Question:
How should a fresh graduate working in the engineering sector manage his/her finances? Long-term and short-term!
Answer from our CEO, Christopher Tan:
Thank you for participating in this AMA and also for your question.
My son is also a fresh graduate, and this is what I shared with him: As a fresh graduate, while you are disadvantaged by your lower income, you have the advantage of having relatively lower financial commitments, obligations, and liabilities, as well as a longer investment time horizon. Therefore, I would suggest that:
In the short-term:
- After setting aside, say, 3-6 months of monthly expenses for emergencies, if possible, set aside about 40%-50% of your gross income to save and invest for short and long-term goals.
- For your emergency fund, you can use fixed deposits, Singapore Savings Bonds, or T-bills. For short-term goals, such as owning a house in the next few years, you can invest in a portfolio of short-duration bonds.
- Your insurance needs are low at this phase of your life, as it is likely that you do not have any dependents. However, please make sure you have a suitable hospitalisation plan. If you have the budget, and only if you have the budget, consider buying a small multi-pay critical illness plan (say $100,000 sum assured) to pay for medical expenses that you cannot claim from a hospitalisation plan, just in case you are down with a critical illness.
For the long-term:
- As you have a very long-time horizon, invest in a portfolio of equities using low-cost ETFs or funds.
At the same time, do remember to set aside some money to enjoy life today as well as showing filial piety and love to your parents. Do also invest in developing yourself, either through books or attending suitable courses, workshops, etc.
Hope the above helps.
Our CEO and Founder, Chris, noticed interest and questions on the SingaporeFI subreddit for some time and had the opportunity to conduct an “Ask Me Anything” (AMA) session in October 2023. The above question was selected from the list of many questions that were asked.
If you are interested in viewing the full Reddit list of questions, you can visit this link.
Christopher Tan, is Chief Executive Officer of Providend Ltd, Southeast Asia’s first fee-only comprehensive wealth advisory firm and author of the book “Money Wisdom: Simple Truths for Financial Wellness“. He is also a Certified Ikigai Tribe Coach.
For more related resources, check out:
1. Discovering Your “Ikigai” with Providend’s Philosophy
2. Developing a Mindset of Scarcity at 18 Years Old Ft. Seth Wee from Sethisfy
3. Two Sides of the Money Equation
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