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Financial resolutions to set for a better 2021

2020 has been a crazy year, no thanks to the ongoing COVID-19 pandemic that’s affecting the world. Singapore is experiencing a deep recession, and is expected to shrink between 6% to 6.5% year-on-year in 2020.

Although things are on the mend and we are ready as can be to put this year behind us, 2020 and its disasters have taught us many valuable lessons that are worth arming ourselves with for the coming year – especially when it comes to money.

Most of us don’t think about our finances when things are going well, but that’s exactly when we should be the most mindful and can best prepare for a rainy day.

As we reflect on the year gone by in the last few weeks of 2020, here are five financial resolutions to set for 2021.

1. Constantly challenge your existing budgets

The recession this year impacted many peoples’ incomes. Even if not retrenched, many suffered significant pay cuts as companies struggled to retain staff and continue operating. The circuit breaker period was particularly damaging to many businesses which were forced to stay shut for two months.

As a result, many people found their savings being depleted too quickly. If you experienced similar difficulties in terms of cash flow, it may be time to review your expenses and spending habits.

But Covid-19 also revealed things that we don’t actually need to spend on. You’ll be surprised how much you can save by choosing to dine out less often, or even switching to a cheaper electricity retailer. The stringent travel restrictions have also helped many of us realise how expensive travelling is. We’re not saying that you should not take a break and enjoy life, just be sure to do so in moderation and your wallet will thank you for it!

By fine tuning your budgets and increasing your savings, you can slowly build up an emergency fund as a safety net. Most experts recommend enough to cover about three to six months of unemployment.

2. Let go of clutter

So aside from cleaning up your expenses, we recommend letting go of all other kinds of clutter as well. Pareto’s 80-20 rule about the imbalance of input and output can help.

Given limited resources – be it money, time or just breathing room – we must focus on the 20% that’s truly important and gives us the best outcomes.

Spring cleaning? Of all the things we own, we probably only really need 20%, so maybe consider selling, donating or giving away the rest of the 80%. Overworked? Identify which 20% are top-priority and let go of the rest before you burnout.

3. Get healthy and buy health insurance

Thanks to COVID-19, the key theme of 2020 is that health is wealth. We may have known this all along, but the pandemic was a timely reminder to put our health back in focus. This 2021, make the New Year’s resolution to lead a healthier lifestyle – and actually keep to it this time!

Go beyond the superficial resolution of losing weight. Eat and exercise well, and also consider health insurance. Health insurance helps you pay for medical expenses when you fall unexpectedly ill or get into an accident. Depending on your health insurance plan, you may have your medical expenses reimbursed, or receive a cash payout.

All Singaporeans are covered by MediShield Life, but that’s the bare minimum. If you want higher coverage and more protection for hospital and surgical costs, you can top up with an Integrated Shield Plan. You can also look into critical illness coverage and/or disability income insurance.

The thing about health insurance is that you should buy it when you’re still young and healthy. If you’re already in poor health, getting covered will be extremely expensive, if even possible at all. Figuring out the sweet spot for health insurance coverage may be tricky, so we recommend reading theguide to understanding health insurance by MoneySense (a government site), and comparing health insurance quotations via GoBear.

Search and compare the best health insurance on GoBear

4. Review your skills – Skilling, Reskilling or Upskilling?

As mentioned, Singapore’s economy was severely hit by the COVID-19 outbreak. Major retrenchments in even the biggest companies have been consistently making headlines. In the latest news, Disney announced plans to lay off 32,000 workers in the first half of 2021 and Dutch bank ABN Amro says they’ll cut almost 3,000 jobs by 2024.

Aside from that, as companies run tighter ships, many careers have been made obsolete. COVID-19 has accelerated the pace of digitalisation, which means job scopes and required skills need to adapt as well.

To make sure you stay ahead and continue staying competitive, take 2021 to review your skills and look into upskilling. Think about how far your current skills can take you. Given the developments in your industry and its landscape, is your career roadmap still on track?

If not, make use of those extra SkillsFuture credits distributed in October 2020 to learn a new skill and upgrade yourself. If you’re unsure of which direction to steer your career, Workforce Singapore (WSG) offers free career counselling and workshops too.

5. Stay informed and diversify your investment portfolio

This year was a rude awakening for those who had put all their eggs in one basket. Investment gurus have repeatedly told us to diversify, diversify and diversify, but it looks like it took the COVID-19 induced market crash to really drill it in.

If you’re continuing to invest in 2021, make sure you spread out your assets. These are unprecedented times, so it’s hard to predict the market. Even many traditionally safe, blue chip choices in Singapore have suffered great losses amid the current recession.

Just take Singapore Airlines (SIA) and CapitaLand for example. These companies have a long history of stability and good payouts, and they’re even tracked by the Straits Times Index (STI). However, due to the freak COVID-19 outbreak, tourism and retail took a big hit.

This sent many new and inexperienced investors into a tailspin, which brings us to the next “lesson”: always invest for the long term. The nature of stocks is volatile, so don’t be too disheartened if you’re suffering short-term losses. Try to build your portfolio for a long-term goal instead.

With that, let’s cheers to a better 2021 as we work towards financial freedom and independence!

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