By Daphne Lye, AWP®
Financial Planning Solutions & Investment Management Lead, MoneyOwl

As I was cleaning out my wardrobe for the upcoming New Year, I was struck by how many unworn clothes were taking up precious space. Going through each item, I decided which ones to keep and which to bid a Marie Kondo-style farewell to. With every piece removed, the wardrobe grew more spacious and I felt an unexpected sense of relief. By the time I was done, I felt lighter and more ready to usher in a fresh start for the year ahead.

If you are like me and find that organising your home to be a form of self-care, having your finances in order will also remove stress and give you that sense of well-being that you’re on track to meeting your life goals.

Here are eight ways to get your finances sorted and on your way to a prosperous new year.

#1 Pay Yourself First 

As the saying goes, it is not how much you earn but how much you save, that determines how wealthy you will be.

In this new year, review your spending and reset your budget by prioritising paying yourself first.

Start by automating monthly transfers from your salary into a dedicated savings account.

How much? Start with 15% of your gross salary and 50% of your bonuses.

In subsequent years, increase your monthly savings by 1% of your new salary.  It’s a good hack, and you’ll hardly feel it.

Find out more in MoneyOwl’s Signature Rubrics: Pay Myself First, and More Each Year.

#2 Build Up Your Emergency Fund

Do you have 6 to 9 months’ worth of expenses saved up in cash as your emergency fund?

Keep this cash savings on hand to help cover emergencies such as a sudden job loss or a large, unexpected expense without having to borrow at high interest rates, or sell your investments prematurely.

You may need to save up more – up to 12 months – if you are self-employed or are in a role where you may need a longer time to find a replacement job.

#3 Declutter Debt

There is a customary Chinese practice to clear all personal debt before the Lunar New Year; otherwise, you risk “owing the creditor” in the upcoming year.

Regardless of whether you follow this tradition, clearing bad debts is always a wise move. 

While having an outstanding home loan is inevitable for most of us, having too much non-mortgage debt such as personal loans or late credit card payments, is a sign of financial risk.

We recommend keeping the non-mortgage debt servicing ratio to less than 15% of your net income (after CPF contributions) and capping total debt repayment to under 35% of monthly gross income (before CPF contributions).

So if your gross monthly salary is $4,500 and take home $3,600 after deducting for CPF contributions:

• Your non-mortgage debt monthly repayment should be no more than $540
• Your total debt (including mortgage debt) monthly repayment amount should be no more than $1,575

If you have non-mortgage debt, aim to pay these off as soon as possible, starting with those charging the highest interest.

Credit card debt falls into the high interest category, with banks charging more than 26% of interest a year for late payments.

In most cases, mortgage debt is good debt.                 

Mortgage debt enables you to buy that “must-have” for well-being – a home of your own – early on, before house prices increase. Getting your own home also allows you to save on rent (which tends to increase with house prices).  

Furthermore, you start to own a long-term asset using a mortgage which is often the lowest interest loan available.

To learn more, check out MoneyOwl’s Signature Rubric on debt management:

#4 Review Your Insurance Coverage

It is fair to say that nobody likes looking through their insurance policies, with all the jargon, complex details, and having to consider the possibilities of being ill, disabled, or dead.

But precisely because insurance protects you financially against severe events out of your control, you need to ensure you and your family are adequately covered, without overpaying.

One common mistake is to think that we are well covered just because we are paying a lot of insurance premiums. But take a look at exactly what you’re paying for – you might be “paying” for a low-return saving product with insufficient protection.

Additional resources:

• Insurance Philosophy eBook

For some Lunar New Year Reading to de-mystify this, we recommend MoneyOwl’s Insurance Philosophy eBook.

Here, we break down for you, how everyone can buy as much protection as they need, but pay as little as you can, and how to prioritise the 5 types of essential insurance.

• OwlStar – the first-of-its-kind insurance product rating tool

After understanding what you need, if you have any insurance gaps, we also know that it can be hard to decide which insurance product to buy.

