Category: Spending

Teach your kids to budget! Try this.

Parents of young children frequently ask me a recurring question: “What is the best approach to teach my kids about personal finance?” While the task itself may not be overly challenging, finding an enjoyable and non-materialistic approach can be. To tackle this, I have begun exploring a different way by focusing on teaching children the concept of “resource planning” instead of purely financial planning.
 
And the resource? SNACKS.
 
My kids (Riley & Rowan) are now on a Snack Budget. They receive a limited amount of snacks per month and they are allowed to make their own choices on when/what they want to eat. So far, I think it’s been fairly effective. It instils responsibility AND it saves me my sanity. I no longer have to deal with their constant requests for snacks. Here is a short summary of the steps involved in this approach:
 
1. Explain the concept: Start by explaining the idea of limited resources, budgeting and allocation. Explain it through themes such as Time, Money & Resource (in this case, snacks).
 
2. Set a monthly snack allowance: Determine a reasonable amount of snacks that your child can have in a month. This could be a fixed number. You can also set some rules. For example, snacks are only allowed after breakfast, or snacks are only allowed to be taken out from a dedicated snack box. (It will also be wise to keep a higher proportion of quality snacks at home, to manage the diet).
 
3. Track and plan: Help your kids create a simple tracking system, such as a chart or a notebook. Personally, I print this out for them. Every time they grab a snack, they would have to cross out one ‘token’. The snack tokens only get replenished at the start of the next month. 


 
If your kids older:
 
4. Involve them in the shopping: Take them along when grocery shopping and involve them in making choices. Give them an allowance ($), and allow them to choose their own snacks. This will help them understand the value of money and the importance of making good choices.
 
5. Encourage saving: Teach your child the benefits of saving money. If they manage to have some snacks left at the end of the month, encourage them to save that extra amount for future goals or treats.
 
By teaching children budgeting through limited snack allowances, they can learn valuable lessons about money management & making choices. This approach can lay a strong foundation for their financial & personal well-being in the future.

If you try this and it works, do drop me a note too. would love to hear more about it 😉

The basic things you need to know, if you are a Self-employed, hustler or freelancer in Singapore

If you are a self-employed individual in Singapore, there are several aspects of finances that you should pay close attention to. Managing your finances effectively is crucial for the success and sustainability of your self-employment/ hustling life~

Here are 6 important things to keep in mind:

  1. Know your taxes!
    Understand your tax responsibilities and ensure timely filing of your tax returns. Familiarize yourself with the applicable tax rates and deductions available for self-employed individuals.
    Tax Reliefs: https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/tax-reliefs-rebates-and-deductions/tax-reliefs
    Guides available on IRAS: https://www.iras.gov.sg/taxes/individual-income-tax/self-employed-and-partnerships/tax-obligations-by-industry-trade-or-profession 

  2. Keep it organised!
    Maintain accurate financial records to track your income and expenses. As you income /expenses go up, consider using accounting software or hiring a professional to assist you with bookkeeping tasks. It also gives you a better idea of how profitable you really are.

  3. Money moves! So take note of your budget & cash flow.
    Create a realistic budget to allocate your income and expenses effectively. Ensure you have sufficient funds for both personal and business needs. Cash is queen. Cashflow is king!

  4. Future Planning -Plan for your retirement.
    Unlike employees, self-employed individuals do not have mandatory Central Provident Fund (CPF) contributions. Therefore, it is crucial to plan and save for your retirement through alternative means, such as voluntary CPF contributions or other retirement savings vehicles to ensure streams of guaranteed income in retirement.
    Note: Self employed individuals are also required to make mandatory Medisave contribution. You can find out more here: https://www.cpf.gov.sg/member/growing-your-savings/cpf-contributions/saving-as-a-self-employed-person

  5. Protect yourself from life’s surprises with insurance.
    As self-employed, you do not enjoy employee insurance benefits. Take care of yourself, check out health insurance, critical illness insurance, and business insurance. Ensure that you have adequate coverage to protect yourself and your business from unexpected events.
    At the different stages, different vehicles may work to your favor. In the early years, a term plan may be idea to keep premiums low. But if budget allows, a life plan may be a better solution in the long run.

