Good financial habits are the cornerstone of a secure and fulfilling life. Whether you are just starting your career or approaching retirement, practicing sound money management can help you achieve your financial goals and weather unexpected challenges. After speaking to many friends over the festive season, it is still surprising to hear that alot of individuals are either not saving enough, or simply leaving their money in the bank.

Here are five essential money habits to consider adopting from the moment you receive your first paycheck until your retirement years.

1. Budgeting: The Foundation of Financial Success

Budgeting is your first step to financial clarity. Tracking your income and expenses ensures that you are living within your means and saving for future goals.

Start Early: From your first salary, create a simple budget using the 50/30/20 rule: allocate 50% of your income to needs, 30% to wants, and 20% to savings or debt repayment.

Adjust Over Time: As your income grows, revisit your budget regularly to account for new responsibilities like housing, education, or healthcare.

Tools: Use budgeting apps or an excel spreadsheet to simplify tracking.

Pro Tip: Always include a “miscellaneous” category for unexpected expenses to avoid overspending.

2. Save Consistently, No Matter How Small

Savings are the backbone of financial security, and starting early can maximise the power of compound interest.

Emergency Fund: Aim to save three to six months' worth of living expenses for emergencies, providing a buffer for potential unexpected situations like job loss or medical crises.

Stack Bonuses: Credit your salary to a dedicated higher-interest savings account like DBS Multiplier or UOB One every payday. Coupled with giro or credit card expenses, you can get some money back on top of pure savings.

Diversify Goals: Include short-term goals (vacations or gadgets) and long-term objectives (a down payment for a house or retirement).

Pro Tip: Treat savings as a non-negotiable expense, just like rent or utility and phone bills.

3. Invest Wisely for the Long Term

Investing allows your money to grow over time and helps combat inflation.

Start Early: Even a small investment in your 20s can grow significantly by retirement due to compound interest.

Diversify: Balance your portfolio with a mix of fixed deposits, T-bills, bonds, stocks, or other assets based on your risk tolerance and financial goals.

Seek Professional Advice: If you are unsure where to start, consult a financial advisor or consider robo-advisors for tailored investment strategies.

Pro Tip: Investing isn’t about timing the market, but staying invested for a long term, and harnessing the power of compounding.

4. Minimise and Manage Debt

Debt can be a financial drain if not managed carefully, so it is essential to develop healthy habits around borrowing and repayment.

Avoid Lifestyle Inflation: Resist the urge to upgrade your lifestyle every time you get a raise. This can keep unnecessary debt at bay.

Prioritise High-Interest Debt: Pay off credit cards and high-interest loans first to reduce financial strain.

Use Credit Wisely: Build a good credit score by paying bills on time.

Pro Tip: Stick to borrowing only for appreciating assets (like education or a home), and avoid debt for discretionary spending.

5. Plan for Retirement Early

Retirement planning might seem distant in your 20s or 30s, but starting early can make a significant difference. Legit, recent encounters with various seniors showcased the need when medical expenses and more can quickly deplete savings. Some of you may have heard of FIRE (financial independence, retire early), which includes determining your target retirement income and lifestyle, lasting for 25 years or more.

Contribute Regularly: Check and allocate a percentage of income to your Central Provident Fund (CPF) balances to ensure you are on track to meet the various Retirement Sums, which will help fund basic needs in retirement.

Revisit Goals: Periodically reassess your retirement plan to account for changes in income, lifestyle, or market conditions. Do not overestimate your future sources of income or underestimate potential expenses. Do consider the location and housing type for retirement too, as the cost of living would differ and include other expenses such as taxes, transportation options, plus access to amenities.

Pro Tip: Use CPF’s monthly payout estimator to estimate how much you need to save to retire comfortably.

Conclusion

Financial habits, much like physical fitness routines, require consistency and discipline. By starting early and adapting these five habits, you can build a solid financial foundation that not only supports your immediate goals but also ensures long-term security. Remember, the key is to start small, stay consistent, and adjust as your life and income evolve. Your future self will thank you!

Master Your Finances Wisely,

Value Vaulter