Financial Planning as a 24 year old 🕶

Sharing my financial planning as a 24 year old for yall trying to do adulting like me! 🥲 I am NOT AN EXPERT and this is not financial advice so just do your own research and make decisions based on your own income, circumstances, etc❗ I just want to share to gain insights from others and maybe shed some light for those who are lost so they get some idea of what's out there. 💫 Okay, on to my very long post!

First of all, my monthly income (after deducting CPF) is split into 15% savings, 40% expenditure, 40% investments and 5% insurance. So basically my budget each month to spend is 40% of my salary and I try to spend less so my savings is usually more than 15%. My investment and insurance amount is fixed. Okay, what does each part consist of and why that percentage?

1. Spendings ✅

Obviously, all my wants and needs: food, transport, shopping, etc. I also include my parents allowance in it (I give 5% but this is a really personal decision so you should decide by yourself). Also, if you are worried about HDB mortgage in the future: don't worry because you can expect to pay the mortgage off with CPF OA amount monthly and top up mayb just a few hundred which can still be within 40%. It's definitely good to aim spending well below your budget because you might have a month or two where you exceed due to paying for a big ticket item. Also, make sure you plan your overseas trips to be within the budget of how much bonus you get from your company so you don't actually bust your budget at the end of year or decrease your spending budget.

2. Savings ✅

This is basically excess money from the other 3 segments. Usually mine is slightly more than 15% because I spend a little lesser than 40% and my other segments are fixed. Why is mine 15% so little as compared to most people at 30%? Okay, this is because my investments consists of very low risk investments which are sort of like savings (endowment & money market fund) and I have made good progress in saving up for my short term goals like buying a HDB (downpayment), wedding (waiting for my BF to save up enough on his part since I started working 1 year earlier). This segment is different for everyone depending on what your short term goals are and your progress towards it. If you are still saving for the HDB downpayment then obviously this part should be 30% or more.

Savings consists of 2 parts. One is very liquid money that is for your spending and is also your emergency fund which is usually just kept in your bank account. Usually people advice that this sum in your bank account is 6-12 times your monthly spending but for me its exceeding but I'm okay with it because I have a high interest bank account where I am earning about 4-5% on it (learn more about it: here). The other part that exceeds the amount allowed to earn high interest in the high interest bank account can be put lumpsum in Singapore Savings Bond, T-bills, Fixed Deposit, etc which is a very secure and safe places to keep the excess savings which is earning a decent interest of 2-5%. Currently, I only have SSB. This money however should be money you are not using in the very short term as it's usually parked there to earn that interest and withdrawing it forfeits the interest. So for example, if you are buying a HDB soon, make sure your Fixed D or T-bills, etc fit your goal timeline.

3. Insurance ✅

This is your wealth protection. Okay, this part can vary from 5% to 15% depending on your company insurance coverage level and salary. Since I have pretty good insurance coverage from my company and as a dependent of my BF for his company insurance, I only put in 5% to my personal insurance so that if something happens when I am unemployed, I still have some basic coverage. This is risky because if something happens to my health and my new company does not have good insurance benefits coverage, then I wouldn't be able to upgrade or increase my coverage for my personal insurance anymore but so far, I'm taking the risk because I don't want to pay for something I'm not using. Anyways, you should minimally get a hospital plan, accident plan, term or life plan (includes TPD) and critical illness plan. There's guides online for how much coverage you need for each based on your salary so you can also adjust your percentage based on this amount.

4. Investments ✅

This part is wealth accumulation (sort of but I think income is the best lol). Basically, this is putting away your money for the long term goal which mainly is retirement! Mine is slightly high at 40% because of what I have explained under Savings. There's so many ways to do this and I think this requires another post but overall, I put my investments in a few places. CPF is sort of one (savings/secure investment) but its already not included in my planning since its compulsory. I also have an endowment plan (from AIA). I treat it as a compulsory savings which I cannot withdraw for a certain period (I chose 20 year, usually you can choose 10, 15, 20 or 25 years) or I will lose quite a big sum of money in exchange for a decent interest of 4-5%. I consider it investment because its not liquid but you could technically say its savings too. It's like CPF, but I get to withdraw the whole sum when I want it nearing retirement. This plan has a sum guaranteed which makes sure that even with a market crash when I want to retire, I will have a good sum to take first and is a time-tested method. Another portion is placed in money market funds which is also a rather secure investment that yields about 3.7-5% interest anually. You can read up on Syfe Cash+ or Endowus Cash funds if you want more info. Honestly, this portion could also be counted in your Savings, not investments because it can be used for short term but I just put it here as I use it mainly to sort of diversify my portfolio. The other portion is more risky investments which can be in unit trusts, robo advisor portfolios, ETFs, stocks, etc. For me, I was considering ETFs, unit trusts, Investment Plan from AIA and Robo advisor portfolios. Ultimately, I chose to try out Endowus's flagship portfolio of 20% fixed income and 80% equities. I was afraid I could not keep up enough with the news to manage my own ETF portfolio. Though ETFs itself is diversified, there is no portfolio managers to adjust anything since its just a group of stocks so you also need to learn about the ETFs and its stocks and make adjustments overtime as the world market trends change (developed markets vs emerging markets, etc). Investment plans from AIA sounded really enticing as explained by my FA but the management fees of 3.5-4% was too high for my liking. Unit trust and robo advisors portfolio had lower fees of about 1.5-3%. In the end, I chose the robo advisor portfolio from Endowus as it had lower fees than unit trusts and is the main product of Endowus so I feel that they would try their best to make sure the portfolio does well. Another investment would be my own company stocks as I enrolled into my company's stock buying benefits (won't share much about this since its not really relevant to most people). Overall investment portfolio is about 25% endowment, 35% cash funds, 25% equities robo advisors portfolio, 15% company stocks which is a rather balanced/conservative portfolio that I might adjust to be more aggresive soon.

Oh my you made it here, congrats! ✨ Hope this gave you some insights on how a random 24 year old non finance person is doing financial planning! 🙊 Honestly, it took me a year to figure out the different instruments available to do my financial planning since its not something I look into regularly so don't be anxious about adulting and just take things one step at a time. I think you can also try to meet up with Financial Advisors from Insurance companies to let them teach you about financial planning, though they will also try to sell you their products. ✅

Comment your opinions or anything that I'm not doing right! 📣 I'd love to learn more! I'm no financial expert but if there's any question I can try to answer or maybe someone else will! 💁‍♀️

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