  6. Stay in the know, continue learning.
    Stay updated with the latest financial regulations, tax changes, and government schemes that may benefit self-employed individuals. Attend workshops or seek professional advice to level up your financial knowledge and skills.
    OR, you can also reach out to me, a Certified Financial Planner @ Financial Alliance to find out more.

By paying attention to these key financial aspects, you can better manage your finances as a self-employed 😉

Maximise tax reliefs and save on taxes today.

Once again, the tax season has arrived and if you have not filed your taxes yet, here are some key ways you can save on taxes, simply by maximising and allocating your tax reliefs.

Part 1: Upon tax reporting in March / April 2023:

(1) Course fee tax relief $5,500: Any course of study, seminar or conference in 2022 for the purpose of gaining an approved academic, professional or vocational qualification

(2) Life Insurance tax relief: $5,000: If your CPF contribution is < $5,000, you may claim the lower of: 
a.  the difference between $5,000 and your CPF contribution; or
b.  up to 7% of the insured value of your own/your wife’s life, or the amount of insurance premiums paid
New! The voluntary cash contribution to your Medisave account is not considered for the $5,000 limit for the total CPF contribution for YA 2023 onwards.

(3) Parents relief $9,000: You may claim this relief if you have supported the following dependants:
a. Parents / Parents-in-law / Grandparents / Grandparents-in-law
b. Stay with dependent $9000 / Don’t stay with dependent $5,500
TIP! You may also discuss with your siblings on how to share the parents relief.

(4) Qualifying Child Relief $4000: For parents, you may claim tax relief of $4,000 per child.  
TIP! Depending on your income, it may be better for QCR to be claimed under fathers, as mothers have Working Mother Child Relief

(5) Working Mother Child Relief: Percentage of income. For working mothers, you may claim up to 60% of your income depending on the number of children as below, and your child did not have an annual income exceeding $4,000.  1st Child: 15%, 2nd Child: 20%, 3rd Child: 25% of income.  
Tip! if your child worked part-time before tertiary education, your WMCR will be automatically removed. But you may write to IRAS to request to re-instate the WMCR once your child is back to full-time studies.  

NEW! Budget 2023 – From YA 2025, there will be changes to WMCR from a percentage of income to a fixed amount. Budget 2023: Child relief for working mothers to be fixed from 2024

Click here for full list of reliefs. Do also note that there is an overall tax reliefs cap at $80,000

a tax is a fine for doing well a fine is a tax for doing wrong

Part 2: By end of the year 2023. Reliefs & deductions to reduce tax for 2024 NOA  (to be done before 31/12/2023): 

(1) Do good and save on taxes at the same time! Donations to approved Institution of a Public Character (IPC) enjoy tax deductions of 2.5 times the qualifying donation amount.

(2) CPF Cash Top Up Contribution Up $16,000: This is applicable if you top up to the CPF SA account if you have not reached the Full Retirement Sum.
TIP! You can enjoy tax relief of up to $16,000 for cash top-ups made in each calendar year. Get up to $8,000 tax relief when you top up for yourself and up to $8,000 when you help your loved ones build their retirement savings. 

For self-employed: Max contribution $37,740. You may contribute the maximum CPF contribution of $37,740 to reduce your taxable income 
Tip! You should top up as early as possible to benefit from the power of compound interest over the years.

(3) Supplementary Retirement Scheme $15,300: SRS is a tax deferment scheme. Every dollar contributed to your SRS account is eligible for SRS Tax relief the next year. 
Tip! You are able to invest the monies in your SRS, or put into saving vehicles like SSB, making it a great retirement accumulation tool.

Hop the above information is useful! 

If you are still unsure about the tax reliefs or have any queries, drop me a WhatsApp

Cheers and happy saving taxes!

Reasons to review your finances during a recession & how to do it. Here’s step 1~

a financial review when the outlook of the economy is gloomy is more important than financial planning when things are rosy.

