If you are a young Singaporean male who has yet to enter National Service (NS), congratulations! You have just clicked on the right article.
We decided to write today’s article because we know that there are many young guys out there who are just like us – absolutely clueless when it comes to financial matters before entering NS. We understand – we were once in your boots shoes.
Here are 5 financial planning tips that we think all NS Full Timers (NSFs) should know about.
1. Save… Before You Spend
According to the Credit Bureau Singapore, more than 100,000 people in Singapore have credit card debt. 1 in 3 Singapore investors are also in debt. Examples of debt include personal loans, student loans and credit card debts (mortgages are excluded).
If you are spending more than you are earning, you will eventually end up in debt. It’s that simple.
For NSFs, we start out as recruits with a low allowance. As we get promoted, our allowance starts to increase. But does this increase in allowance make us save more or spend more?
If you are spending more instead of saving more, then your financial priorities are clearly not in the right order. This problem wouldn’t be major, yet, but if you continue to leave it unchecked, this bad habit would follow you into the working world, where you would have more challenging financial matters to manage.
The solution to this problem is to prioritise saving before spending. Here is an illustration of what it means to prioritise your savings over your spending.
|Monthly Allowance||Monthly Spending||Monthly Savings|
|3rd Sergeant (Prioritise Savings)||$880||$500||$380|
|3rd Sergeant (Prioritise Spending)||$880||$820||$60|
Forget about boring budgeting classes. If you learn how to save before you spend, you will naturally become good at spending below your means.
2. Buy The Right Insurance
On your enlistment day, you might encounter enterprising insurance agents loitering around Pasir Ris MRT, hope to generate leads for their insurance products and services.
Do yourself a favour. Stop, and accept their name cards.
That said, we strongly advise against buying anything on the spot from these agents. If you do meet them in the future to chat about your financial needs, do not be obliged to commit to any policies just because they bought you coffee.
Your agent should be focusing on what your needs are, rather than on selling you products that he or she is pushing. Common examples of useful insurance policies at this point in life would be an integrated shield plan as well as some basic life insurance coverage (if you don’t already have them).
It’s common for agents at this point to try pushing for Investment Linked Policies (LIPs). Say “no” to these. They are expensive and come with many different types of cost. You would be better off just saving money first while learning how to invest on your own.
Which brings us to the next point.
Read Also: The Ugly Truth Of ILPs
3. Start Reading Up About Investing
There will be lull periods during NS. This gives you an opportunity to read up on useful knowledge for the future.
One of the things that should definitely be on your to-read list would be investing. Picking up basic investing knowledge at this age would be useful for your future. You can also consider reading some of Singapore’s top personal finance blogs.
If you go on to study finance, it will help expose you to some of the basics. If you take another degree, the investing knowledge that you picked up would still be relevant in the future.
Read Also: 5 Must Read Financial Articles In Singapore
4. It’s Okay To Dabble In Stocks
Upon learning some investing knowledge, you might be tempted to dabble into stock investing. Go for it!
The way we see it, there are two possible outcomes.
One, your investment choices pan out well. The companies you bought into showed the good business growth that you expected. As a result, its share price increases and it gives out more dividends to its shareholders.
Alternatively, the companies that you invested in may not perform well. There might be reasons for that. Perhaps you focused too much on just one or two sectors. Or you started investing at the wrong time, just as the overall economy was declining.
Whatever the reasons may be, you will learn an important lesson on the risk of investing. And it’s better to be taught an expensive lesson when you only have $3,000 in your bank account to lose, rather than $30,000 in the future.
5. Spend Time Thinking Of What You Want To Do
2 years give you a lot of time to think about what you want to do.
If you are pursuing your studies after NS, then you should study something that is related to what you hope to pursue as a career. All too often, young people make the mistake of studying what they are good at, rather than what they are interested in.
If you are heading straight to work after NS, then you should be deciding on what career you would like to go into. If you know exactly what it is, you can start making some plans during NS to pick up an evening course or some skill sets that you need for your future job.
It may not be enough to teach you everything you need to know, but at the very least, it shows your future employers just how serious you are towards working in the job that you want.
National Service Could Be When You Start Financial Planning
The enlistment age of 18-19 is when it is timely to start thinking about financial planning. NS provides an opportune moment for young Singaporean guys to start financial planning. Making the most of your time at NS can start you out on the right financial footing.