Fresh Graduates: An early start for a better future

Congratulations on your graduation and welcome to adulthood! You have spent close to 17 years of your life studying and depending mostly on your parents, it is now time for you to take on the responsibility to start planning for your future.

Living in a country like Singapore where a high cost of living and oftentimes a dearth of welfare pose problems, it is surely important to be smart and disciplined when it comes to managing our personal finances. We need to start early in order to confidently diversify our income.

Starting Early

You have a lifetime ahead and ample time to plan for your next few stages of life. However, even though we understand the importance of planning ahead, many nevertheless fail to plan. Do you recall hearing familiar complaints which typically revolve around how tough it is for young adults to move on to their next stage in life? For example: “Where got money to start a family?”, “No money, how to retire?”. These are very common lamentations we hear from people around us. Many of them look back and regret not putting in place financial plans at an earlier stage of their lives.

The good news is that, after reading this article, you should feel a sense of motivation to start now and start early in achieving your financial goals. You are definitely aware that you have to move on to the next life stage, you know you will eventually have to retire, so why not partner with time now and get the most out of it. If you would start early, planning for life will prove to be a much easier process.


Diversify your Income

Receiving your first pay check can be one of the most fulfilling moments of your life. There might be a list of things you would like to achieve or buy, this truly is part and parcel of life. To effect proper planning with the money you now have, you will be required to diversify your sources of income in order to maximise your dollar. You should do so by managing lifestyle choices, building emergency funds, exploring insurance purchase and making clever investments.


Gone are the days where you receive $600 as a monthly allowance. With a hard-earned monthly income of close to $3000, you might be tempted to upgrade your lifestyle. You have worked hard every single day in anticipation of receiving your pay check at the end of every month, it is normal that you might wish to treat yourself to an occasional holiday or spend the cash on fashion items. However, it is also important that you manage your expenditure with care and discipline. It is necessary that you do not overspend such that you can have enough surplus funds to save for emergency purposes and to channel into insurance and investment.

Saving for emergency:

Life is not always going to be smooth sailing. There are good times and there will be bad times. It is an imperative to save for the rainy days and it is a good practice if you can ensure that you possess at least 6 months-worth of emergency funds in the case of unforeseen situations such as unexpected retrenchment. While you might still be single and matters of marriage, home ownership, having children and planning for retirement seem like far-fetched destinations, giving thought to increasing your savings can allow you to better meet these potential challenges. Many of us may bear the impression that we can always fall back on CPF savings, but do keep in mind that these are not liquid assets which you can withdraw freely.


Insurance is an important component of a proper financial plan which must not be ignored. Some of us may have the privilege of owning the insurance policies purchased by our parents. It is definitely fine if you do not have them as well. Now that you have started working, it is due time for you to take ownership to start looking out for your individual needs and to transfer possible risks to insurance.

There are 2 types of personal insurance; health insurance and life insurance. Health insurance typically include the hospitalisation plan, critical illness plan and disability income insurance, these plans help to cover healthcare costs as well as an unexpected loss of income. Life insurance with examples such as term insurance or whole life insurance aid in ensuring that your dependants receive help in sustaining their normal lives in the case of sudden death.


We work hard to earn the monthly pay check and on top of that, need our money to work equally hard for us in order to grow our wealth. With inflation and rising GST rates, it is only wise to start investing at a young age so as to beat inflation and to expand our storages of wealth. Let’s take a look at what I mean:

For illustration purposes only.

  James John
Salary $2500 $2500
Expenses $1000 $2000
Surplus $1500 $500


James and John are both fresh graduates earning the same income of $2,500. James is a more prudent saver and has decided to limit his expenses to $1000 a month, rendering him a corresponding surplus of $1500. On the opposing side, we have John who is an avid spender. His expenditure hovers around $2,000 monthly and he is typically left with a surplus of $500.

For illustration purposes only.

  James John
Surplus $1500 $500
Emergency Funds $800 $200
Insurance $200 $200
Investment $500 $100


With a surplus of $1500, James can allocate $800 to building emergency funds, $200 for insurance cover and $500 for investment to meet his medium to long term goals. Whereas for John, with a surplus of only $500, he can only channel $200 toward his emergency funds, $200 for insurance coverage and $100 for investment.

Now look at the what James and John would have achieved respectively after 10 years.

  James John
Investment $500/month $100/month
Returns 5% 5%
Portfolio $124,225 $15,528
Liquid Assets $60,000 $24,000
Total Assets $184,225 $39,528


In 10 years, James would have accumulated $60,000 of liquid assets and $124,225 through a compounded interest of 5% from investment. This will add up to having a total asset amount of $184,225. Conversely for John who is more averse to saving, he would have gathered $24,000 of liquid assets and $15,528 through a compounding interest of 5% from investment. This will add up to a total asset amount of $39,528.

Now you should decide for yourself, whether you would prefer to be a “James” or “John”. In Singapore, adopting a lifestyle like that of James can usually be regarded as going against the norm. While many of your friends might enjoy luxurious trips, frequent café visits or purchasing the latest luxury goods, you might feel a little discomfort with a frugal lifestyle. While it might be an uncomfortable first step to take in planning for your future at an early stage, I assure you that this will aid you in leading a life of greater financial freedom later on. Financial planning can be a complex and confusing topic to grasp, it will be most ideal if you could begin by speaking to a professional financial consultant. So, lets face it, you are adults now. Start planning!


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