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Money Talks – 3 Money Hacks That Get You Closer To Retirement Readiness

Published by Autumn on 

Money is not the root of all evil, but the love of money is. Like it or not, money buys you time and options. Do you have sufficient funds to buy you options and the kind of retirement lifestyle you envision?

Here we distil 3 key points that will bring you closer to Retirement.

1. Manage Your Personal Finance

Pay yourself first

A golden rule of personal finance, this is a financial strategy of increased and consistent savings and investment while also promoting frugality. It’s a very effective way to ensure you continue making your chosen savings contributions month after month.

Paying yourself first simply involves building up a retirement account, creating an emergency fund, or saving for other long-term goals, such as buying a house. It sets the foundation to enable you to be retirement ready.

Get the most of credit card promotions

We all have to spend anyway, so why not get the most out of your expenditure. Credit cards are vying for your share of wallet with many 1 for 1 dining offers. Platforms such as CardsPal (cardspal.com) helps you find the best credit card deals to maximise your savings for shopping, dining, travel and more.

Also look out for periodic retail offers such as Black Friday deals or post Christmas offers – these are great opportunities for value deals. Shop smartly.

2. Improve Your Financial Quotient

The best gift that you can give to yourself is to improve your financial literacy. There’s a lot of literature out there on financial planning and not to mention many financial instruments to help you grow your money. But knowing these 3 basic financial ratios is a good start.

(a) Basic Liquidity ratio = Cash Available / MonthlyExpenses

(Measures the number of months you can sustain yourself if all existing sources of income are lost temporarily)

(b) Total Debt Service Ratio = Total Annual Debt Repayments / Annual Take home income

(Measures your ability to maintain your debt obligations comfortably)

(c) Savings ratio = Savings / Gross income (Measures your savings rate)

These ratios will help set the context for developing your financial strategy along with your defined goals and time horizon. What is a good ratio for you? What does it mean to you? Talk to a trusted advisor to help you strategise.

3. Stay Invested Consistently

Dollar cost averaging is one of the time-honoured methods of investing. It is also popular as you do not need a lump sum to start. It is easy to apply and takes the guesswork out of when to invest. It is an investment strategy where you invest a fixed amount every month over a long period of time. By doing so you can smoothen investment risks.

The historical average annual returns on the S&P 500 index (a benchmark measure for annual returns) is 10% in the last century (before inflation). That’s why it’s important to stay invested consistently and leverage on the power of compounding return.

According to the June 2019 MAS survey of 27 economists and analysts – core inflation rate for 2020 is likely to be trending between 1.5% and 1.9%. The Singapore fixed deposit rates hovers around the same range. So having cash in fixed deposits doesn’t help you grow your wealth at all. Stay invested and leverage on the power of compounding interest.

* The information in this article is not intended to be and does not constitute financial advice, investment advice, trading advice, or recommendation of any sort offered or endorsed by Autumn.

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