Your 7 pots of gold
Updated: Apr 24, 2020
You think about money.
You work for money.
You save money.
You spend money.
You give your money.
You stress over money.
So how are you handling your money?
Even though money may not be the most important thing in your life.
A significant portion of your life will revolve around earning, saving, giving, and spending money.
There’s nothing wrong with our resources.
Just the way we manage them.
Here is an idea of how you can manage your money into the 7 Pots.
These are the basic necessities in our lives which we have to spend on for the sole purpose of survival. The recommended expenditure on this portion would be 50% of your income.
As Singaporeans get increasingly busy with work, we tend to eat out or pack food back home. One can occasionally cook simple recipes to save money and eat healthier.
Singapore is a small country and it is possible to get to almost every location thanks to our highly interconnected public transport system. Some of us commute to work, some drive and others use private hire transport services - your expenditure will vary depending on the mode of transport you use, so be wise about it.
Talk about flying cars!
We all need a roof over our heads and a place to call home. It is common for Singaporeans to continue to live at their parents’ homes well after entering the workforce, which saves us a great deal of money in terms of rent. However, some of us might move out when we feel that we require more privacy or personal space to grow into our own person. If this is the case, it is important to consider how much you are comfortable with spending on rent given your income.
These include whatever recurring bills you need to pay for. Common monthly bills for an average person include phone bills, utility bills, transport fees and maybe even subscription fees for special services like Spotify and the Entertainer App to name a couple.
All work and no play makes Jack a dull boy.
The recommended spending for this would be 5% of your income.
Most entertainment activities include the following:
Reading, going to the gym, watching a movie, catching up with friends at a bar, and so on.
Fun is subjective to everyone and it’s important to know what activities make you happy and get your adrenaline pumping. This can be going to a theme park or exploring a nature trail.
Singaporeans love to travel. Not surprising given how small our country is - most of us would have already explored all points of interest, so traveling is a good way to broaden our perspectives and experience new things.
Education should be viewed as an investment to upgrade ourselves.
We recommend spending 10% of your income on education.
All of us have different interests, hobbies, and talents. To nurture your talents and what you love doing, hiring a coach can be of great help.
You can hire a mentor to develop or guide your career. It is important to also recognize that your boss/lead/employer are mentors to you as well. Be open-minded and learn from them as much as possible.
Strive to make reading a habit and read books that increase your knowledge and wisdom. Self-help books are a good place to start.
These can be online or offline courses that teach you a new skill or theory.
For example, coding seems to be the new “in-thing” and knowing how to code might aid you very much in your career progression. There are many online courses out there that teach this skill.
You can also develop and deepen your skills to enhance your opportunities and potential with the help of SkillsFuture.
Workshops are especially fun and engaging as you get to work with others during hand-on activities. Instructors also get to go round and check on your progress, which can offer a more personalized learning experience.
4. Long term Goals
A common mistake Millenials make is to not plan your finances with the long term in mind. It is recommended to allocate 10% of your income for long term purchases that usually a large sum of money.
The average cost of weddings in Singapore ranges from $30,000 to $100,000. Let’s not forget the amount you’ll need to spend on your honeymoon.
Raising children in a city like Singapore can be expensive. Besides basic necessities like food and a comfortable living environment for your children, you might also need to start spending more on things like tuition, enrichment classes and holiday activities when they grow older. As your child reaches their young adulthood, university tuition fees are also a huge expense that you need to set aside money for.
We all need a roof over our heads and a safe place to call home. Those who have some extra money can consider buying property as an investment to generate passive income.
5. Safety Net
Save money and money will save you.
We save money to save us from emergency.
First of all, we need to build our emergency funds.
They are typically 3 - 6 months of our expenses.
That can last for us in terms of short term unexpectations for eg. change of job, life stage transition.
For other unfortunate circumstances, insurance is one of the tools we use for our safety net.
The various insurances include:
Death comes to everyone someday, and someday to us.
The question is- are we prepared when it comes?
Life insurance is not bought because you will die, but is for your loved ones when you die.
When we are not around, we do not want to leave any debts and liabilities to our loved ones.
All Singaporeans and Permanent Residents who are working and contributing to CPF have the basic Medishield Life, a basic health insurance plan that aids you in paying for large hospital bills and certain high-priced outpatient treatments like chemotherapy and dialysis. It is meant for Class B2/C wards and subsidised treatment in public hospitals.
MediShield Life payouts are pegged at B2/C-type wards in public hospitals and will cover a certain portion of your bill.
For those who wish to seek higher coverage and alternative treatments for hospitalization, they can purchase Integrated Shield Plans and International Health Insurance.
Daily Hospital Cash
In the unfortunate event of hospitalization, we will continue having to spend only daily expenses. Thus there is daily hospital cash plan to take care of our daily expenses.
Accidental Medical Reimbursement
The hospital bed crunch in Singapore means that patients diagnosed with non life-threatening illnesses face the possibility of being sent home instead of being warded. We usually head to neighborhood clinics for minor accident injuries like ankle sprain or insect bites. Thus, there is the accident medical reimbursement plan to help offset the medical fees.
Wouldn’t you agree that a good medical plan will ease your financial strain and take care of both big and small medical bills?
Critical Illness especially Cancer cases in Singapore have been rising over the years.
Having Critical Illness Coverage is important to ensure your hard-earned savings are not depleted in the event of critical illness.
The costs related to Cancer are as follows:
Payments for prescribed medicines or alternative medicines during cancer treatment period to help manage common side effects.
Payments for medical care, such as radiation therapy sessions. In general, cancer treatment can extend to a few months or even years.
Transportation and travel
Expenses for traveling to and fro the treatment facility for self and family.
Family and living expenses
Expenses related to running your household and caring for your family during your treatment, such as childcare, tuition fees, care for your elderly parents
Care giving and long term care
Costs for additional care such as hiring someone to prepare meals or help our in daily activities. It may include nursing care at home or external facility
We can keep our fingers crossed but critical illness can happen to anyone, and unfortunately for some, more than once.
Can you afford to leave critical illness to chance?
We are more likely to become disabled in our working life than we are to die. This is true even if we don’t work in a hazardous position.
Accidents happen not only on the job but also at home – and disability can strike anyone anytime.
Financially speaking, disability can be worse than passing away. It is one of the most devastating threats to a family’s financial security. And it’s a mistake to think that disability only strikes the elderly.
The new CareShield Life in Singapore features higher payouts which will increase over time, with no cap on payout duration. This provides enhanced protection against the uncertainty of long-term care costs should you become severely disabled.
A lump sum payout and an ongoing income provides vital financial stability and peace of mind while you adapt to your new situation due to disability.
It’s unfortunate to become disabled.
It’s more unfortunate if we do not have the financial means to handle the disability.
It is often said that the family home is the biggest financial commitment that most of us will make in our lifetime.
But your biggest financial asset is not your home.
It is yourself.
You insure your car, your home, and your valuables, so isn’t it wise to also protect your single biggest asset - your ability to earn an income?
Have you got a substitute income earner?
Would you use 3% of your annual income to cover for 75% of your annual income?
In general we recommend allocating 10% of your income for your safety net.
We don’t save our investments.
And we don’t invest our savings.
Investment is about Opportunities and Diversification and towards our Financial Freedom.
The different Investment Instruments include
Long Term Savings Plan
The higher the risk, the higher may be the returns.
But always take the calculated risk.
In general we recommend allocating 10% of your income for your investment.
Remember that not everyone is blessed enough to be earning a comfortable income. Many others are struggling to make ends meet and it would not only help them but also yourself a favor by giving back to the society, or those who need help.
We recommend allocating 5% of your income for this purpose.
Giving builds positive energy around you and also makes you happier.
“Remember that the happiest people are not those getting more, but those giving more.” ―H. Jackson Brown Jr.
We make a living by what we get.
We make a life by what you give.
Disclaimer: All these are just some of the guidelines that you can follow.
Each and every one of us is special and unique and thus we will design program and plans that cater to your own individual needs and wants.