**Newbie's Guide to Investing**

TL;DR

Make more money for investing by cutting back on unnecessary spending and using affordable alternatives, using cashback to earn on necessary spends and investing in CPF or SRS to save on taxes.

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Investing can seem overwhelming—too complicated, too expensive, or simply out of reach. I know the feeling because I was once in that position. However, after nearly two years of research and practice, I've gained a solid understanding of how to approach investing while addressing these common concerns.

This guide breaks down three fundamental steps to make investing more accessible:

1. Cutting costs to free up more money for investment

2. Creating a cash reserve strategy

3. Investing in index funds for long-term growth

While there are other strategies, I believe these are the most beginner-friendly and impactful steps to start with. In this post, I'll focus on the first step: cutting costs to increase your disposable income for investing.

** Lowering Your Cost of Living**

Reducing everyday expenses sounds simple in theory but can be challenging in practice. It requires a thorough evaluation of your spending habits and a willingness to make adjustments. Here are some key strategies:

Track Your Expenses: 

Identify areas where you may be overspending. Small, recurring costs can add up significantly over time.

-Reduce Unnecessary Subscriptions:

 Cancel services you rarely use or find cheaper alternatives.

Cook at Home: 

Eating out frequently can drain your budget. Cooking meals at home is both cost-effective and healthier.

Use Public Transportation or Carpool:

If possible, reduce reliance on private transport to save on fuel and maintenance costs.

Adopt a Minimalist Approach: 

Prioritize needs over wants and avoid impulse purchases.

**Making Use of Cashback**

Cutting expenses has its limits, especially with the rising cost of living. However, there are ways to get a little back from what you spend—primarily through cashback and miles earned from credit card spending (and some debit cards).

Now, you might be thinking: credit cards? Buying on credit and racking up debt—how does that help anyone get ahead? The key is how you use these cards. Irresponsible spending beyond your means leads to debt, but if you treat your credit card like a debit card—only spending what you already have in your bank account—you can benefit from rewards without falling into debt.

(Disclaimer: Only consider this strategy if you have strong budgeting discipline. If you have a history of poor credit management, it's best to avoid this approach.)

Using credit cards strategically can help you save on everyday expenses. Here are some examples:

Citi Rewards Card: Best for everyday leisure spending.

UOB One Card: Ideal for offline purchases.

Trust Link Card: Great for grocery shopping.

Chocolate Finance & HeyMax: Provide cashback on AXS utility bills.

**Cutting Back on Taxes by Investing in Retirement**

The Singapore government allows cash contributions to either CPF or SRS to be tax-deductible, up to $8,000 for each. For example, if you have a taxable income of $48,000, the portion exceeding $40,000 is taxed at 7%. That means the additional $8,000 would incur a tax of $560. However, if you contribute this amount to CPF, it compounds at about 4% per year, earning $320 in interest while also reducing your tax liability by $560.

In total, by topping up your CPF with $8,000, you effectively save and earn $880. However, there are some downsides—CPF top-ups primarily go to the MediSave Account (MA) and Special Account (SA), which have restrictions on their usage. You can view this as a long-term investment that pays off upon retirement, or you may consider an alternative: the Supplementary Retirement Scheme (SRS), which offers more flexible investment options, including stocks and bonds.

At first glance, contributing $8,000 to save $880 might not seem appealing, but it’s similar to earning cashback on mandatory expenses. Making structured contributions to your retirement savings can be a strategic financial move, providing both immediate tax benefits and long-term returns.

By making thoughtful financial decisions and leveraging these strategies, you can gradually lower your cost of living and allocate more funds toward your investments. In the next sections, I’ll discuss how to build a cash reserve and invest wisely for long-term financial growth.

Investing doesn't have to be intimidating. By taking small, strategic steps, you can build a strong financial foundation and set yourself up for long-term success

As the saying goes, the best time to plant a tree was 20 years ago, the next best time is now

By implementing these strategies, you can gradually lower your cost of living and allocate more funds toward your investments. In the next sections, I'll discuss how to build a cash reserve and invest wisely for long-term financial growth.

@CaptainTiger  @TigerWire  @Optionspuppy