There are several principles in our spending habits that could affect our cash flows. Here are the tip and tricks to generate higher savings and cash flows. The saving interest rate is now 0.05 per month spreading across different banks, in which there was a change in regulations, at least a week ago from my current writing. Do take note that the following are mere advice and you may not agree to everything that I have written, as you may have your own strategic plan in your financial journey.
Savings habits
- This goes without saying, you should input a fixed amount in your savings every month after paying yourself. In this way, it is easier and much predictable to reach your financial goals.
- To generate higher savings would also mean reducing or remove as many liabilities as you can. Clear as much debt as possible to prevent compounding interest from acting against you.
- Get a savings account that can accrue a higher interest rate, although this may include other conditions like setting some amount aside for spending using Visa or Mastercard and you must save at least $500 per month in a saving account like this. Another transaction like transferring some amount to another bank account is not eligible for the increase of interest rate, unless for payment of services or/and products from merchants.
Spending habits
- It is advisable to have a budget tracking app to track your everyday expenses, although doing it consistently is difficult. You will become more conscientious in your everyday budget and spending in the long run, and eventually, you will be surprised saving more than you have initially planned.
- Buy things or services that have the similarity of a good ROI (Return of Investment). This means you should buy something that is very valuable and can sustain in the long run.
- Train yourself on thinking twice or even thrice to prevent yourself from buying things on impulse. You decide on how valuable those items actually are.
- Get a debit instead of a credit card if you just want to go for a frugal lifestyle with only the necessary spending. If you still want to own a credit card for benefits like getting KrisFlyer miles, earning cash back from regular retail spending, grocery shopping, etc; remember to always pay for your card by the end of the month to prevent late payment charges.
Lifestyle
- This sounds old school or traditional but you should live frugal in order to live a life free of the financial burden. This does not mean not treating yourself to good food, leisure, hobbies, activities with family and friends. What is money if you have kept saving, right?
- Changing to the latest trend of clothes, gadgets, cars, credit cards, etc are a luxury and is not advisable to grow your wealth. In the end, you are paying more for your temporary sense of excitement and achievement. Rich people are deep in their pockets and not to show off how rich they actually are.
- Many people like to travel and willing to spend big bucks on exciting great experiences. Do read some travel blogs and try different travel companion and advisor apps to receive as many informed recommendations as possible. It is at least much better than dubious merchants and stall owners who are not transparent about the pricing and is pushing their sales tactic onto you.
- By being a non-smoker, non-drinker, you are already saving more than your peers. Smoking a pack of cigarettes costs about $14 and a beer tower about $40. It is fine enjoying these activities once a while but you should drift away from the longer-term plan towards financial freedom.
Investment
- There are these people from a certain forum, who has mentioned their family and friends getting burned from buying stocks during the SARS period. They have thought about profiting in the crisis but may have forgotten about risk managing their financials by doing dollar-cost averaging. It is especially important to diversify your portfolio instead of speculating and putting a lot of faith in a single or a few stock prices.
- Having clear objectives like investment horizon, underlying funds, yields, investment objectives and underlying sectors in a different geographical setting could help you in making a better judgment in investing. Reading a financial and investment blog or articles may give you a better understanding of the demand and supply in the market.
- Investments are still much better than savings in the bank. Savings will have its value eroded by economic downturn and inflation. If you are still want to save without investing, get an endowment plan from any Financial Advisor in any of the FA companies. The projected value from the guaranteed p.a. of the savings plan would accumulate around 3.25%.
Properties
- You can generate positive cash flow from rentals after deducting factors like property tax, maintenance fees, and mortgage. Don't forget about Additional Buyer's Stamp Duty (ABSD) used in the deduction for additional properties brought. As a Singaporean, your first property does not require ABSD.
- Do a refinancing with the loans from banks which serve a lower interest rate as compared to HDB loans. Any additional amount remaining after paying for the house could be used for investments. By leverage with the right amount, you can maximize your returns
- Never overspend on your mortgage with more than 25% of your take-home salary unless you are very sure the properties brought can generate cash flow.
- The appreciation for housing can be due to accessibility, amenities, attractions, occupancy rate (ideally 95% or more), bustling activities.
- Properties with low psf and cheap property pricing do not guarantee to get an ideal number of tenants and rental income. Your data is your best friend. Sources like URA and foursquare are great in checking for units and the number of transactions. If you have an industrial property type, under the tenant purpose for renting the space. It could be used for warehouse and storage and does not get enough occupancy rate.
- It could also be a good idea to invest in REITs instead as you do not have to get a bank loan and large capital for the down payment. This may reduce the need to bargain with the property agent in getting a good price.
Insurance
- It is a very good idea to buy term insurance at a young age. Term insurance provides very low premiums but has high coverage, mostly death benefits.
- Always spend not more than 30% of your overall take-home salary on overall insurances. Do research on websites like gobear and comparefirst for best returns and across different financial institutes.
- You may include the policypal app to share the policy details with your loved ones. The app allows you to add a policy document from a variety of insurers for you or your family and friends' needs. It has a built-in portfolio to tabulate your total payment and find out the type of coverage you have been missing.
- Great insurance coverage includes all three areas of coverage from health protection, wealth accumulation, and planning for retirement.
Savings for university student
In order for you to receive the most amount out of your studies, you should look at the ROI (earnings after graduation which began to even out from school fees).
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