Sunday, September 27, 2020

33 financial tips for my 33rd Birthday

Today I am celebrating my 33rd Birthday.

Thus, I would like to share my personal 33 financial tips with everyone.

Credit Card
Credit card is a very powerful double edged sword.
It will either:
              1) help you to save money (Reward via Cashback or Miles) compare to paying with CASH
              2) harm you with their super high interest rate average of 25%

Tips #01 : If you have trouble paying your credit card bills in full for 2 consecutive months, you should stop using your credit cards until the bills is fully paid.

Tips #02: You should obtain your personal credit score rating at least once per year via

Everyone should aim to obtain AA or BB minimally.

Tips #03: You can get your free credit score rating when you applied for a new credit facility such as new credit card (Link).

Tips #04: Use credit card rather than Cash
When you make payment via cards, you will be rewarded with either cashback / miles / points. 
When you make payment via cash, there is no reward given back to you.
These few cents will add up to alot in the long run.

Tips #05: Never pay for credit card annual fees (unless you are miles lover)
Check every line of your credit bills especially for those opt for Giro payment.

Tips #06: Your brain is the most powerful asset.

Process of manifestation in 'Secrets of the Millionaire Mind' Book

Tips #07: Invest in yourself

Instead of trying to find a multibagger stock/investment, you should invest in yourself to ensure that your salary achieved multibagger.

If your first job salary is $1,800, a 2 bagger mean you reached $3,600 salary.
Imagine if you invest in yourself and managed to achieve a 4 bagger salary :D

Tips #08: Keep learning and reading.....

You should read 1 book per month on average.
If reading book is a sleeping pill to you (I have this issue too), then try to read articles or join some useful community forums.

You can read your financial articles via:

Financial community:
1)    (1M65 Mr CPF)

Free local newspaper via National Library Board

Tips #09: Fail Fast, Fail Cheap
The earlier you learn about failure, the better you will become.

A clever person learnt from his failure.
A Smart person learnt from someone else failure.

Insurance is about transferring your risks which you can't afford to take up yourself to 3rd party.

Tips #10: The most basic or first insurance you should get for yourself is Integrated Shield Plan + Rider (Hositalisation).

Although Singapore have one of the best healthcare system in the world, you should get yourself a plan that cover private hospital bill too. Reasons being when you are sick, you would like to get treated asap. The long appointment date will be a killer as it will affect both your body health and mental health too. 

Ability to recover or get treated in the most comfortable environment also will help in your recovery phase.

Tips #11: Never buy an Investment-Linked Policy (ILP) plan.

By doing a simple google, you can read alot of reviews about ILP plan, especially in term of the yearly fees + charges involved.

In short, never mixed investment and insurance together.

Tips #12: Buy when you don't need them
Insurance should be bought when you don't need them (when you have clean bill of health) because when you need them (diagnosed), it is often too late as you can't find insurance company that is going to sell their policy to you.
Remember, insurance company are profit organisation, which majority of them are listed companies.


Tips #13: Buy the house within your means
If possible, try to paid fully your house with 15 years housing loan max.
If you need to top up cash with a 15 years housing loan, that house might be not within your means.

If you took HDB loan (2.6% interest):
$400,000 flat for 10yrs = $454,800   ($54,800 worth of interest)
$400,000 flat for 15yrs = $483,660   ($83,660 worth of interest)
$400,000 flat for 20yrs = $513,600   ($113,600 worth of interest)
$400,000 flat for 25yrs = $544,500   ($144,500 worth of interest)

The compounding interest is very scary.
Just look at how much the interest you are paying.

You will not be able to reach CPF Full Retirement Sum (FRS) if large amount of your money is spent on HDB.

Size of the house doesn't matter.
What matters is we live in a house with LOVE

Tips #14: Do not take renovation loan
If you need to take up renovation loan to renovate your house, you should reduce your renovation wish list or get a few more ID quotes to ensure the pricing you obtain is of fair quotes.

Tips #15: Transfer your CPF OA to SA as early as possible
CPF OA earned 2.5% interest while CPF SA / MA earned 4% interest.

Compounding interest is a double edged sword too.
You can see how much interest you are paying for your HDB due to the power of compounding interest.
You can make use of the power of compounding in your favour if you transfer from OA to SA.