When times are bad (note that the list is not exhaustive):

  1. Our income may be affected.
    • The risk of unemployment goes up.
    • Pay cuts happen.
    • Contract workers may not get renewed
    • Drop in revenue (affects business owners)
  2. Expenses may go up
    • Think rent, mortgages, petrol and even food prices. There are many news regarding this recently so I shall not elaborate.
  3. Tougher borrowing terms
    • You may not be able to get financing easily
    • In the event of a drop in asset prices/loss of income, you may not even be able to refinance your loans

A financial review will help you assess your capacity to deal with any of the above scenarios, and allow you to make adjustments to improve your situation.

And step 1: awareness on your spending habits. What are you REALLY spending on?

First, calculate your monthly fixed expenses. This includes bills and payments which HAVE to be paid and which remain fairly consistent in the short term – this means you can’t just make huge cuts just because you want to.

Think rent & mortgage repayments- even if you were to make lifestyle choices and move to a more modest home, the process takes time.
This is also the reason why the government has the mortgage servicing ratio and total debt servicing ratio in place to ensure financial prudence.

If a huge chunk of your income is going to fixed expenses, you may find yourself in a more stressful situation in the event of a pay cut/unemployment as it would require you to make major lifestyle changes to bring down the expense to fit the budget (or a smaller income)

To mitigate this, keep enough emergency cash or have a plan that can buy you time (such as renting out a room in the house, moving in with your parents temporary, exercising retrenchment benefits/premium holiday on your insurance plans).

Next up, calculate your monthly variable expenses. This includes discretionary spending that can be reduced easily.

  • Food – Dining in vs preparing your own meals
    For some people, dining out could be cheaper as it may not be cost effective to cook for one. For others, having their meals at home can save a huge chunk.
  • Transport – Public transport vs driving/taking the taxi

and the list goes on.

The good news if a large part of your income goes to discretionary spending is that you can easily make adjustments when times are bad. The bad news is that human beings are creatures of habit and it can be painful to change your spending habits overnight.

If you are working in a high risk sector, you may want to start assessing your spending habits in order to be better prepared.

The whole point of calculating your expenses? To help you determine the level of emergency cash to keep. (No, I do not think that the commonly advocated emergency cash of 3-6 months expense is sufficient)

Example:
Monthly Fixed Expenses: $5000
Monthly Variable Expenses: $3000
Total Emergency cash to keep: $5000 * 12 + $3000*6 = $78,000

Of course, if you still aren’t convinced to do this ‘tracking exercise’, just keep 12 months of your income as emergency cash.

The Singapore Savings Bonds is currently giving a high interest rate of ~3.4%p.a. As it is a highly liquid vehicle, it is a great vehicle to use to hold your emergency cash. And the reason why I advocate this over FD/T-bills is because i do not believe that interest will stay at a high level (not 10 years, anyway) perpetually.

more on that in my future post 😉

How are you accumulating for retirement?

In the course of my work, the one question I love asking clients will be their outlook towards retirement accumulation.  Recently, I’ve started to classify the attitudes of my clients in their late 20s/early 30s.

(1) The Lifelong worker: Individuals who are not too concerned about the future because they believe/want to work for as long as they can.

(2) The Live Light: Those who prefer to reduce liabilities as soon as they can to reduce financial commitment, thus allowing them to ‘semi-retire’ earlier. These are usually the ones who like to clear off their mortgages and pay up for their insurance. And as soon as they are free from liabilities, they will save aggressively for their retirement. Investment volatility? No problem – because they have no liabilities.

(3) The Early Savers: Those who prefer to save aggressively when they are young, so that they can semi-retire early with multiple sources of passive income. These are the ones who kickstart their annuities early and plan more longitudinally. They don’t mind having loans as long as their total income can cover the repayments. They do not mind investment volatility either because they have the luxury of time.

(4) Retirement? Money isn’t a problem. I am building my empire! 

There’s really no right or wrong approach to retirement planning but the important thing is to know and to plan according to your preferences. After all, different strokes for different folks and what matters is that we all get there.

Do you belong to one of the above too?

If you have been thinking about your retirement (or if you have not done it at all), feel free to try out this calculator here: https://northstar.efc.sg/link/consultant/yvonnelim/retirement 

Otherwise, just drop me a note. I promise it’ll be a fun discussion!