In the second half of 2020, HSBC conducted a FinFit Index study of 1,200 respondents to uncover the financial habits, knowledge and financial security concerns of Singaporeans. The results, released earlier this year, provide further insight into the main financial problems facing Singaporeans.
Additionally, we’re exploring some simple ways you can improve your FinFit (financial fitness) game so you are in better shape. While we are already four months in 2021, it is not too late if you want to turn the knob up.
What are the main financial problems for Singaporeans?
As part of HSBC’s FinFit study, they wanted to understand what are the top financial problems for Singaporeans. The financial concerns were based on the three defined FinFit levels:
- The best: 80 to 100 in the FinFit score
- Moderately fit: 50 to 80 on the FinFit Score
- Unfit: Under 50 in the FinFit score
Insight 1: A moderate fitness group has the most financial concerns
First, those in the moderate fitness group are likely to be in the sandwich generation – the ones who have parents and children to care for.
Second, the number of concerns also depends on knowing what you don’t know. This group appears to be more financially literate than the unsuitable group and therefore seems more concerned about failing to meet various aspects of their financial planning.
Third, while they’re the middle-income class (with cash around $ 722,000), they’re not as adept at financial planning as the fittest group. In fact, only 58 percent of this group review their financial plans annually, compared to 95 percent in the most appropriate group. The lack of financial planning has pushed them into the background and they are struggling to meet their financial goals.
Insight 2: Unexpected expenses are a common financial problem across all groups
Regardless of the FinFit score, there are some financial concerns that are common to all three groups. The financial concerns that arise in all three groups include:
- Unexpected expenses
- Unexpected medical expenses
- Reduction of wages or income
- unemployment
- Life in retirement cannot be supported
5 ways you can improve your financial fitness if you are not yet FinFit
The poll results impress Singaporeans that these financial concerns you may have are very real, and you are not alone in them. More importantly, once you are aware of them, you need to take concrete steps to address them.
When you’re ready, here are some ways you can improve your financial fitness.
1. Insure yourself against unexpected costs
Unexpected expenses are always lurking and you never know when one might hit you. It could be an unexpected medical bill due to a traffic accident. It can also come in the form of unexpected car repair costs if someone accidentally drives into your car.
Unexpected expenses can occur anytime, anywhere, making them impossible to avoid. Since you can’t avoid it, the next best option is to financially protect yourself against it. This is exactly what insurance and personal accident plans do for you. It helps you stay financially protected so you don’t have to worry about unexpected expenses.
If you’re already covered, kudos to you. But if you don’t already have insurance, it may be time to get yours today.
2. Build emergency funds
Wage cuts and unemployment are part of working life. Sometimes there is nothing you can do about the macro environment. Case in point? Covid-19 and the following breaker from last year.
However, you can get into the habit of throwing away a modest 10 to 20 percent of your paycheck each month to help build an emergency fund.
The emergency fund acts as a safety net that can cover your monthly expenses such as necessities and mortgage repayment while you are unemployed. Emergency savings can also help you get through the difficult period without causing too much financial hardship while you are busily looking for a job.
Ideally, you want to have emergency funds available that are at least six to twelve times your monthly expenses, including repaying large ticket loans. If you haven’t already started building your emergency fund, you can start yours today with a high-yield savings account to optimize your savings.
3. Invest as early as possible
The inability to support life in retirement is one of the common financial problems facing Singaporeans. And there is no price for why.
Planning for retirement life isn’t as easy as a five minute doodle job. You need to have a clear idea of what it will look like after you officially hang your boots, so to speak. Will you travel occasionally? Are you downgrading to a simpler lifestyle? Do you think you will help support and raise grandchildren? Is what you get from the CPF LIFE payout sufficient?
From there, you need to work through the math to find the shortfall to that ideal amount before devising a plan to bridge the gap.
If you want to alleviate worries about not being able to sustain life in retirement, investing early should be an early stage. The sooner you start investing, the more time your investments will have to accumulate and you can reach the projected retirement dollar amount you need.
Getting started with your investment doesn’t have to be difficult. If you know your way around investing, all is not lost – there are robo-advisors out there to help beginners get started.
ALSO READ: 8 Best Investment Apps You Can Use Right Now
4. Be familiar with your home loan
As Singaporeans, we love property. After all, 90 percent of Singaporeans own a house. Some of us invest in housing. The fear of not being able to buy our own property really scares us, especially if property prices continue to rise in Singapore!
When it comes to financing your home, there are plenty of hacks in the game book. However, it is proven that you will actively work to re-examine your home loan situation when the opportunity arises.
Finding that you are already out of the lock-up period (with no penalties) and you come across a home loan from another bank that offers a cheaper interest rate can cut the cost of your home ownership significantly.
So make sure you set a reminder to help you identify the best home loan interest rates that you can find quarterly so that you don’t overpay on your home loan whenever possible.
5. Get more money for everyday expenses
