How To Start Your Financial Planning In Singapore 2025

As we start 2025, the importance of effective financial planning in Singapore cannot be overstated. With the evolving economic landscape, rising living costs, and significant changes in government policies, it is crucial for individuals to take proactive steps to secure their financial future.

Here are some significant changes in government policies in Singapore, effective from 2025

The Singapore government will raise the Annual Value (AV) threshold used in various social support schemes. This change aims to provide continued support to Singaporeans by expanding eligibility for benefits under schemes such as the GST Voucher and Workfare Income Supplement. The second AV tier will increase from a maximum of $25,000 to $31,000, allowing more than 1 million residential properties to qualify for assistance. [1]

The upcoming Budget for 2025 will be focusing on enhancing social safety nets and addressing cost-of-living concerns. Analysts predict that the government may introduce measures such as vouchers and support for skills upgrading to help workers adapt to evolving job markets. This budget is anticipated to be particularly significant as it will be the last one before the next general election. [2]

To address long-term care and housing needs for the elderly in Budget 2025, initiatives will be aimed at alleviating cost-of-living pressures for families with young children and enhancing job opportunities through skills development programs.

Wage Adjustments Based on National Wages Council NWC Guidelines will call for fair and sustainable wage increases for employees. This policy reflects a commitment to ensuring that wage growth aligns with productivity improvements and economic conditions. [3]

Understanding the Importance of Financial Planning

Financial planning is not merely about budgeting; it encompasses a comprehensive approach to managing your finances, including saving, investing, and protecting your assets. It allows individuals to:

Set clear financial goals: Whether it’s buying a home, funding education, or preparing for retirement, having defined goals helps in creating a focused plan.

Prepare for emergencies: Unexpected events can disrupt financial stability. A solid financial plan includes an emergency fund to cover unforeseen expenses.

Achieve financial independence: With a well-structured plan, individuals can work towards achieving financial independence and security.

Key Steps to Start Financial Planning

1. Assess Your Current Financial Situation

Before diving into planning, it’s essential to have a clear understanding of your current financial status. This involves:

Calculating net worth: List all assets (savings, investments, property) and liabilities (loans, credit card debt) to determine your net worth.

Tracking income and expenses: Maintain a record of all sources of income and monthly expenses to identify spending patterns.

2. Set Financial Goals

Establish short-term and long-term financial goals based on your needs and aspirations. Common goals include:

Emergency savings: Aim to save at least 3 to 6 months’ worth of living expenses.

Retirement savings: Consider how much you need for retirement and set targets accordingly.

Investment objectives: Identify what you want to achieve through investments, whether it’s wealth accumulation or passive income.

3. Create a Budget

A budget acts as a guide to help you manage your finances efficiently.

Categorise expenses: Divide expenses into fixed (rent, utilities) and variable (entertainment, dining out) categories.

Allocate funds: Based on your income, allocate funds for necessities, savings, investments, and discretionary spending.

4. Build an Emergency Fund

Having an emergency fund is essential for ensuring financial stability.

• Set a target amount: Aim for at least three months’ worth of expenses initially.
• Choose the right account: Consider high-interest savings accounts or Singapore Savings Bonds (SSBs) for easy access and growth.

5. Protect Yourself with Insurance

Insurance is an essential component of financial planning that safeguards against unforeseen circumstances. Key types of insurance include:

• Life insurance: Ensure coverage of at least nine times your annual income for death and total permanent disability.
• Critical illness insurance: Aim for coverage equivalent to four times your annual income.
• Health insurance: Familiarize yourself with national schemes like MediShield Life that cover large healthcare bills.

6. Invest Wisely

Investing is vital for wealth accumulation over time. Consider these strategies:

• Start early: The earlier you start investing, the more you benefit from compound interest.
• Diversify your portfolio: Spread investments across various asset classes (stocks, bonds, mutual funds) to mitigate risk.

Utilise CPF schemes: Take advantage of the Central Provident Fund (CPF) for retirement savings and investment options.

Government Resources for Financial Planning

The Singapore government offers various resources to assist citizens in their financial planning efforts:

MoneySense

MoneySense is a national financial education program that provides tools and resources for effective financial management. It offers:

Basic Financial Planning Guide: Launched by the Monetary Authority of Singapore (MAS), this guide outlines simple steps for enhancing financial well-being 13. It covers emergency funds, insurance protection, investment strategies, and legacy planning.

MyMoneySense

MyMoneySense is a digital service that helps users track their finances and set savings targets. Key features include:

Personalized dashboard: Users can monitor cash flow, wealth status, and protection needs 58.

Budgeting tools: The platform provides tools for budgeting and tracking progress towards financial goals.

Preparing for Changes in 2025

As we enter 2025, several significant changes in Singapore’s financial landscape will impact personal finance management:

Closure of CPF Special Account (SA): For members aged 55 and above, the CPF SA will close in January 2025. Funds will be transferred to the Retirement Account (RA), necessitating adjustments in retirement planning.

Increased monthly salary ceiling: The CPF monthly salary ceiling will rise to $7,400 from January 2025, allowing higher contributions towards retirement savings. [4]

Starting your financial planning journey in Singapore in 2025 requires a proactive approach that encompasses assessing your current situation, setting clear goals, creating a budget, building an emergency fund, obtaining necessary insurance coverage, and making informed investment decisions. Utilizing government resources like MoneySense and MyMoneySense can significantly enhance your ability to manage finances effectively.

By taking these steps now, you can pave the way toward achieving long-term financial stability and security in an ever-evolving economic landscape.

The article above should not be taken as financial advice. Investments and their corresponding products have risks. Please seek advice from a financial adviser representative before making any investment decisions. In the event that you choose not to seek advice from a financial adviser representative, you should consider whether the investment or product in question is suitable for you.

References:

[1] https://www.mof.gov.sg/news-publications/press-releases/government-raises-annual-value-threshold-for-social-support-schemes-from-january-2025-to-provide-continued-support-for-singaporeans

[2] https://www.straitstimes.com/singapore/politics/govt-studying-how-to-tackle-cost-of-living-concerns-take-better-care-of-seniors-pm-wong

[3] https://www.mom.gov.sg/-/media/mom/documents/press-releases/2024/annex-a—nwc-guidelines-2024-2025.pdf

[4] https://www.cpf.gov.sg/member/infohub/educational-resources/cpf-changes-in-2025-and-how-they-benefit-you