If I was 21 years old again, what would I have done differently in my finances? | Expert views
Alfred Chia, CEO, SingCapital
If I was 21 again, I would marry my wife as early as I can and apply for our Housing Development Board (HDB) flat. After the minimum occupation period, I would move on to an Executive Condominium, and then after that I will upgrade to a landed property. That would fulfil my property investment journey where I maximise my opportunity as a Singaporean. And, I would use cash to service my housing loan instalments, leaving the money in my CPF account to grow.
Aw Choon Hui, Deputy CEO, GYC Financial Advisory
This is the advice I would give to my 21 year old self who is just starting to earn an income.
- Diligently invest at least 10-20% of my income monthly into a low cost global equity index fund that is weighted towards academically proven sources of return. To avoid the temptation of selling out when markets go through volatile patches. Try to invest any spare cash during market crashes.
- Buy at least $200K of critical illness insurance that covers the rest of your life. This will provide cash for treatment as well as sustain living expenses (in case you need to stop work) during recovery periods from any protracted critical illness. You can either buy this as a rider to a whole life plan or term insurance.
- Get an integrated shield plan (using Medisave to pay the premiums). This will cover the bulk of hospitalisation expenses. If you can afford it, go for the private hospital coverage as premiums are low when you are young. You can always easily downgrade the plan later if necessary. On the flip side, it is harder to upgrade any plan later as you may become uninsurable due to new medical conditions.
- Work out a budget and stick to it, reviewing it once a year.
- Start saving for a house that is affordable enough such that mortgage payments can still be met during periods of unemployment (eg. retrenchment) as well as reasonable interest rate increases.
- Engage a financial adviser who is adept at both insurance and evidence-based investing.
- Find a spouse who also shares the same values about money
The GoBear Team
If I was 21 again, I would start to research the different life insurance and health insurance plans available, because starting early means having lower premiums to pay per month.
I would put my money in 2 banks, one for fixed expenses and one for high-yield savings. That way I can earn a higher interest on my savings, and earn rewards for my spending.
I would also take up a tuition fee loan instead of paying my tuition fees in full (since tuition fee loans are interest free before graduation) and use the money for small investments or start-up projects.
Albert Tse, Head of Intermediary Business (South East Asia), Schroders
If I were 21 years old again, I would start planning for retirement right away and invest in a diversified portfolio to do so. That way, I could have accumulated a bigger fund to support my post-retirement needs.
It is understandable that the younger generation across the globe may want to focus on their immediate financial needs, whether it is buying property, paying for tuition or supporting elderly family members. Some are not prepared or able to commit to investing more of their hard-earned money into long-term retirement schemes, which will likely realise benefits for the savers only 40 years down the road. Current economic uncertainty may also in a way influence savers to focus on the near term instead of the future which may seem challenging to plan for.
Yet, younger savers need to realise that decisions made early in their working life can have a bigger impact on building their retirement nest egg than later. As life expectancy in Singapore continues to increase, individuals will need to prepare more for their retired life, and it is also likely that they will have to financially support their parents for a longer timeframe. All of these will add further strain to the financial resources that individuals build up over time. As such, younger savers need to note that, unless they start taking action now, they will unlikely be able to build up adequate resources upon retirement, especially if they only rely on CPF alone.
I would go for a diversified portfolio as diversification helps control risks while achieving an investor’s desired outcome despite a low-growth environment. As young investors will go through fluctuations in market cycles for a longer span than their older counterparts, it is particularly important for them to be able to maximise risk-adjusted income by investing flexibly across a diversified portfolio, which is vital in protecting savings through volatility.
Kazumasa Tomita, Founder, ZUU Online
I would have learnt how to read and utilise financial statements, like Profit & Loss Statements and Balance Sheets, because it is super powerful in business and in life.
In business, it speaks of the shape of each business model. We would still need to check other aspects of the business, but these figures don’t lie.
On the other hand, in our lives, these help to manage and express the financial condition of the individual. In private banking, bankers use them for their client’s asset management and it is far more valuable than their portfolio. An individual’s balance sheet can include the intangible aspects of human capital, like knowledge, skills, personal connections, health and credibility. These can in turn generate cash flow in the individual’s profit and loss statement.