Building wealth might sound like a far-off dream, but it’s more attainable than you think. It’s not about luck or being born into riches. It’s about developing the right skills to manage, grow, and protect your money. If you’re in Singapore, understanding these skills is even more crucial.
Our financial market is unique, with various opportunities and regulations to navigate. For instance, there is such a thing as bad credit loans, which allow you to borrow money even with a low credit score.
Here’s a closer look at the skills you should work on before you can start building wealth.
Meticulous budgeting
Singapore isn’t cheap. From rising housing prices to daily kopi breaks, it’s easy to overspend. That’s why budgeting is non-negotiable.
Begin by taking stock of your income and expenses. Identify your net income, which is your total monthly salary minus any mandatory contributions like taxes and CPF. Others may call this “take-home pay”.
Once you’ve determined your take-home pay, deduct your total monthly expenses from it. This way, you’ll have a good idea of how much money you have left each month. If you find that your expenses are too high, consider budgeting with the 50/20/30 rule.
- You can spend up to 50% of your income on needs like food, rent/mortgage, utilities, and transportation.
- 20% of your income goes straight to savings and investments.
- The remaining 30% is for discretionary spending (eating out, shopping, leisure, etc.)
Remember, a budget isn’t a punishment. It’s a plan to help you live within your means while preparing for a better future.
Save before spending
Building wealth starts with a habit of saving. In Singapore, it’s tempting to rely on your CPF (Central Provident Fund). But CPF alone isn’t enough for long-term goals like retirement or starting a business.
Make an emergency fund your first savings goal. A good rule of thumb is to accumulate 3-6 months’ worth of essential expenses as your emergency fund. Once you have this, you can then save for other goals, like a holiday abroad or your own home.
Also, consider putting some of your money in stocks, real estate, and other legitimate investments. This is a surefire way to grow your money over time.
If you want to prioritize saving, you may set up GIRO transfers with your bank. This way, a portion of your monthly income will automatically be transferred to a separate savings account. Then, you can only spend whatever remains in your primary bank account.
Learn how investing works
Investing can feel intimidating, especially with Singapore’s complex options like REITs, ETFs, and robo-advisors. But if you want to build wealth, you have to learn how to invest.
Begin by identifying your risk profile. Are you willing to risk your money for the chance of higher returns, or do you prefer low-risk investments even if the returns are less? Also, how much of your money are you willing to part with? Your answers to these questions will determine the kinds of investments that are right for you.
Here’s an important thing to remember: Investing isn’t about quick wins. It’s about growing your money steadily over time. Anything promising fast and high returns over just a short time is a scam.
Educate yourself financially
What’s the interest rate on your credit card? Are you getting the best terms on a loan you’re about to take out? Do you know what the numbers and terms mean on your CPF statement?
If you can answer these types of questions, you are most likely financially literate. If not, you need to do your homework. Financial literacy is not just something nice to have. It’s necessary if you want to build wealth.
If you think you need to be more financially literate, take it slow and steady. Read articles on personal finance blogs. Get to know the terms used in the financial industry through sites like Investopedia. You can even invest in tickets to seminars and workshops by reputable financial advisors. And don’t shy away from asking questions. The more you know, the better decisions you’ll make.
Patience and discipline
Building wealth doesn’t happen overnight. It takes effort on your part. First, you need the discipline to spend wisely, stick to your budget, and to save and invest as much as you reasonably can.
Then, it takes patience to be consistent in your efforts to grow your money. Building wealth takes time – there are no shortcuts.
Once you develop healthy money habits, building wealth will be easier than when you first start. It will become your lifestyle, and you can influence others to do the same.
Conclusion
Building wealth isn’t just about earning more money. It’s about managing what you have wisely. With the right skills—budgeting, saving, investing, and staying disciplined—you’ll be well on your way to a wealthy future.
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