“Ultimately, there's one investment that supersedes all others: Purchase yourself.” – Warren Buffett.
Many would consider investments like a diversified portfolio of stocks, property, or perhaps cryptocurrency. But purchasing ourselves is really a smart financial move too.
When you start working, the future looks bright and there is regular income arriving. But what goes on when there are unexpected expenditures, and you have insufficient savings?
To be good at managing finances, knowing how in order to save isn't good enough. It's equally important to know whenever we should spend and invest in ourselves.
#1 Spending To enhance Ourselves
When we're young and also have a full career ahead, our capability to work and generate income is our biggest asset.
Many Singaporeans now pursue tertiary education. On average, young people might have between 13 to 16 years of formal education before entering the workforce.
In this fast-changing world, you need to upgrade ourselves constantly to remain relevant. Otherwise, we risk being disrupted by technology or start up business models.
We can tap on schemes under SkillsFuture, which gives us the chance to pick up courses to bolster our existing skillsets. SkillsFuture initiatives will help workers prepare for the near future, and make them more productive and employable.
Whether it is a full graduate degree or a short professional course, purchasing ourselves and improving our employability is essential, as this allows us to position ourselves well for future career opportunities.
The Government continues to invest strongly in supporting Singaporeans. Pm Lee Hsien Loong in August said the Government could be making preschool and tertiary education “even more affordable, especially for lower-and middle-income families”. Additionally, the retirement and re-employment ages would be raised for individuals who desire to work longer.
Investing in people helps to ensure that Singapore is able to cope with global headwinds by continuing to keep its people resilient and able to thrive in uncertain economic times.
As a country, Singapore invests not only to our people, but also on infrastructure. Lawrence Wong, Minister for National Development and Second Minister for Finance, said that major infrastructure projects over the next decade would put our economy with an even stronger footing. Included in this are investments into big infrastructure projects such as Changi International airport 5, transforming Tuas into a mega seaport, whilst rejuvenating our heartlands.
#2 Investing For Our Future
The goal behind purchasing ourselves would be to create benefits that lead to the future, making the roi worthwhile, while creating more value to live in. With the future as the goal in your mind, we are able to also consider investments that generate sustainable and regular income.
Such investments are not just important personally, but also nationally. For instance, in Singapore, the web Investment Returns Contribution (NIRC) in the national reserves is currently the only largest source of government revenue, with an estimated contribution of $17.2 billion for FY2021, totalling about a fifth of government revenue.
This is really a tremendous amount. If Singapore had not put aside funds to grow the nation's investment portfolio consistently and with discipline over the years, the funds would need to be collected from citizens by means of extra taxes, or the country would need to cut its spending in certain areas.
It was because previous generations of Singaporeans were prudent and far-sighted enough to save and invest for the long-term that today's generation is able to enjoy substantial contributions from the national reserves.
#3 Have Multiple Revenue Stream From your Investments
While purchasing ourselves as well as in a good portfolio is nice, we ought to go a step further to make sure that there exists a diversified portfolio providing multiple revenue streams. Jetski from us from becoming overly reliant on only one income source and offers stability for the future.
For example, even if we are working, we're able to try to have investment income to supplement our work income. Such income can come from different sources, for example dividends from stocks, or coupon payments from bonds
Similarly, from a national standpoint, it might be healthy if a country's revenue originates from diversified sources. For example, besides personal tax, Singapore also receives revenue from corporate tax, Goods & Service Tax (GST), and property-related taxes such as stamp duty. We can't hope to keep increasing anyone revenue source to finance the required increase in our expenditure, thus becoming over-reliant onto it. Diversification is the key.
This is why the government only uses as much as 50% of the NIRC to contribute to the Budget revenue – the rest is added to the reserves and re-invested. This reflects a prudent method of fiscal spending – to spend to achieve desired outcomes, instead of spend to the last dollar available. Furthermore, as government spending needs increases over time, it is vital to spend inside a disciplined way and be sure sustained benefits.
Whether it's from the personal finance viewpoint or perhaps a national perspective, you need to keep in mind that the spending we make today (as well as in the future) needs to be sustainable. We can't manage to spend some money today, both as individuals or as a country, if you don't take into account future earnings and expenditure.
Another facet of ensuring that we acquire a financially secure future is to invest in ourselves to ensure that we remain economically relevant, and may protect and increase our income-earning capability during our working years.
Similarly, for that government, the country's money is invested to ensure that Singaporeans can reap future dividends for spending later on.
Continuing to invest in people and infrastructure is really a far-sighted strategy to ensure the economy continues to grow, which Singaporeans can be developed to their full potential.