A recent survey conducted by the Monetary Authority of Singapore (MAS) found that only one in five Singaporeans feel that they are knowledgeable about investing.
So how can we build up our confidence when it comes to financial literacy? One way is to start thinking of financial wellness in terms of physical health, a more intuitive and readily understood topic for most people.
Budgeting is like deciding what to eat
Laksa or chicken rice? Kopi or diet cola? We’re no strangers to making these choices on a daily basis, considering the trade-offs and potential gains involved. For example, opting for a less sugary drink during lunch may mean room for dessert at dinner.
From a financial perspective, this balancing of options is similar to budgeting, when we decide how and where we use our income. Proper budgeting requires us to understand our financial goals and priorities in order to allocate our funds accordingly — akin to making food choices and deciding what to spend our calories on.
Having a goal-based mindset
Think of investments as workouts. For either one of them to be successful, it’s important to have a goal-based mindset. What are your desired outcomes? Depending on your answers, it can mean drastically different plans to get there.
For example, some working professionals may be more concerned with meeting their retirement goals, while a young parent is more likely to worry about having enough for their children’s education. Or, to put things in a fitness perspective, training for a marathon and training for a bodybuilding competition require different methods to gain success.
Having a clear goal in mind will help you plan your next steps and let you exercise discipline and moderation along the way.
