Asked on 02 Feb 2020
Been working for 4yrs+ now but I don’t had a savings or investments plan. I am only monitoring my expenses by making sure I don’t exceed certain amount for cc bills. Always wanted to set up a separate account to set aside money monthly for savings yet I don’t want to fall below the account balance required to get the higher interest in my main UOB One Account. I’m also keen in investing but am quite risk averse. Would love to seek advices from the Seedly community~
Let me start by breaking it down into two key things for you to look at:
Expenses and personal finance
Expenses will dictate your cash flow. If you spend more than you earn, then you'll never find the money to invest. Conversely, if you spend less than you earn, the excess left over at the end of each month is your cashflow. Granted, this varies from month to month, but start by tracking your expenses daily, item by item, if you really want to execute this with rigour. Categorize your spending by category, e.g. needs and wants.
After a few months, you'll know how much you are spending, and how much of it wasn't really needed. That will help you decide if your cash flow can be improved, or it's pretty much there. Short of increasing your salary (i.e. human capital), you will have to work around this figure. Sort out your emergency funds and insurance (you should have done that already, I won't elaborate here) At this point, you should aim to have 20% of your income or more available to invest. Also, maximize the high interest savings accouns.
The meat of the question. I won't be turning this into an essay, but the key things you'll want to do are to pick up knowledge. There are many asset classes to look at. Have a clear goal in mind. What are you investing for? Retirement, etc? With that goal in mind, you will have a target to work towards. Understand what are the pros and cons of each asset class.
Then, take action. Open a multi asset brokerage account. Do your home work. Research, read, ask questions, and formulate your strategy. If you are risk adverse, it doesn't mean that you can't invest in shares. You just need your overall portfolio to be skewed towards 'safer' investments, which means you need a heavier proportion of your investments in fixed income, or even guaranteed products such as endowments, SSB, FDs.
From your cashflow, you will have an idea of how much you can set aside to invest monthly. It doesn't need to be all deployed immediately. Just earmarked for investing. I'm doing RSP DCA for UT, while setting aside money in a warchest for stock opportunities, all while forcing myself to set aside money in an annuity to ensure peace of mind for my retirement. And since I'm self employed, I'm also putting money in CPF on my own accord. The permutations are endless.
Then, be prepared to do monitoring and adjustment of your portfolio as needed. This is often the part where people will eventually lose track of things as life commitments come in to 'steal' away your attention and time. Frankly, there's no easy way around this. At this point, some people may entrust their portfolio to an advisor to monitor. There is no right or wrong answer, just what fits you.
Before you even start to invest, please make sure you have enough money for your rainy day fund as well as your daily expenses. Once done, you can look at options such as robo advisor or regular savings plan.
Assuming you do not want to build your own diversified investment portfolio, there are many ways you can start investing, including but not limited to:
Advisor-assisted brokerage such as iFast Global Markets, where you have an advisor tagged to you to advice you on building a customised investment portfolio based on your risk profile.
You have great intend in what you just asked, and based on what you are sharing, you have good discipline when it comes to money and I respect that.
I think having 2 accounts is a good plan, because it does enforce us to have a spending and a saving account, and subconsiciously it also becomes a discipline as well. I heard someone mentioned before, the most important things to us should be auto-mated, so that we can use that focus else where and not worry.
If you tend to be risk adverse, I think you can consider getting a savings policy as these kind of policies are participating policies, meaning part of your premiums are used by the insurer into safer investment ratio so that most of your capital is protected, but yet there is returns from the slightly riskier form of investments. Of course there might a downside in getting a savings policy from insurers because you lose that liquidity, unless of course you are looking to save for a period of time and get a lump sum at maturity of the policy.
But of course I'm not asking you to put all you savings into a savings policy with the insurer, the wiser choice would be to save some in the bank and some into such a policy so that you have both liquidity (bank) and also better returns (savings policy)
When trying anything, always start small. Similarly, since you are risk averse, you can try putting in small amount in investing and see how it impacts you. If you feel that you cant sleep at night, then switch into something less risky that allows you to sleep well at night.
I make videos about interesting stuff at youtube here
ETFs are already super diversified f.ex. SP500 or MSCI World.
If they drop after buying just have patience, after 2-4 years everything went fine at least in the past. donate also...
Hey! Education is the best investment, especially if you're starting late. There's tons of FIRE blogs are there, but if you're like most heartlanders in Singapore, with at least a 30 minute commute in the morning, i would suggest downloading the app Libby, where you can borrow ebooks from the National Library very user-friendly interface (wayyy better than the previous method of using Overdrive). It's super convenient, super easy, and works almost like kindle.
My top recommendation is the following book available as an ebook via Libby
Financial Freedom: A Proven Path To All The Money You Will Ever Need by Grant Sabatier. My personal review is that this book covers 95% of everything you need, including how to ask for a raise, how to start a side hustle, how to invest etc. If you need a great starting point, i think this is it. This was written by the blogger of millenialmoney.com and he also has a fairly informative podcast. Go check those out as well.
I guess i will end with: for almost anything, the best time to start was yesterday. But the next best time is today. And you dont have to start perfect, or start 100%, you just have to start. And i think the above book will give you more than sufficient strategies/tactics to get started in 90% the right direction.
I just want to add that all the "tactics" are available on the internet, but what's actually more important is the mindset. Are you clear on what are your financial goals?
Best of your luck.
You seem young given you only worked for 4 years plus.
I hope when you mention investment plan you don’t mean ILP, but rather a plan for you to act on.
If you are very risk adverse several options for you are CPF OA and SA voluntary top ups.
Then investing wise now you can invest into a few blue chip companies in SG or buy some bonds or bond funds.
Do your own research to see which suits you.
If you have no time to research individual companies or bond issues, maybe consider dollar cost averaging methods into ETFs/bond funds.
And if you can only contribute
02 Feb 2020