I always encourage young people who just entered the workforce to build up their Emergency Fund as soon as possible. Life is always unpredictable. You never know when you will lose your job or encounter personal finance crisis.
The need to have adequate insurance cover really hit me hard twenty years ago when I was in secondary school. My dad, who was the sole breadwinner, suffered from stroke then and was unable to work. My family lost our sole income and to make things worse, my dad did not purchase any insurance covers. As a result, we went through a period of financial hardship. On hindsight, if my father had bought any life insurance policies when he was healthy, our family situation would definitely be better.
It is important that you insured yourself for the correct amount of protection. In addition, it is important that you buy the correct policies. I know it might sound hollow to you as I am not a financial advisor, but then again, my guiding principles on buying insurance policies is solely for protection. I see no point in buying whole-life, investment-linked or endowment policies. These policies cost so much premiums but provide very limited coverage. Henceforth, I would only purchase term policies which provide large coverage for little premiums. When I was young (19 years old), I was sold expensive whole-life insurance policies and I only realized my mistake a few years ago. By then, the damage has already been done
This year will be the 7th time I am collecting year-end bonuses. I will be receiving 2.5 months of bonuses, excluding 13th month. The amount is not big, but substantial enough for me to settle my renovation and insurance loans. I also intend to set aside some money for some investments and my baby’s endowment plan. I targeted to settle my car loan by next year-end, using next year’s bonuses. With that, I would only need to worry about my housing loan.
Most Singaporeans had already made plans on how they are going to use their bonuses. Some planned to go for overseas holiday while others planned to buy big-ticket items like car or house. My advice for those who had just started out working is to exercise financial prudent and use your bonuses to pay off your study or any other loans. The interest incurred, especially for credit cards. can be scary if you keep rolling