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1. Not saving from the start
We’ll be brutal. Unless you are that intern who gets paid $8,000 a month, the branded bag or New York vacay will have to wait. Set aside 15 per cent of your takehome pay as savings and up to 35 per cent (the maximum you should be spending) for rent or mortgage payments. Even if you don’t have your own place yet, set the money aside for future rentals or mortgage. Then sub-divide the rest of the money according to your spending habits. For instance, leave 25 per cent for food, 20 per cent for insurance and 5 per cent for entertainment. It is better to be frugal when you are young (and still healthy and energetic) than to be forced into frugality when you are older.
2. Spending all your savings on a lavish wedding and honeymoon
Don’t let all the Pinterest research tempt you. It’s nice to have personalised place cards and a month-long Europe trip, but even nicer to have leftover cash for life after the wedding.
3. Not planning for retirement
Put 10-15 per cent of your take-home pay into equities, and reinvest the dividends in a global and Singapore index. At the same time, check if your company offers a savings or investment plan, which typically has better interest rates than a savings account with a bank. Opt for an automatic contribution every month so you won’t be tempted to spend the money elsewhere.

1. Overspending on your kids

Even if you think that they need tuition and after-school enrichment courses, don’t spend more than 5 per cent of your total household income on these. Instead, as soon as the kids are born, set aside some savings every month for their university fees in an interest-bearing account or via an endowment policy.
2. Delaying the purchase of term insurance
This should be bought the moment you have children or elderly parents who rely on your income. Besides, it’s more affordable to buy such insurance when you’re still healthy. Having term insurance with a disability rider promises a specific payout in the event of death or disability.
3. Not having an emergency fund
Even if you’re single and don’t have kids, plan for a rainy day (read: losing your job). A good gauge of how much the fund should hold would be three to four months’ worth of expenses, or five to six months, if you’re married with kids.
Extra tip: To decide how much term insurance you require, calculate how much of your income goes to monthly household expenses, and multiply that by the number of years left before your planned retirement age.

1. Not saving with inflation in mind

The cost of living typically increases by 2-5 per cent a year, according to financial planner Andrea Kennedy, so you need to aim for returns of the same percentage or more. Her advice: Consider an investment portfolio consisting of 60 per cent stocks and 40 per cent bonds. While the latter are generally more stable with less fluctuation in price, you can also consider less-risky stocks such as blue chips, which pay steady dividends.
2. Not having a testamentary trust established for your young kids
A will merely states who gets what if you pass on – it does not protect minors from greedy relatives or future legal issues. A testamentary trust – which can be part of a comprehensive will – allows assets to be distributed in a very specific way over a certain period, for instance, giving your kids a fixed monthly allowance for a number of years.
3. Not paying up your mortgage quickly
You’re likely to be earning the most at this point in your life, so clear your debts – especially if interest rates are low. After all, you want to be thinking about travelling the world and not unpaid mortgages when you retire.


This story was originally published in the November 2015 issue of Her World magazine.