5 finance mistakes to avoid in your early 20s

Like any typical Asian household, money was rarely discussed at home. That kept me blissfully oblivious to the perils of money making in my teen years, but led me straight to a few painful (and expensive) lessons in my early 20s. 

The unfortunate thing is that these lessons are in no way isolated to the early 20s of our lives. If left unchecked, one could repeat these mistakes all throughout life. And that’s not because we’re not smart enough to handle our finances, but because money isn’t just numbers on a sheet, but oftentimes tied to our habits, beliefs and emotions. Because if it were just numbers on a sheet, most of us should be able to work out how to save and spend quite easily. 

Every investment seminar will tell you not to invest with your emotions. Same principle applies to everyday finances.

Avoiding these common money pitfalls will require some harsh truths to be heard. Starting with… 

Not confronting the truth about your finances

Money is usually a very confronting topic simply because it causes discomfort and inconvenience. 

Want to buy a better work from home chair to ease your back pains? But wait…ergonomic chairs cost $300, that can go to paying my student loan… Going out for a nice dinner with friends? Wait a second…how are my ex-classmates able to afford this expensive restaurant?! This takes a huge chunk out of my budget!

Not being able to get what we want is hard to deal with. You’d think that as mature adults we would be able to delay some gratification to fulfil more important responsibilities first. However, and quite unfortunately, just like children crying for candy, adults have their own form of candy that they simply can’t resist. Only this time no one will tell us that we can’t have it. On the contrary, we have plenty of sales people pestering us to spend (more).

This candy is sweetener for the painful, embarassing, disappointing state of our finances. I’ve been in that place of denial – not wanting to confront exactly how much debt I’m in, and just hoping to live (read: spend money) blissfully ignorant of the truth. Nothing good comes out of that except more debts piling up, and less cash resources to deal with it.   

So before you act out of impulse just to bury away the pain of your actual financial situation, put aside your emotions and take time to take stock of your current resources. How much savings do you have? How much debt are you in? There’s no shame if it comes down to a negative number. The more important thing is to have a good look at that, and start devising a plan to improve your financial health. 

Spending money to impress others

The work from home life has opened our eyes up to how little we really need to work. Fancy office locations aside, many of us also needed to keep up with appearances at the office, spending hundreds of dollars monthly on clothes, cosmetics and more.

Some people spend money they don’t have on luxury cars to impress their friends. Others spend on luxury handbags to stay in the good books of their office clique. 

The question to consider is this: what would you cut out from your expenses if you didn’t have to impress anyone? 

It’s okay to splurge on big ticket items, but only if you can realistically afford the item and it serves you well. Otherwise, your hard earned money in your early 20s can be better channeled towards something like a savings fund. 

Not saving for an emergency fund

Yes, not saving for an emergency fund is one of the biggest mistakes anyone can make. 

You can feel like you’re invincible when you’re 20. Your health is in tip top condition, and you won’t be the unlucky one to meet with an accident.

But I’m pretty sure Covid-19 has cleared any misguided perceptions we might have about our invincibility. In truth, none of us are immune to the uncertainties of life. While we’re not going about life waiting for the worst to happen, an emergency fund does provide a peace of mind to let you know that you have something to fall back on. 

There are a few milestones to aim for, so it doesn’t feel so overwhemling to save a large amount at one go. You can start by saving up 6 months of expenses, then progressing to 6 months of your salary. A solid savings account is also a must have before you start investing, which should provide a little motivation to get this done fast.

Underestimating your value

Many fresh grads often fall into the trap of underestimating their value in a company, opting to accept a lower salary thinking it’s fair for their lack of experience. Experience is important, but there are a few soft skills that can give you some additional brownie points. A good attitude, a willingness to participate and even being street smart are some soft skills that can help you excel in the corporate world. 

We’re not saying you should ask for a manager’s salary, but please go into any interview with a clear idea of the value you provide. Here are a few questions to consider: 

• What is the value (hard skills, soft skills) I can provide to the company?
• How much work is the company expecting me to do? 
• What is the career progression like in the company and in the industry?
• Does this job fulfil my interests and passion as a person? 

The definition of a good and fulfilling job differs from person to person. Instead of listening to generic advice like “money is not everything” or “follow your passion”, it’s more helpful if you can determine your own set of factors that are important to you in a career. These factors should directly compensate you for the time and effort you will be giving away. 

Not all factors need to be money related. It’s good to be more strategic about your career so you can plan your way into a career path that reflects your value as an individual. Things like a good exposure to diverse clients, working with an experienced industry player, or a company that aligns with your personal values are some factors that if met, can provide that much needed purpose and motivation for daily work. 

Not planning ahead 

I made the mistake of diving head first into my first career without researching more into the career prospects and progression for my industry, and this directly affected salary, savings, expenditure, the lot. 

The corporate world tends to pigeon hole people very quickly. Unless you’re very sure of the industry you want to be in, think twice before you commit to any particular specialisation. 

Try to speak to relatives or seniors to understand the corporate landscape better. They don’t have to be in the industry you’re interested in. Speak to them to find out more about the recruitment process, career prospects, how to climb the corporate ladder and how to exit the corporate race in future.

Plan meticulously, it really doesn’t hurt to research more before you jump into anything. 

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Hopefully these tips are useful to you. Do let us know in the comments what you want to hear from us in future! 

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What happened in markets this week, and what are analysts talking about?

RH Petrogas

•UOBKayhian; