Some life events can cost you more than you planned for. Here's what you need to be aware of when managing money.
It isn’t easy to be a working adult in the 21st century. Not only do you have to put food on the table, but you also have to save for a home, a car, and potentially a wedding and children as well. We know the struggles, and we’re here to help you succeed by pointing out common financial blind spots you might miss when managing money.
These life events can sabotage your money-saving efforts – leaving you with little or no change to spare. Whether you’ve just gotten your first paycheck, or are well on your way to saving your first $100k by the time you’re 30, this is what you should be looking out for.
Financial blind spots to know when managing money
1. When life is a series of unfortunate events
In childhood, we’re fed pretty wholesome tales about how we all live to a hundred. But the truth is, life is unpredictable and can be cut short anytime. We’re all vulnerable – whether we’re at the tender age of 25 or on the cusp of 70.
A bad accident can affect your ability to work, and hospital bills can pile up when you’re struck with a critical illness. Did you know that cancer and heart disease are the top causes of death among Singaporean adults between the ages of 15 to 59? Even if death isn’t on the cards, it can cost you anywhere from a few hundred to a thousand per night to be hospitalised. Ouch.
That’s why, aside from managing money well, you’ve gotta make sure all your must-have insurance policies are in place. This can help you cover costs, plus give you peace of mind that your family will have some money to tide them through if anything happens to you.
2. Tiring of the retirement chat
The current retirement age in Singapore is 62 or 63. But that feels so far away when you’re only in your early twenties. It can be tough to fathom why this is a financial blind spot you’ve gotta plan for. Especially when you’re only starting to grapple with things like getting your first HDB flat or buying your first car.
But, it’s important to remember that costs won’t just include your daily living expenses and rent. At the age of 60, you may have additional healthcare costs and expenses to upkeep. That’s why we recommend starting to save right now if you want to have a relaxing retirement. You may want to speak to your financial planner to discuss your retirement plan and look into some safe investments to help you beat inflation.
3. Having nowhere to run on a rainy day
It’s not uncommon for most people to consider a mid-career switch or start a business of their own these days. We stan someone who’s brave enough to take charge of their destiny and be their own boss. But don’t make the big boo-boo of making risky decisions before ensuring you’ve got enough savings to fall back on.
The rule of thumb? You’ve gotta have six months’ worth of living expenses set aside for a rainy day. Otherwise, your exciting new venture could result in a huge financial crash if things don’t go as you anticipate.
4. Forgetting it’s not all about you
When we plan for the future, we usually focus on ourselves. But we’ve gotta remember that we may have other dependents to care for. Example numero uno – ageing parents. When managing money, be sure to take into account any additional expenses that might come with caring for the elderly.
Sure, your parents might have their own retirement fund in the future. But that may not prepare them well enough for things that old age can bring, such as dementia or disability. You may need to consider nursing homes, caregivers and more. That can take a huge chunk out of your savings (approximately $1,000 to $3,000 a month), especially if you don’t qualify for any subsidies. Look into this early or discuss an action plan with your parents to help everyone prepare.
5. Letting inflation whoop you in the butt
The biggest mistake you can make in any financial planning process is not investing your moolah. When you leave money resting in your bank account with low interest rates, it begins to depreciate because of inflation. Just think about how our parents used to be able to buy a bowl of noodles for 10 cents, whereas we fork out $3 to $4 now. That $5,000 in your bank account today won’t have the same value in 10 years.
You don’t want to slog your life away only to realise your efforts were for nought. If you’re worried about where and how to start investing, speak to your financial planner or advisor. They can tailor a plan for you depending on your appetite for low or high-risk investments. This keeps you ahead of the curve so you won’t get blindsided by inflation.
Remember: when you’re looking into the best ways to manage your money, don’t let these financial blind spots catch you off guard.