The past year has been financially turbulent for most of us. Jeraldine Phneah, who writes about career and finance for millennials and was listed as one of Linkedin Singapore’s Top Voices of 2020 along with 16 experts who have contributed to inspiring and thoughtful conversations in the community, weighs in on five financial scenarios that you might find yourself in.
Freelancing definitely has many benefits, including the ability to earn more, a flexible work schedule, and the freedom for personal branding. However, working in a full-time job also has its advantages, such as a steady monthly income stream, company benefits and CPF contributions.
There are a few factors to consider when deciding on the better option for yourself:
1. How is your design portfolio right now? Do you have enough work to show to engage more clients? If not, working in an agency could help you build your portfolio.
2. What are your current lifestyle needs? If you have dependents to support, then a full-time job with benefits might be a better fit for you.
3. Are you able to make your freelance income more regular? This includes marketing your work better or actively engaging previous clients to encourage repeat business and referrals.
4. Do you have a short-term money goal? If the full-time job pays a lot less than the freelance role even after employer CPF contribution, it might not be a good idea to choose that option if you’re in need of money.
(Read also “How Freelancers Can Manage Their Finances Like A Pro“)
Do you have at least six months’ worth of savings right now? This is especially important given the current economic situation. So if your monthly expenses are $2,000, you should have at least $12,000 in emergency funds right now. It is also important to understand your reason for wanting to quit. If your work environment is toxic or the workload unbearable, and it’s taking a toll on your mental and physical health, it makes sense to leave.
However, if you do not have sufficient emergency funds and wish to quit because you’re bored of your job or there’s misalignment with your long-term career goals, you could instead try for a change of role within the organisation. This can be achieved by speaking with your direct manager about your career development.
The first one worth considering is hospitalisation insurance. It can protect your wealth if you ever meet with an accident or fall very ill.
If your parents are relying on you to support them, you may wish to also consider Term Life, a type of insurance that provides your dependents with financial support upon the death of the insured.
(Read also “Are You Spending Too Much Money On Insurance?“)
If you have some additional funds, you may also wish to consider critical illness insurance. A sum of money is assured for a list of 37 critical illnesses when discovered by doctors, and this payout can be used for medical expenses that aren’t covered by your hospitalisation insurance. It can also provide you with income while you take time off work to recover, or if you’re unable to return to work.
A lower interest rate is an advantage, but there are also other factors to consider. Firstly, when you take a bank loan, the down payment required is up to 25 per cent of the price of the flat. Of this 25 percent, at least 5 per cent of it has to be paid in cash, and the remaining 20 per cent paid using your CPF OA or cash. This means you may have less cash for investing, and that’s an opportunity cost if you are a savvy investor who can Given the lower interest rates now, should I switch from a HDB loan to a bank loan? consistently outperform the market.
Also, the bank loan’s interest rate will fluctuate as it is affected by movements in the market. Bank loans may have lower interest rates, but they are only valid for up to two to three years at best. This means that the interest rate you pay in the future is likely going to be different from what you’re currently paying.
It is also important to note that after switching your home loan to a bank loan, you won’t be able to switch back to a HDB loan for the same property.
For people who have never invested in their life, I suggest starting off with dollar cost averaging into a Robo Advisor to practise, or a Regular Savings Plan. There are two advantages to these compared to going straight into buying stocks.
By investing a fixed sum each month, you have a disciplined way of staying invested irrespective of market conditions. Also, the volatility is not that high compared to individual stocks. This would help build your emotional tolerance to withstand dips that are part and parcel of the stock market.
If you are interested in investing in stocks, I recommend first taking a course to learn how to analyse companies. This would ensure that you make your investments based on data and deep understanding of the business, not hearsay. Belief in a business will empower you to purchase more stocks during a short-term dip and not sell them away due to undue panic.
Jeraldine Phneah is not a certified financial adviser. Should you require personalised financial advice, it is best to speak to a certified professional.
This article first appeared in the February 2021 issue of Her World.
