Just one more week to the new year and some of us have either set our new year resolutions… or not. Life goals aside, our personal finance plans for the new year determine how we are going to spend (and save) our money – considering most of us are disciplined adults to stick to it that is!
Here are three actionable ideas we can take before the end of 2016. It would be great to take action on all three but even starting on one is a good first step.
1. Top up CPF-SA or SRS for tax relief (Save)
Income taxes, something everyone around the world (not just Singapore) has to pay depending on the individual’s annual income. This is not exclusive to Singaporeans but we can get tax relief through various contributions, donations, topping up, etc. We are looking at topping up your Central Provident Fund (CPF) Special Account (SA) or your Supplementary Retirement Scheme (SRS).
There are some minor differences between the two and this article on CPF’s areyouready.sg provides a good explanation. It is a very long article, though, so to save you the time, we are going to give you three main considerations. Aren’t we nice? It’s the season of giving!
- Top up your CPF-SA if you are not confident of using your SRS money to invest and beat the 4% (extra 1% for the first $60,000) interest rate.
- Top up your CPF-SA if you do not intend to withdraw your money before your retirement age; money in SRS can be withdrawn at any time but you suffer a 5% penalty for each withdrawal.
- The top-up limit is $7,000 for CPF-SA, $15,300 for SRS (as of 2016). Unless you fall under the top income brackets, topping up $15,300 into your SRS for a paltry bank interest of about 0.05% would be less attractive than that of CPF-SA. Furthermore, we can withdraw our CPF-SA money earlier (at age 55) as compared to our money in SRS accounts (age 62 without 5% penalty).
The most important thing to note: you can only qualify for the tax relief if it’s done by 31 December according to IRAS. You don’t have much time left to decide.
2. Invest in SSB for 2.18% per annum for 10 years (Grow)
Earlier on 14 December (US Time), the US Federal Reserve raised rates for the second time. When rates are raised, (existing) bond yields will drop while newly-issued bonds will have higher yields. That explains why the Singapore Savings Bonds (SSB) are offering higher interest in January 2017.
Looking at the graph above by Kyith (Author of InvestmentMoats), you can see that the interest rate or bond yield of SSB has raised substantially in a month. Is this the best time to buy SSB? We can’t say for sure because the Fed did mention they would be raising rates gradually in 2017 too. Of course, whether the Fed holds up to that promise remains to be seen.
3. Apply for credit cards that offer cash rebates (Leisure)
It is true that using cash allows us to keep a close watch on our budget. But at some point of our lives, credit cards are one of the key tools to make huge payments. Since we need credit cards, why not look at those that can offer attractive incentives?
There are quite a number of credit cards out there that offer cash rebates. Those are typically targeted at eCommerce or consumer spending. Getting some extra cash “back” every month for paying your credit card bills on time seems pretty attractive, isn’t it?
We are not the most qualified to make recommendations for credit cards but you could head on down to Singsaver Singapore or Money Smart Singapore for credit card comparisons.
End the year with new year plans
Above are a short list of three ideas to start your new year with (some sort of) a financial plan, at the very least. They are all very actionable but there is a deadline – we’re just one week away! Remember, topping up your CPF-SA or SRS account and investing in SSB must be done before 2016 ends. The Shares Investment and Aspire team wish you a prosperous and wealthy 2017!