For many of us, getting our first job and paycheck signifies the first step into adulthood and financial independence. It’s easy to get carried away with frivolous spending because hey, who’s gonna tell us how to spend the money we’ve earned?
But with bad spending habits eating away at your funds, you might end up having to live from paycheck to paycheck with no savings set aside for a rainy day. If you want to learn how to save wisely and inculcate healthy spending habits from the get-go, here are some easy financial moves you can make once you get your very first job.
Although we might dread the classic “Wanna catch up over a cup of coffee?” text from insurance agent friends and acquaintances, getting some form of Critical Illness insurance coverage while you’re young is important.
You’re less likely to have medical condition(s) when you’re young. Hence, you’ll more likely be able to enjoy a lower entry premium without the risk of having any pre-existing medical conditions excluded from your coverage.
Critical illnesses can happen to anyone, even if they appear to be fit and healthy. And if you do – touch wood – meet with a medical mishap that leaves you unfit to work, at least you’ll benefit from a payout to help with the resulting financial burden.
Having a critical illness plan doesn’t necessarily have to be expensive. For just $4/month*, eCriticalCare by DBS and Manulife Singapore gives you a protection coverage of $50,000 over a 10-year policy term. This includes coverage for 37 critical illnesses, and coverage in the event of ICU admission for a total of five consecutive days due to unforeseen circumstances like accidents and even new infections such as Covid-19.
*Premium is based on male non-smokers aged 18. For non-smokers aged 30 and above, the premium will cost $5.37/month.
Adopting healthy saving habits from the start of your working life can help you earn a bit of passive income and you’ll get to enjoy the benefits in the long run. Stash your cash in a savings account to gain higher returns and earn from the yearly interest rates.
Choosing a savings account with an attractive interest rate can be a tough process – especially while working your first job and not having much in savings – as most bank accounts require a minimum balance.
Fret not, however. Seeing as the average entry-level salary in Singapore is about $2,700 a month, most jobs would qualify you for the DBS Multiplier account. If you take home a minimum salary of $30,000 per year, you’ll be able to gain an interest rate of up to 3.0% p.a. Find out more about the DBS Multiplier interest rate tiers.
Not to mention, this personal account doesn’t require a minimum amount to start racking up interest, and you’ll also be able to snag exclusive perks and rewards when you spend with DBS/POSB Cards.
Image credit: DBS
Apart from being a convenient way to make purchases, credit cards usually allow you to earn cashback, rebates, miles and reward points with each spend. This means you could get frequent discounts on everything from food to big ticket purchases, and get free or upgraded hotel rooms and flights with credit card miles.
Most credit cards that offer cashback usually have a minimum spending of $400-$2,000 a month, depending on the credit card type and issuer. If you’re 21 and above and drawing a minimum salary of $30,000 a year (or $2,500 a month), the DBS Live Fresh Credit Card is a good card to start with.
It allows you to get up to 5% cashback on online and Visa contactless spending, and an extra 5% cashback at eco-friendly establishments. Plus, the annual fee of $192.60 would be waived for your first year of usage, and you get a cashback of $300 when you sign up in November 2021 with the promo code <NOVFLASH>.
Budgeting can be tough, especially if you have many factors like food, insurance, bills and debt repayment to consider. A straightforward method you can utilise to help budget and manage your money more efficiently would be to follow the 50/30/20 rule.
It states that 50% of your monthly income should be spent on essentials such as groceries, transportation, insurance and debt repayment, while 30% should be spent on non-crucial wants. This includes shopping, eating out, entertainment and holidaying. And the last 20% should be set aside as savings.
Using the 50/30/20 method makes it easier to save based on your personal monthly income, so you won’t overthink every single purchase or beat yourself up for splurging on the occasional Hai Di Lao feast.
Tip: Utilise expense tracking apps to keep you on budget for your spending on needs versus wants. DBS/POSB account holders can make use of the DBS NAV Planner to seamlessly track their finances at a glance.
It can be a hassle to manually transfer money between your accounts to set aside savings, but a standing order can help take the trouble out of diligent financial planning.
Basically, a standing order is an automated method of making payments at regular intervals. You can set the transfer for a fixed amount of money you aim to save each month – say 20% of your monthly income, as per the 50/30/20 rule – to another account you own.
By having an account for savings and a separate one for day-to-day expenses, it’ll be easier to budget your spending for each month. This ensures that you won’t overspend and eat into your savings unknowingly.
Though planning for your retirement might seem like a stretch especially when you’re just starting your first job, transferring money from your Ordinary Account to Special Account is a risk-free method to earn compound interest.
Both accounts are under CPF, and the Ordinary Account contains funds that are set aside for housing, education, insurance and investments. On the other hand, the money in your Special Account is reserved for retirement funds and the purchasing of retirement-related financial plans.
When you start transferring savings into your Special Account, you’ll be able to gain a higher interest rate for your retirement funds. The Special Account earns a higher interest rate of 4% for the first $40,000 you put in, as compared to 2.5% for the Ordinary Account. This means that you’d get a guaranteed $2,000 a year if you have $40,000 in your Special Account.
One downside is that the Special Account is purely for retirement funds, and you won’t be able to withdraw any cash from it till you’re 55. The transfer is irreversible, and you won’t be able to use the money for purchasing property or your children’s education in the future.
So, while the rewards are significant, make sure to plan wisely if you want to take advantage of the high interest rate.
A good rule of thumb would be to always pay credit bills on time and clear debts as soon as you can, to avoid racking up even more debt coupled with high interest rates.
A helpful reference is to ensure that your total debt incurred is less than 15% of your total income. For example, if your salary per annum adds up to $30,000, your total debt incurred should be no more than $4,500. That way, you’d still be able to afford paying it back without suffering in other areas of spending.
Student loans, in particular, should be cleared as soon as you can because interest kicks in once you’ve graduated. While having financial freedom might tempt you into finally spending on whatever you desire, landing in piles of debt is defo not a spot you would want to be in.
Clinching your very first job and seeing your salary credited to your bank account every month is exciting. But before you start splurging on wild online shopping sprees and extravagant meals with your hard-earned money, there are some wise financial moves that are more pressing. Get these out of the way first, and the Future You will have plenty to be thankful for.
Health and protection is undoubtedly one of the first things to cross off that checklist. Although having a Critical Illness plan doesn’t seem necessary when we’re young and in the pink of health, none of us can predict the future. Having an insurance plan might just come in handy one day, and you’ll be able to thank your younger self for being proactive and well-prepared.
With eCriticalCare, you’ll be covered against death and 37 different critical illnesses (CI). You’ll also receive a payout of 30% of your CI coverage amount in advance if you were to be admitted into an ICU ward for a total of five consecutive days, as a result of accidents or medical conditions. Yes, this includes new infections such as Covid-19.
The good news for those who dread tedious paperwork is that eCriticalCare is also quick and fuss-free to sign up for. All you have to do is answer three simple questions online and you won’t even have to go for a physical medical checkup to qualify for the policy.
As much as we don’t want to sound grim, critical illnesses can happen to anyone at any time. Make sure you don’t get caught in a position where you’ll have to dig deep into the savings you’ve painstakingly set aside each month. Having adequate insurance also gives you peace of mind that you’d be able to afford the appropriate healthcare you need, no matter when that might be.
This post was brought to you by DBS.
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