How I handle my own finances

24th Jul 2021

The purpose of this article is to share how I manage my finances as a fresh graduate who just started working in a non-finance field, and the rationale behind my decisions.

One caveat to this is that my approach isn't optimized. Personal finance is a broad topic and it can be quite time-consuming to go in-depth into a particular area. Hence, I prefer to apply heuristics and focus on improving my engineer skills for my career. Instead, I hope this encourages others who just started on their personal finance journey - even someone as type A as myself don't have everything figured out.

This page will be updated along the way if any of my decisions changes.

Savings

I keep very little cash in my savings account. They are usually enough to last me a few months. The rest of my monies are allocated towards my emergency funds (if it is not filled yet) and to other financial goals.

I plan to allocate my emergency fund in the following way:

• ~ 2 months in my Singlife insurance savings plan

• ~ 3 months in a cash management account (where the capital isn't guaranteed)

• ~ 1 months in Syfe's REIT+ portfolio

The rationale is that it is very unlikely that I will need to draw down all my funds. Even if I need money urgently, I will always draw from my Singlife account first. Hence, I can afford to leave some amount in REITs, which are riskier.

Investments

I mainly invest through roboadvisors for two reasons, convenience and auto-rebalancing. I can simply set standing instruction to transfer a fixed monthly amount, and the auto-rebalancing feature will ensure that my portfolio's allocation will be constant. This way, I can simply 'set-and-forget' and focus on my other interests.

Admittedly, this may not be the most cost-efficient method. For those looking to invest via brokerages, Interactive Brokers recently removed their monthly inactivity fee, making them one of the most cost-efficient brokerages for retail investors with low AUMs.

My portfolios for the different financial goals are divided accordingly

General investing (timeline is 20 years and longer)

• Portfolio: Autowealth's 80-20 portfolio & Endowus' 100% Dimensional World Equity Fund

• I initially started with Autowealth. However, after reading about Dimensional, I felt more convicted about their investment thesis, and started allocating my funds to Endowus.

• I will still continue to DCA some amount in Autowealth.

For Children/Pregnancy

• Portfolio: NTUC's Dreamsaver Endowment Plan

• This was the first investment "mistake" I made while I was in NS. However, it just so happens that the endowment plan matures when I'm 28, which is roughly when my fiancee and I plan to have a kid.

Insurance

Most advisors will tell you that you should spend 10% of your income on insurance. In my opinion, that is total BS. If anything, you should be maximising your coverage while minimising your insurance premiums.

The total cost of my premiums is <5% of my take-home pay. They are:

PruActive Term

• What it covers: Death and TPD

• Coverage: 10X of annual income up to age 65

Aviva MultiPay Critical Illness IV

• What it covers: Early critical illness (ECI) and late-stage critical illness (CI)

• Coverage: Almost 2X my annual income for ECI and 4X my annual income for CI

• Most other multipay CI plans allow you to claim up to 5X, which I find to be a bit of an overkill. I mean, if you're diagnosed with a CI more than 3 times, what kind of quality of life are you going to have? Hence, I prefer to get one that only allows you to claim <5X.

AIA HealthShield Gold Max B with an additional rider.

• Coverage: A Class ward and below.

• I personally don't see the need to cover up to private hospitals. I've been warded before and I find that our public hospitals are good enough for me.

PruPersonal Accident Plan

• Costs ~$22 per month

Rationale for term over whole Life

This isn't a new debate, but my opinion is that the point of covering against death/tpd and critical illnesses is for income replacement. This is so that your dependents can be provided for if you are unable to work.

This should end when your dependents have either passed on or when they have become economically productive. Hence, I don't see the need to insure myself against death, tpd and critical illness beyond age 65. My health insurance will still be able to cover against CI treatments.

Rationale for getting plans from different insurers

Evidently, I didn't buy everything from a single agent. Different insurers may have products that are better than others. It is also not that troublesome to purchase your insurance from different insurers.

Credit Cards

I've applied for the CitiBank CashBack Plus for the sign-up bonus.

However, my main cashback card will still be the UOB Absolute CashBack Card as they have the highest cashback rate at 1.7%. Additionally, there are no spend exclusions. i.e. You can use it to pay for your utilities and insurance premiums, which puts this card on top of the other cashback cards in the market.

So far I have not gotten a miles card yet. That will be something I'll decide on at a later date.

Disclaimer

This article does not consitute financial advice in any way. I simply want to be transparent with how I handle my own finances to encourage others who just started that it is okay if you haven't got your finances completely figured out.