Singaporeans worry most about unexpected expenses - here's how to deal

PHOTO: Reuters

Are you financially fit? Check out five simple ways you can uplift your financial fitness to be in better shape.

In the second half of 2020, HSBC conducted a FinFit Index study across 1,200 respondents to uncover the financial habits, knowledge and financial security concerns among Singaporeans. The findings, released earlier this year, unpacks more insights around top financial concerns among Singaporeans. 

Not just that, we also explore some simple ways you can uplift your financial fitness (FinFit) game so that you get in better shape. While we are already four months into 2021, it’s still not too late if you want to turn up the dial.

What are the top financial concerns for Singaporeans?

As part of HSBC’s FinFit Study, they wanted to understand what are the top financial concerns for Singaporeans. The financial concerns were based on the three defined level of FinFit: 

  • Fittest: 80 to 100 on the FinFit Score
  • Moderately fit: 50 to 80 on the FinFit Score
  • Unfit: Below 50 on the FinFit Score

Insight 1: Moderate fitness group has most financial concerns

Firstly, those who are in the moderate fitness group are likely to be in the sandwiched generation – those who have parents as well as children to care for.

Secondly, the number of concerns is also a function of knowing what you don’t know. This group seems to have more financial knowledge than the unfit group and thus appears to be more concerned about not meeting different aspects of their financial planning.

PHOTO: HSBC FinFit Study

Thirdly, while they are the middle-income class (with liquid assets of around $722,000), they are not as savvy in financial planning as the fittest group. In fact, only 58 per cent of this group review their financial plans yearly compared to 95 per cent in the fittest group. The lack of financial planning has put them on the back foot and they struggle to achieve their financial goals.

Insight 2: Unexpected expenses is a common financial concern across all groups

Regardless of the FinFit Score, there are a few financial concerns that stand out for all three groups. The financial concerns that appear in all three groups include: 

  • Unexpected expenses 
  • Unexpected medical expenses
  • Pay cut or income reduction
  • Unemployment
  • Unable to support retirement life

5 ways you can up your financial fitness if you aren’t FinFit yet

The survey results impress upon Singaporeans that these financial concerns that you might be having are very real, and you are not alone in it. More importantly, once you are aware of them, you need to take concrete steps to address them. 

So, if you are ready, here are some of the ways you can up your financial fitness.

1. Insure against unexpected expenses 

Unexpected expenses are always lurking around and you never know when you might get hit with one. It can be an unexpected medical bill because of a road accident. It can also come in the form of unexpected car repair expenses when someone accidentally reverses into your car. 

Unexpected expenses can happen anywhere at any time, which makes it impossible to avoid. Since you can’t avoid it, the next best option you have is to guard against it financially. In fact, that’s what insurance like personal accident plans does for you. It helps you stay financially protected so that you don’t have to worry about unexpected expenses.

If you are already covered for, kudos to you. But if you don’t have an existing insurance, perhaps it’s time to get yours today.

2. Build emergency funds

Pay cuts and unemployment is part and parcel of working life. Sometimes, there’s nothing you can do because of the macroeconomic environment. Case in point? Covid-19 and the ensuing Circuit Breaker from last year.

However, what you can do instead is to get into the habit of squirreling away a modest 10per cent to 20 per cent of your paycheck every month to build an emergency fund.

The emergency fund acts as a safety net that your monthly expenses such as necessities, mortgage repayment can be met while you are unemployed. Having emergency savings can also help you tide over the tough period without causing too much financial distress while you are eagerly looking for a job. 

Ideally, you want to have emergency funds of at least six to 12 times of your monthly expenses, including big ticket loan repayments. If you haven’t already started building your emergency fund, you can start yours today with a high interest savings account to make your savings more optimized.

3. Start investing as early as you can

Being unable to support retirement life is one of the common financial concerns among Singaporeans. And there’s no prize for guessing why. 

Planning for retirement life isn’t as straightforward as a five-minute doodle job; you’ll need to have a clear idea of how it’ll look like after you officially hang up your boots, so to speak. Will you be travelling occasionally? Are you downgrading to a simpler lifestyle? Do you think you’ll have a hand in supporting and raising grandchildren? Is what you’ll be receiving from CPF LIFE’s payout enough? 

From there, you’ll need to work the math to determine the shortfall to that ideal amount, before you come up with a plan to bridge the gap.

If you want to alleviate the concern of not being able to support retirement life, a key action to take is to start investing early. The earlier you start investing, the more time your investments have to accumulate and help you hit the projected retirement dollar amount that you need.

Kickstarting your investment early doesn’t have to be difficult. If you know nuts about investment, all is not lost – there’s robo advisors to help beginners get started.

ALSO READ: 8 best investment apps to use right now

4. Be savvy about your home loan

As Singaporeans, we love property. After all, 90per cent of Singaporeans own a home. Some of us invest in housing. The fear of being unable to buy our own property really scares us, especially when housing prices in Singapore continue to climb! 

When it comes to financing for your home, there are many hacks in the playbook. But a proven one is to be active on relooking your home loan situation when the opportunity arises. 

If you find that you’re already out of the lock-in period (with no penalties incurred) and you chance upon another bank’s home loan that’s offering a cheaper interest rate, it may significantly reduce the cost of your home ownership.

So, be sure to set a reminder to check out the best home loan rates you can find every quarter so that you don’t overpay on your home loan wherever possible. 

5. Get more bang for buck out of daily expenses

PHOTO: HSBC FinFit Study

This article was first published in SingSaver.com.sg.