When was the last time you had to choose between buying the latest phone model as soon as it was released or waiting to purchase it later when you truly need to upgrade? While we may find satisfaction in being the proud owner of the latest gadget, we may not realise that instant gratification can make us lose out on a lot more in the long term. Here are 4 ways to make your earnings work harder by planning ahead.
Before sending off your money to do the heavy lifting, you’ll want to ensure that you are debt-free. As we move towards a cashless society, accumulating credit card debt happens more easily than you’d think.
Let’s say you’re renovating your house and have just bought a new sofa for $5,000 – on a credit card with an interest rate of 25% and late payment fees of $100 per month. In 1 year, your $5,000 purchase will snowball to about $7,8001 if you fail to pay your credit card bill on time! Bearing this in mind, it pays to have strategies that help you pay off your debt faster in a less painful way.
Whether it’s a credit card debt, personal loan or student loan, one of the best ways to reduce financial strain is to pay more than the minimum monthly payment or instalment. If your loan allows for capital repayment, you could consider paying off as much as you can earlier – to reduce the loan balance and its subsequent interest.
Becoming debt-free is sometimes the best way to take control of your finances so that there is flexibility to make other plans with your savings.
1 Calculations are for illustration purposes only.
When planning for retirement, our financial health usually comes to mind. But how many of us realise that investing in our physical health is equally as important?
For instance, we may opt for fast food over healthier food choices due to its appeal or convenience. However, making a conscious effort to eat healthily and exercise regularly will improve the quality of your life in the long run. PM Lee pointed out in the recent National Day Rally that 1 in 9 Singaporeans suffer from diabetes. This is a serious problem but it can be avoided simply by taking actions to lead a healthier lifestyle such as taking the stairs instead of the escalator, or replacing a can of soft drink with water. Not only will you save yourself from costly future medical bills, the money saved on drinks could help you meet your financial goals faster.
Another way to make your money work harder for you is to invest in yourself. Investing time and money into furthering your studies or picking up new skills can make you more marketable to employers.
This doesn’t have to mean spending your savings on higher education. It might be as simple as taking a class at your nearest Community Centre to master Microsoft Excel or using your SkillsFuture credits to subsidise courses. There are also lots of online resources run by institutions such as NUS and NTUC Learning Hub that offer free classes from the best learning providers.
With attractive interest rates of up to 5% p.a. in your Special Account (SA) or 6% p.a. in your Retirement Account (RA), these accounts are good options to park your spare cash for the long term. One way to benefit from this without additional cash is to consider transferring any idle OA savings into your SA.2
Let’s assume you are 30 years old and can transfer $10,000 from your OA to SA. Based on current OA and SA interest rates of up to 3.5% p.a. and 5% p.a. respectively, you could earn an additional $9,202 in interest by the time you turn 55, as compared to leaving your savings in your OA. Still not convinced? Try our CPF transfers calculator for yourself here!
Rather than constantly thinking of reaping your benefits now, consider investing in yourself, your health and your CPF savings to maximise your earnings and enjoy a more substantial future income.
Do you have any personal stories or tips on how to make money work harder for our readers? We would love to hear from you, so please share your tips below so we can all learn!
2 For members below 55, you can transfer an amount up to the current Full Retirement Sum (FRS) to your SA.