Money Matters to Know Before You Turn 30

Turning 30 is a significant milestone, often seen as a transition into full adulthood. For many Singaporeans, this period usually involves new responsibilities. As you approach this important age, it's vital to have a strong financial foundation. For the Zillennials reaching 30 soon, here are seven key money matters you should be aware of to ensure a secure and prosperous future.

1. Budgeting and Saving

A well-structured budget is the cornerstone of financial health. Track your income and expenses to identify areas where you can save. Consider the following split:

• 50/30/20 Rule: Allocate 50% of your income to necessities, 30% to discretionary expenses, and 20% to savings and investments.

• Automate Savings: Set up automatic transfers to your savings and investment accounts to ensure you save consistently.

  
  

a. Know your expenses

Tracking expenses is like everybody knows but hard to practice kind daily of habit. By keeping a detailed record though, you will gain a clear understanding of where your money is going, allowing you to identify unnecessary spending as things get more expensive and areas to cut costs if needed.

This helps to promote mindful spending, creating and adhering to a budget, and that essential expenses are prioritised. Additionally, tracking expenses can aid in building savings, preparing for emergencies, and reducing debt, leading to greater financial stability and peace of mind.

b. Emergency Fund

An emergency fund is your financial safety net. Ideally, you should have three to six months' worth of living expenses saved in a liquid, easily accessible account. This fund is for unexpected situations, such as medical emergencies, job loss, or urgent home repairs.

Building an emergency fund can prevent you from going into debt or derailing your long-term financial plans. Don’t touch this fund for travels or branded goods, save more money for those instead.

2. Understanding CPF

The Central Provident Fund (CPF) is a key component of Singapore's social security system. It's essential to understand how it works, especially the Ordinary Account (OA), Special Account (SA), and Medisave Account (MA). Contributions to CPF not only help in saving for retirement but also for housing, healthcare, and education. Make sure you're maximising your CPF contributions and taking advantage of the compound interest it offers.

3. Insurance Coverage

Insurance is also a vital part of financial planning. You should have adequate coverage in several areas:

• Health Insurance: Ensure you have a comprehensive health insurance plan that covers hospitalization, critical illness, and outpatient treatments.

• Life Insurance: If you have dependents, a life insurance policy can provide financial security for your loved ones in the event of your untimely demise.

• Disability Insurance: This can protect your income if you're unable to work due to a disability.

4. Debt Management

By this age, you should aim to have a solid debt management strategy. This includes:

• Paying off high-interest debts: Prioritise clearing debts with the highest interest rates, such as credit card balances.

• Student Loans: If you have student loans, make regular payments to avoid accruing excessive interest.

• Good Debt vs. Bad Debt: Understand the difference. Good debt, like a mortgage, can help you build wealth, while bad debt, like high-interest consumer loans, can hinder your financial progress.

5. Investing for the Future

Investing smartly is for growing your wealth faster. Try to be familiar with different investment vehicles, such as:

• T-bills and Fixed Deposits: Preferred options for those who want shorter terms low risk investments.

• Stocks and Bonds: Understand the basics of the stock market and consider a diversified portfolio.

• Real Estate: Property investment can be a good long-term strategy, especially in Singapore's robust real estate market.

6. Building Multiple Income Streams

Relying solely on your primary job can be risky in the recent waves of retrenchment news. Consider developing additional income streams, such as:

• Side Hustles: Freelancing, tutoring, or starting a small online business.

• Investments: Generate passive income through dividends, interest, or rental properties.

• Skills Enhancement: Invest in education and upskilling to increase your earning or promotion potential.

7. Tax Planning

Understanding and planning for personal taxes can save you a significant amount of money as not all income earned are considered assessable income. For instance, lottery winnings and capital gains made from stocks investments are not taxable. Familiarise yourself with Singapore's tax system, including:

• Tax Deductions and Reliefs: Utilise available deductions and reliefs to reduce your taxable income.

• Investment Taxation: Be aware of how different investments are taxed to optimise your after-tax returns.

Turning 30 is a pivotal moment to reassess and strengthen your financial health. By focusing on these key areas — budgeting, emergency funds, CPF, insurance, debt management, investing, income streams, and tax planning — you can ensure a solid financial foundation for the future. Start taking these steps today to secure your financial well-being and build a prosperous life ahead.

Master Your Finances Wisely,

Value Vaulter