There are ways to make your money work harder for you, says Revolut's head of savings Marsel Nikaj. “[These include] daily activities like paying for your groceries and taking advantage of any incentive offered to you,” he continues.
For instance, if you're looking forward to travelling, Nikaj says rounding up spare change and saving them in a different currency using the Revolut app. Rounding up spare change after paying for things like restaurant bills or groceries, can help would-be travellers accumulate a tidy sum for their holiday fund. Of course, you will also need to have a clear idea as to which currency you will want to convert your spare change to.
As for saving towards your golden years, putting your money into your Supplementary Retirement Scheme (SRS) account is another way to make your money work a little harder, as depositing into the account lets you enjoy tax reliefs, says Nikaj. However, do note that the sum deposited into your SRS account can only be taken out when you reach 62 years of age. Any withdrawals made before then will incur a penalty of 5%.
That said, younger investors should only consider this option only if they have no use for the extra funds deposited into their SRS account. The SRS account also has a fixed interest rate of 0.05% per annum, compared to the 2.5% enjoyed in CPF’s ordinary accounts (OAs). This means investors should only consider this option if the amount required to lower their tax bracket isn’t a hefty one.
How to get more information on making the best decisions for your money?
In this day and age, there is a lot of content for those seeking to learn more about personal finance. Among the numerous books, podcasts and articles to look for, Nikaj recommends the book The Psychology of Money by Morgan Housel.
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“I think Housel definitely hit the nail on the head when he wrote that money is an emotional subject. I also like Money for the Rest of Us by J David Stein — the book is touted as a “common sense guide to investing”. Stein also has a podcast of the same title where he makes it easy for his listeners to understand topics like inflation, gold prices, cryptocurrency and NFTs,” he says.
The road to financial independence
While there are no particular financial skills required to be able to achieve financial independence, Nikaj notes that “our attitudes towards money management is important”. Stick to a plan: Basic rules like preparing a budget, being disciplined enough to stick to it while making a point to save and invest a portion of our income goes a long way.
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For Nikaj, true financial independence means being able to live life on his own terms, and being able to work because he wants to and not because he has to. “If I decide to quit my job tomorrow so I can retreat to a cabin in the woods to write a novel, I shouldn’t have to worry if my mortgage is going to be paid or if my family is going to go hungry,” he says.
“I think it is also important to explain that ‘financial independence’ is not [having] the freedom to buy anything you want. If you charge your credit cards to [its] maximum [limit] or take out a loan, you can find the money to buy what you want; you just have to pay it all back eventually.”
On taking the first steps towards having financial independence, Nikaj says a basic level of financial literacy is needed. Learning how compound interest works, for example, is learning how to “protect and grow our savings and what instruments like insurance and investment can do for us — is the first step towards financial independence,” he says.
“Some of us don’t have the interest or time to become day traders or watch the stock markets, that’s fine. Then find yourself a good financial advisor or find solutions that you understand and won’t lose sleep over.”
You should also be organised and have an accurate overview of your finances at all times, he adds.“Too often, people sign up for credit cards for the free gifts and they end up losing track of their bills or overspending,” adds Nikaj.
“I think it is important to recognise that financial independence is something all of us can definitely achieve. There is a saying that goes, ‘You can be twice as rich by deciding that you need half as much.’ We can save ourselves a lot of money if we cut back on impulse shopping. I’m a fan of buying pre-loved clothing and items because I believe in giving second life to things and it's one way I can help the environment. With the money saved, you can invest it for a more secure future.”
Photo: Revolut
