Home Getting Started A Smart Guide to Investing: Personal Finance

A Smart Guide to Investing: Personal Finance

As you start off your investment journey, retirement may seem like a faraway goal.

Many people do not give serious thought to retirement planning until they get much closer to the official retirement age of 62.

It doesn’t help that big ticket items, such as buying a first home and raising a family, make planning for retirement a daunting task, akin to climbing Mount Everest.

In trying to reach the peak, we can’t enjoy the beautiful scenery without first starting out at the bottom.

Similarly, if you want to enjoy a comfortable retirement, it’s time to take that first step.

The three ‘I’ philosophy

On a long and gruelling journey, the right equipment can make a big difference in ensuring the climb is successful.

When it comes to personal finance, there are also tools that can help you out.

One of them is the three ‘I’ philosophy, or “income”, “insurance” and “investment”, in that order.

This philosophy provides a framework to assist you in developing the right financial habits and mindset towards money.

Segmenting the topic of personal finance into these categories provides you with a structured approach to reach your financial goals.


The first, and probably most important, factor in planning your finances is income.

Income determines the amount of money available to meet your spending needs.

If expenditure exceeds income, then you will have no cash left over to save or invest.

It is therefore important to find ways to raise income and lower expenses.

Finding a secondary income source or achieving a pay bump can go a long way in growing your finances.

Over time, your earning potential can grow exponentially, increasing your savings rate along with it.

Learning new skills, building a side hustle, and finding jobs with good growth prospects are ways you can grow your income.

A disciplined savings habit, such as setting aside a fixed portion of our income every month as savings, can make a world of difference to your financial health.

This save-before-you-spend approach ensures that your cash reserves keep growing, sheltering you from major financial shocks.

Be aware of lifestyle creep, though.

An increase in income may cause you to increase your spending in tandem, thereby limiting the amount you can save.

Keeping your lifestyle simple even when you earn more is one effective way to increase your savings rate over time.


Many people have a negative perception of insurance, but it remains an important facet of your financial planning journey.

Insurance ensures that an unexpected event does not completely throw your financial situation into disarray.

It is a good idea to be insured against potentially devastating events such as accidents, permanent disabilities, loss of income, and critical illness.

Having a life policy also ensures that your family receives a lump sum of cash that can tide them over.

There are also disability income policies that will pay out a steady stream of cash if any accident or disability renders you unable to work.

Do keep track of the premiums you are paying each year, though.

If you are struggling to keep up with the premiums, then you should dial down your insurance coverage to ensure it remains affordable.

For example, if you do not have a mortgage or have few or no dependents, you will need less insurance.

Remember that getting insured at a younger age typically means cheaper premiums as well, so don’t hesitate to hunt for good insurance policies as soon as you can afford them.


With the savings you have after paying for expenses and insurance premiums, you can now start to think about investing.

A good rule-of-thumb is to have six months’ worth of emergency savings set aside for rainy days. Any amount in excess of that can be used for investment.

The aim of investing is to grow your money at a rate higher than inflation so that its purchasing power increases over time.

Assets such as bonds and dividend stocks are great ways to generate a passive, supplementary income.

As we shared before in our beginner’s guide to investing, investing need not be a daunting concept.

By continuing to follow The Smart Investor’s series of investing guides, you should be armed with the right knowledge and skills to grow your money consistently in the financial markets.

Periodically reviewing your finances

By adhering to the three ‘I’ philosophy, you should be able to meet your financial milestones with confidence.

But as you reach major milestones such as getting married or having children, you should take time to reassess your finances.

It could be an opportune time to reassess your spending needs, boost your insurance coverage, or modify your investment goals.

If you have spare cash lying around, you could even consider making voluntary contributions to your CPF accounts or join the Supplementary Retirement Scheme (SRS).

Voluntary contributions to those accounts will provide some tax relief, as well as help to earn good returns on your money.

By regularly reviewing your financial goals and status, you will get a better sense of your financial progress and can execute your financial plans with confidence.

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Disclosure: Herman Ng does not own shares in any of the companies mentioned.