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Anonymous
I’ve just hit my 1 year mark in the workforce, salary basic $3k. I also earn passive income each month by through tuition.
However, I’m still in school debt of about $28k, which I’m paying $500 a month towards.
I’m also supporting my fam ($500/month).
I invest only $100/month as I’m still trying to build my savings.
I feel discouraged when I look at my peers who has no debt at all. Any tips on what I can use as a benchmark?
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Hi there anon!
I’m sure many undergrads & fresh grads are in a very similar position as they begin sorting their personal finance. Here’s my two cents worth of opinion!
TL;DR: Follow our Seedly Personal Finance Guide & Seedly Salary Allocation Model
Achieving financial independence begins with managing your personal finances well, which comprises of the following 5 verticals:
I would touch on all of them in my sharing below but do refer alongside this Seedly Personal Finance Guide for more details :) For starters, I wanted to introduce you to Seedly’s income allocation model. I’ll be using $2,400 (your after-CPF salary) in the following example:
1. Expenses/Spending: 50%
Additionally, if you’re thinking of getting a credit card, I would say pick those that will reward you with cashback! This makes your expenditure feel a little more worth it / hurt a little less. I personally wouldn’t focus on any travel plans until my student debt is cleared, therefore, I wouldn’t suggest getting a miles credit card. Here’s a Seedly article recommending the top cashback credit cards in 2019.
2. Investments: 30%
3. Savings (& Debt): 20%
You didn’t mention anything about the amount you save every month at the moment besides the fact that you would like to grow it. That said, I’ve got 2 things I wanted to point out:
With regards to your question on what should be your benchmark, I would say your peers are definitely not it. Your peers have different jobs, family backgrounds, lifestyles, and investment preferences - it’s impossible to find someone remotely similar to you and your financial position. Therefore, you shouldn’t compare yourself against them and their financial positions, it’s not a fair match. In short, there’s no need to feel discouraged because the comparison shouldn’t even take place. I think you’re doing great because you are:
I hope this helped, all the best and keep up the good work!
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Vincent Tan Wen Bin
03 Jul 2019
Assistant Vice President at Thinkers Alliance
I can understand why you are worried. Comparing yourself to your friends who do not have any study loans is demoralizing.
Instead of spending the energy being envious of them, use this reason to spur yourself to work harder.
There are many success stories of people who started off with odds against them and they turn it around. Let this be the reason to spur you up instead of bringing you down.
I would recommend you to read the book "The Richest Man In Babylon". The methods in the book is simple and effective for you to build wealth. These are fundamentals that you can use to increase your wealth step by step.
In your situation, I would attack the debt aggressively. Have a goal to clear it within a deadline. Channel all your energy to clear the debt within your deadline and doing so can build up your resilence and create momentum for wealth building.
In the meanwhile, invest in yourself. Go to the library and borrow books on personal finance, investing, personal development and build up your skillset and confidence. I equate financial independence as success. And you do not chase success, you become someone who is capable of being successful and success will come to you.
This takes time and the only way to achieve that is to keep investing in yourself to grow.
I hope what I share can help to inspire you and I would love to hear how far you can get to in a year or 2.
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Eric Chia
03 Jul 2019
Senior Financial Consultant at Prudential
Your family and debt commitments are very high! They take about a third of your take home income (after considering CPF contribution).
3 key benchmarks based on your situation:
1) emergency fund and insurance is a must, especially since you are supporting your family. With your situation, I'd suggest setting not more than $100 a month on insurance, you may want to get a term plan covering 10 years with high protection plus medical and accident with it, then consider upgrading to whole life plan after that
2) investments - know your risk appetite and set your goal, how much you want to get in life. $100/ month is a good start if you're aggressive. You may want to tighten your spending further (sorry to say this because you've high commitments compared to the salary that you're drawing)
3) part time income - how much are you charging for tuition? Are you earning more dollars per hour compared to your full time job? Otherwise you may want to charge more for the tuition because you're spending extra time that you sacrifice outside of office working hours to get more money
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Looks like most of the answers are focusing on numbers and a game plan so ill try to answer this fro...
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The most important thing before investing is to be completely free of debt.