For this purpose, we developed OwlStar, the first-of-its-kind insurance product rating tool that evaluates insurance products based on whether they are fit for purpose, and their value based on their coverage.

It’s kind of what the Morningstar does for investments, but for insurance, and simplified!

#5 Boost Your Retirement Savings

When it comes to planning for your retirement, the good news is that the earlier you start, the more time your money has to compound and grow exponentially over time.

Before investing in any retirement income product, consider topping up your CPF Special Account up to the Full Retirement Sum (FRS), which is $213,000 in 2025.

Everyone should aim to hit the FRS. This provides us with a lifelong monthly payout from 65 years old to cover our basic expenses in retirement, forming part of our Safe Retirement Income Floor.  

To give you an idea of what this is – for those turning 55 years old in 2025, having FRS of $213,000 will provide a monthly payout of about $1,700 from age 65 years onwards. That may not fund a luxurious lifestyle, but it’s a pretty good base!

You can top up your CPF either monthly – part of the Pay Yourself First amount after building your emergency fund – or lump sum top-ups whenever you have excess cash or CPF Ordinary Account savings (above an emergency fund amount of say, 12 months’ worth of mortgage payments). In addition, enjoy dollar-for-dollar tax relief of up to $8,000 when you top up your CPF with cash.     

Do note that CPF top-ups are irreversible, so be sure you have no need for the money in the near-term.

#6 Plan For Your Loved Ones

The new year is also a chance to express gratitude and appreciation to your parents.

Consider topping up your parents’ CPF accounts to enhance their retirement savings.

If your parents are eligible, from 1 January 2025, the annual matching grant cap under the Matched Retirement Savings Scheme will increase from $600 to $2,000. Otherwise, you will receive an additional $8,000 in tax relief when you top up your parents’ CPF Retirement Accounts in cash up to the Full Retirement Sum.    

#7 Invest to Grow Your Wealth

After setting aside our emergency fund, we should invest so our savings can beat inflation and we can reach our long-term goals.

We can aim for sufficient and reliable returns by investing in low-cost, globally diversified portfolios, with an equity-bond ratio suited to your risk appetite and time horizon.

Additional resources:

We have curated low-cost passively indexed funds offered by Amundi and worked with PhillipCapital to make them available on POEMS platform at zero platform and advisory costs (We don’t earn anything from this either – just doing it for the common good!) First-ever in Singapore and the lowest cost way to invest either cash, SRS or CPF.

#8 Enrich Yourself

The New Year also signifies a new start, and you may decide to improve your understanding of personal finance so that you can better your financial security.

You can browse MoneyOwl’s website for best-in-class unbiased financial planning content, which includes easy-to-follow financial planning checklists based on different life stages.

You can also look out for our monthly public talks to gain practical tips and insights into key topics such as money management, CPF and retirement planning, insurance, investments and estate planning.

Congratulations on getting a head start to 2025!

Many people have ‘working on their finances’ as a new year resolution, but many drop off due to how complicated it might seem to get started.

It’s similar to how I kept putting off clearing my wardrobe as I dreaded the effort it would take – especially when it came to sentimental or barely worn items. But once I got started, I got immersed in the process and felt a sense of accomplishment when I finally finished. Tackling your finances can feel the same – daunting at first but deeply rewarding once you get started and experience the benefits.

So, we hope this list serves as a simple springboard to get you on the right foot with your money this new year.

While spring cleaning all your finances at once with these 8 to-dos is ideal, you can also start off with 1 or 2 of these points above and work your way from there.

Here’s to a prosperous and more financially healthy 2025 ahead.

Disclaimer:
While every reasonable care is taken to ensure the accuracy of information provided, no responsibility can be accepted for any loss or inconvenience caused by any error or omission. The information and opinions expressed herein are made in good faith and are based on sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. Expressions of opinions or estimates should neither be relied upon nor used in any way as indication of the future performance of any financial products, as prices of assets and currencies may go down as well as up. All investments carry risk. Past performance should not be taken as indication of future performance. The author and publisher shall have no liability for any loss or expense whatsoever relating to investment decisions made by the reader.