Want to spend without guilt? Start with a budget: ST InvestMe panel
Spending within your means is key to achieving financial freedom
Having a budget allows individuals to spend on both their necessities and desires without feeling guilty. This was the main point emphasized during a panel discussion held as part of The Straits Times InvestMe campaign on September 17. To create a budget that aligns with one's desired lifestyle, as explained by Leon Loh, a financial services consultant from GEN Financial Advisory, it's essential to first envision the lifestyle one wishes to achieve.
Loh, who spent 22 years in corporate finance, noted that many people struggle to estimate their retirement needs. He shared that while some might think they require $5,000 to $8,000 a month, they often lack a clear understanding of their spending patterns. This realization highlights the importance of tracking expenses in order to establish a realistic budget and comprehend one's financial requirements.
The panellists, Leon Loh and Tan Huey Min, general manager of Credit Counselling Singapore, advocated for the use of apps and spreadsheets to monitor expenses. Tan explained that a budget functions like a blueprint, guiding where money should be allocated. She also emphasized that having a budget does not prevent one from enjoying life; instead, it allows for setting aside a "fun money" allowance for activities like watching movies or socializing with friends.
However, merely having a budget is not sufficient. Retirees, in particular, must ensure that their financial resources can sustain their desired lifestyle throughout their retirement years. This involves estimating the cost of their desired lifestyle and comparing it to sources of recurring income like CPF Life and private investments. Additionally, it is crucial to have savings set aside for unpredictable expenses such as medical treatment, home maintenance, and appliance replacements.
Cash flow becomes even more critical during retirement, as retirees need to ensure their finances last a lifetime. One smart strategy is to avoid using loans for non-essential expenses, such as overseas holidays. Instead, before taking on a loan, consider the acronym PAO - purpose, affordability, and options. For example, before using a credit card for a plane ticket, evaluate whether the loan repayments are affordable and if alternative options exist, like postponing the trip until sufficient savings are accumulated.
The panelists also stressed the significance of financial resilience, the ability to withstand unexpected shocks such as hospitalizations. They advised that while starting financial planning earlier provides more time for savings and investments to compound, it's never too late to begin, especially for those in their 40s or 50s.
Tan highlighted that even individuals in these age groups can still plan for retirement based on their current financial situation and the lifestyle they can realistically maintain, rather than taking excessive investment risks.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
