Employees
Already in workforce or mid-career
Review your various payments and categorize them into fixed and variable expenses.
Fixed expenses
Recurring costs that remain relatively constant each month. Examples include phone bills, insurance premiums, subscriptions etc.
Variable expenses
Expenses that fluctuate based on usage or activity levels. These can include shopping, entertainment, and transportation.
To gain a clearer understanding of your spending habits, track your expenses for a month or two. While it may be challenging the first time you do this, it’s largely a one-time effort.
Check your Total Debt Servicing Ratio and Non-Mortgage Debt Servicing Ratio.
Total Debt Servicing Ratio (TDSR)
Measures how much of your income goes toward paying off debts.
To calculate your TDSR, add up all your monthly debt payments (like loans and credit cards), divide by your gross monthly income, and multiply by 100 to get a percentage.
For example, if your total monthly debt repayment is $2,000 and your gross income is $5,000, your TDSR would be ($2,000 ÷ $5,000) × 100 = 40%. A TDSR of 55% or lower is generally considered healthy.
Non-Mortgage Debt Servicing Ratio (NMDSR)
Measures the percentage of your gross monthly income used to pay non-mortgage debts like personal loans and credit card bills.
To calculate your NMDSR, add up all your monthly non-mortgage debt payments, divide by your gross monthly income, and multiply by 100 to get a percentage.
For example, if your monthly debts total $1,000 and your income is $5,000, your NMDSR would be ($1,000 ÷ $5,000) × 100 = 20%. It’s advisable to keep your NMDSR below 20% to ensure your debt is manageable and to maintain financial health.
Click below to read more about clearing your debts.
Build up 6 months of expenses as your emergency fund, in case of job loss.
You can also build the mortgage part of the buffer in your CPF Ordinary Account.
Click here to read our OwlRubrics: Building your Emergency Fund.
Set a target of how much to save, invest, or pay off debt (“pay yourself first”). 15% of gross salary is recommended as a minimum (not counting CPF contributions).
Think about how you would adjust your expenses to make that happen. There may be non-essential expenses you can do without. This practice ensures that you live within your means and can prioritise saving and investing for future financial goals.
Decide where this 15% to Pay Yourself First would go:
Build your emergency fund, in savings (if you have less than 6 months’ worth of expenses)
Pay off debt, while building some of your emergency fund; or
Investing for the longer term through CPF and/or a suitable investment portfolio
Implement the Budget and “Pay Yourself First” using the 3- Account system. This includes automating the transfers through a monthly standing instruction.
Do this even if you are not yet ready to invest (under Do Next) – you can keep the 15% in the savings account first for a bigger emergency fund
Do this even if you can’t do 15% – start with whatever you can
Increase what you do by 1% every year. It’s like building muscle!
Click here to read our OwlRubrics: Implementing Personal Budget.
Optional Steps
Insurance does not have to be expensive. You need to get the most essential insurance (to protect against loss of income and high medical bills) as early as possible while you are healthy, and when premiums are cheap.
Consider the following essential insurance types:
Integrated Shield Plan (IP): Offers a higher coverage than MediShield Life, which is a compulsory scheme that already covers hospitalisation stays in B2/C wards of government hospitals. Consider at least a low-cost “B” class IP.
Critical Illness (CI) Insurance: Provides a lump sum payout for income replacement in case of a critical illness diagnosis like cancer or heart attack to enable you to recover without working, or for alternative medicines not covered by the IP/MediShield plans.
Life Insurance (covers death/ Total & Permanent Disability): Ensures a lump sum payout to cover your dependents’ living expenses and repay loans if you pass away, giving your family financial security.
Disability Income Insurance: Provides monthly payouts (65%-75% of your income) in the event of illness or injury that prevents you from working.
Click below to explore our curated Insurance Solutions, featuring packages tailored for various age groups and budgets.
Understand how markets work and how to invest wisely without stress.
Invest in a suitable portfolio. Caution! You need to be financially healthy and to have the right time horizon and risk appetite.
This can be part of “Pay Yourself First”: out of the min 15% of gross income we recommend you save/invest in a “regular savings plan”. Increase it by 1% every year.
Invest 50% of your variable bonus
You can consider using SRS to invest, which gives you tax savings. There are restrictions on withdrawal.
Click below to visit our investment page, where you can explore our investment solutions and use our risk profiling tool for personalised portfolio recommendations.
Top up your CPF Special Account (SA) early to the Full Retirement Sum (FRS). The interest rate is attractive and it is virtually risk-free. The power of compounding means you can have a good retirement nest-egg.
You can also enjoy up to S$8,000 in tax relief annually by topping up your CPF SA using cash, up to the prevailing SRS (under 55 years old). If you are 55 years old or older, you can top up your Retirement Account.
If you are just starting out, consider topping up Special Account by 5% of your gross income (on top of normal CPF contributions), and increase it every year towards 10%. If you can’t do 5%, start with what you are comfortable with.
Alternatively, invest this amount (5% → 10% of gross income) in a portfolio suited to your risk appetite, for retirement.
*You can also top up your MediSave Account to the Basic Healthcare Sum (BHS) but this is more for tax relief. Caution: All top-ups to CPF are a one-way street. You cannot reverse or withdraw top-ups!
Click below to learn more about topping up your CPF.
Your ability to generate income is one of your most valuable financial assets, as it directly impacts your financial stability. This means investing in yourself through education, skill development, and professional growth is essential.
Consider using your SkillsFuture credits to upgrade your skillsets or learn new skills.
For NTUC members, you may consider stacking your UTAP credits with SkillsFuture credits to further lower the cost.
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