughts you should have.
If you can’t plan your spending, save some money for emergencies or consider the needs of those who are to depend on you, like parents in their old age, then you are just irresponsible with your money.
- A degree from a popular school gets you higher salary
It is never wrong to get good education and have great certificates. However, your employers will not pay you because you attended a popular university. They will pay you because you solve their company’s needs. If a diploma holding engineer has better skill than you in designing a desired kitchen sink, he will get that job before you, no matter what your certificates say about your education.
Not every employer will pay you what you expect even if you have the best of certificates, but if you have the capability to find needs and provide solutions then you will live to earn much more than you expect.
The key is skill deployment. The better skills you have and the more you deploy them to help someone the more they will pay you. The skills you acquire after tertiary education will determine how much you can earn. Therefore make it a habit to stay informed and to acquire new skills as needed by the developing world.