How to Achieve Freedom with Financial Planning in Singapore

Every working Singaporean wants to achieve financial freedom. If you plan your finances properly, it is possible.

Here at ValueChampion, we cover a diverse range of financial products available in Singapore. In this article, we will explain what some of these products are and why they are so important for your personal financial planning.

Credit Cards

What are credit cards?

In Singapore, credit cards are generally plastic or metallic cards that you can use to buy goods and services from businesses that accept payment through them. When you use a credit card to pay for goods and services, you are borrowing money from the company or bank that issued you the card. You are expected to return this money, which may have interest or other conditions attached to it.

Why are credit cards important for financial planning?

One of the main benefits of using a credit card is being able to buy goods and services without being limited by the funds you have available. This allows you to make big-ticket purchases more easily. For example, you can buy a car with your credit card even if you don’t have the requisite amount of cash.

You can also redeem perks such as cashbacks, rewards, and airline miles when you make purchases using a credit card. For example, you can obtain up to 20.88% fuel savings at Esso & Shell if you spend at least SGD 800 a month using the Citi Cash Back Card. This card is one of the best credit cards in Singapore for cashback and rewards.

As Singapore moves towards being a “cashless society”, credit cards will only grow in importance.

Citi Cash Back Card

Great cash back card for average spenders looking to benefit from everyday purchases.

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Pros

• Great dining and groceries rewards
• High petrol discounts

Cons

• Lacks shopping and entertainment rewards
• Not suitable for lower budgets

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Another example of a good introductory credit card in Singapore is the CIMB World Mastercard. It gives you up to 2% unlimited cashback in specific spending categories such as online food delivery, movie tickets, taxi and automobile spending as well as luxury good purchases. It also allows you to earn an unlimited 1% cashback on all of your other spending. This makes it an easy and fuss free card to use as you know that all of your spending will earn you rewards.

CIMB World Mastercard

CIMB Word MasterCard is one of the highest unlimited cashback cards on the market.

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Pros

• Enjoy 2% unlimited cashback on eligible merchant categories and 1% unlimited cashback on other spend
• Benefits highly diversified spending

Cons

• Minimum spend of $1,000 to enjoy the upsized 2% cashback on eligible merchants
• Travel, dining out and petrol spend are not eligible for upsized cashback

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What are the different types of credit cards in Singapore?

There is a wide variety of credit cards in Singapore. One way of classifying these cards is by the type of perks they are best for obtaining. For example:

Credit cards for cashback – credit cards that give better cashbacks on purchases
Credit cards for miles – credit cards that are better for accumulating frequent-flyer miles
Credit cards for rewards – credit cards that are better for redeeming rewards through a rewards program

Loans

What are loans?

When you apply for a loan, you are applying for a sum of money that will be lent to you with the expectation that you will return the money. Depending on the lender, you might also have to pay interest or extra charges on top of the initial sum.

Why are loans important for financial planning?

Like credit cards, loans allow consumers to make large purchases they otherwise wouldn’t be able to make. For example, most people would not have hundreds of thousands, or even millions of dollars on hand to purchase a home outright. That does not mean that you’ll never be able to achieve your dream of becoming a homeowner. A mortgage loan is a prime example of a loan that can play a big part in the average person’s financial planning. A personal loan is another example of a loan that can be of great help during emergencies, such as sudden medical illnesses, when you may be cash-strapped during times of emergency.

What are the different types of loans in Singapore?

There are many different types of loans in Singapore. Some are geared towards a certain big-ticket purchase while others can be used for smaller day-to-day expenses. For example:

• Home loans – loans to cover the purchase of a residential abode
• Car loans – loans to cover the cost of a car or Certificate of Entitlement (COE) renewal
• Education loans – loans to cover the cost of studying in an educational institution
• Personal Loans – loans that can be flexibly used for a variety of things, from funding your wedding or vacation to paying for medical emergencies

Insurance

What is insurance?

Buying an insurance plan or policy is a way of protecting yourself if you incur unforeseen expenses. When you buy insurance from a company, the company agrees to provide you with a payout if you incur financial losses. These losses have to meet a certain set of criteria that the company determines.

Why is insurance important for financial planning?

Insurance provides a guarantee of compensation if you incur losses from unforeseen events. As we are unable to predict everything that will happen in the future, having insurance can afford us some peace of mind.

What are the different types of insurance in Singapore?

Most types of insurance in Singapore are aligned to a specific need. For example:

• Car insurance – covers damages related to your car
• Home insurance – covers damages related to the structure of your home
• Health insurance – covers expenses incurred from illness and disease
• Travel insurance – covers expenses incurred from mishaps while travelling (medical, lost bags, cancelled flights etc.)

Investments

What are investments?

When you buy an investment, it is with the expectation that its value will increase over time. This allows you to make a profit on the investment.

An example of an investment in Singapore is an Exchange Traded Fund (ETF), such as the SPDR STI ETF.

This ETF tracks the Straits Times Index, which in turn tracks the 30 largest companies on the Singapore Stock Exchange. You can buy ETFs like these through an online brokerage in Singapore.

Webull Online Brokerage

Webull has some of the lowest trading fees currently available, making it suitable for those who are just getting started with investing or those with a small investment budget.

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Pros

• Supports fractional trading for US stocks
• Allows you to earn interest on your idle cash
• Allows you to automate your investing

Cons

• Trading of US stocks during overnight hours has slightly higher commission fees than during regular and extended hours
• Limited investment features

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Why are investments important for financial planning?

Making investments can let you grow your wealth. When the rate of return on your investments is higher than the inflation rate, you prevent inflation from eroding the purchasing power of those investments. Not only that, investing in equities and bonds allow you to earn passive income through dividend payouts as well as capital gains when stock prices increase.

Your investment returns also have the potential to compound. This occurs when you reinvest the profits from the investment back into the said investment. This can exponentially increase your profits over a long period of time.

What are the different types of investments in Singapore?

Some of the more common types of investments in Singapore are:

1. Stocks
2. Bonds
3. Unit Trusts
4. ETFs

Related: Investing 101: A Basic Guide to Stocks

Compare Online Brokerages in SingaporeFind Out More

Conclusion

With advances in financial technology, new financial products are coming to the fore everyday. This also means that new ways of obtaining financial freedom in Singapore are emerging.

We have only covered four different types of financial products in this article. We recommend that you browse our site further to gain a more in-depth understanding of the various products available.

Read More:

• 5 Best Dividend-Paying Stocks and REITs in Singapore
• Is Dollar Cost Averaging The Secret to Hassle-Free Investing?
• How To Invest & Buy Insurance Without Sacrificing Your Starbucks Coffee Or Mala Hotpot
• 4 Low-Risk Investment Alternatives to Fixed Deposits
• How to Pick Dividend Stocks For Your Investment Portfolio

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