However, do note that this is a 1 way transfer, thus you need to plan properly to avoid any potential cashflow issue.

Tips #16: Hit CPF FRS as early as possible
Based on past statistics, the increment of FRS amount every year is less than 4%.
Thus, if you able to hit the FRS in any particular year, you should not have any issue meeting the FRS amount when you reached 55 years old, even without any contribution moving forward, because CPF SA pay 4% interest rate.  

Tips #17: Use your CPF MA interest to pay for your insurance
Who say there is no free lunch in this world?!?!?!?!?
If your CPF MA interest amount is more than your insurance premium, technically, CPF aka government is paying your insurance policy.
Cheat sheet: Top up your MA and dont use MA to pay for your polyclinic / medical bills during your young age

Tips #18: Your buy price determine how much your profit and losses the moment you bought it

"Buy low sell high" is everyone dream.
If you buy the stocks at high price, you have a higher chance of losing money although there is also a phase call "Buy High Sell Higher". But remember, investment is not gambling.
If you relate investment as gambling, I rather you take your money and place your bet in Casino on BIG/SMALL so that your can get your result in few seconds later.

Tips #19: You must be able to justify at least 4 reasons why this stock is worth buying

After doing your own research, if you cant even list out min 4 reasons why this is a good stock, you better skip buying it.

Tips #20: Guts + Patience
After doing your own research, you must have the guts to go against the market although the market noise tell you otherwise. It will take some time for the share price to reflect its worth, thus patience is required.


Tips #21: The best time to start was yesterday. The next best time to start is NOW.

Tips #22: Take Action
Taking the first step is always the hardest. 
Move bit by bit is better than staying in same position.

Tips #23: Spent on experience rather than branded products

Tips #24: Don't spent money to impress others
People come and go. 
You need to find quality people in your life rather than quantity in your social media.

Tips #25: Don't buy things you don't need, else you will end up selling things you need

Tips #26: Delayed Gratification

Alot of times, we buy things due to impulse purchase.
By going for delayed gratification, doesn't mean you need to lower your life quality. 
Its all about NEEDS vs WANTS.

Tips #27: Don't increase your life quality faster than your single source of paycheck
If your monthly expenditure increase less than 30% comparing during your school day vs when you earn $4,000 monthly salary, you are on the right track.

Don't rely on single source of paycheck (income) as nobody is indispensable in the company.
Always look for 2nd or 3rd source of income.

Tips #28: Without Health = Poor

We have been busy chasing after money and neglect our health.
We eat junk food due to convenient and cheaper in cost.
Lack of exercising is also another excuses we always give ourselves due to laziness.
In the end, our health deteriorate faster than our age and we use our hard-earned money to heal our health.

Tips #29: Asset vs Liability
Asset are things that will bring in money for you while Liability are things that draw money out from you.

A car is a liability as the value depreciate over time.
However, if you are a private hire driver (for example), then car is an asset to you become it will bring in money (income) for you.

Recommend to read "Rich Dad Poor Dad" book by Robert Kiyosaki to find out more on how to differentiate between Asset and Liability.

Tips #30: Set a Goal 
You need to know your endgame. 
Everything you do must have an objective.
Once you set the goal, reverse engineer it to find out on the process needed to achieve your end goal.

Tips #31: Cash is King. Cashflow is King of the King
Alot of people are asset rich but cash poor.
If you cant make prompt payment to your loan amount, bank will take ownership of your asset from you and auction it to recover the loan amount.
If you take up alot of bank loans but is still able to make prompt payment for your loan because you have the cashflow, all is still good.

Thus, when taking up any loan, need to ensure you have enough cashflow and not looking at just the ability to make the first downpayment only.

Tips #32: You only die once. But you live everyday.
I don't like "YOLO" (You Only Live Once) as this 4 letters give you excuses to spend your hard earn money away.

It is important to achieve "FI" (Financial Independence) as early as possible and if you could reach "FIRE" (Financial Independence Retire Early) stage, you can escape the rat race.


Tips #33: You don't purchase things with money. You purchase it with your TIME

As an employee, we exchange our time for money.
If you earn $4,000 per month and your car loan is $1,000 per month, this mean that you need to trade 1 week of your time to enjoy your car.
If you earn $8,000 per month and your car loan is $1,000 per month, this mean that you need to trade 1/2 week of your time to enjoy your car.

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