Starting a journey to financial independence is not just about investing

Financial literacy is a term bandied about regularly these days. Against the backdrop of rising costs and interest rates, it is unsurprising. 

In a dipstick poll among 500 youths (aged 16 to 34) conducted by the National Youth Council in November, most respondents said that they engage in financial planning or plan to do so, with the goal to meet their basic needs (72 per cent), be prepared for unexpected situations (72 per cent) or to be able to retire early (52 per cent). 

However, most said they were only “somewhat confident” or “not really confident” that they are doing what is needed to meet their long-term goals. 

In a podcast episode by the Straits Times, supported by the National Youth Council (NYC) in support of Forward Singapore, two Singaporean youths dissected more about the topic. 

Shubaashini VIjayamohan, a lead designer with ThinkPlace Singapore and member of the INSPIRIT community, shared that she started her financial planning only in her late 20s, which she says was “quite late”. 

She only got started because she was volunteering at Meet-The-People sessions and met people who could not get proper housing or were suffering from financial issues. 

“It triggered me to start thinking about myself,” she shared. “I went through that hunt where I was reading a lot of articles… I even participated in free events or sessions. I felt like, ‘wow there’s so much to learn’.” 

One important concept to grasp when starting the financial planning process is to form a habit of saving.

“It’s always about how you can start, when you can start, and building the habit,” shared Shubaashini. 

Kenneth Lou, who previously ran the financial platform Seedly, added: “Picking up on the habits side of things is so important. The moment you have bad habits like spending before you save, it’s a very bad move to make.” 

Both Shubaashini and Kenneth both agreed that a quick way to form that bad habit was to indulge in buy now, pay later schemes. Kenneth pointed out that these schemes are “rebranded” versions of instalment schemes. 

“The reason why they are giving credit to people is because they can’t get in the traditional way,” said Kenneth. 

Using the examples of how instead of paying $200 for a pair of sneakers, youths may choose to pay $70 in three or more instalments, which leads to them paying more than the actual cost. 

“It’s spending more than you have, which to me, is not very good financial prudence,” he added. 

Shubaashini said it’s a “scary” scheme, because youths may lose track of their actual expenditure, particularly for the younger youths starting out with minimal income. 

“And when you can’t track it, you get into a situation where you end up in debt. That’s the last place that, when you are talking about financial well being, you want to get into,” she explained. 

On the topic of investment, having a clear goal and understanding their own risk profile will help. 

Shubaashini shared that it is crucial when it comes to investment to not jump into trends blindly. Citing the example of cryptocurrencies, she said that just because it looks extremely attractive, particularly when people on social media brag about their “overnight boom”, does not mean it’s a good investment. 

“The question is always for how long (that it can sustain), and whether… you’re willing to lose in case anything happens,” she said, referencing the crypto crash that happened last year. “I think it’s only something that people should get in, if they are ready to ride the waves. Most importantly, I only step into this space if I know I can afford to lose the money completely, which is how I’ve kept myself very grounded on whether I want to step in or not.” 

There are a lot of investment products and tools in the market, and some can be personalised for the user. 

“It is also key to understand that investing does not mean putting big amounts of money into tools or products. Amounts as low as $100 can help kickstart one’s investment journeys too,” shares Kenneth. 

But the journey to financial independence will always start at the basics: having insurance and savings. 

“Don’t invest until you have your basics, which are your insurance, savings, in order,” said Kenneth. “If not, you will basically be leaky.” 

The full podcast can be found on Spotify, Apple Podcasts and Google Podcasts.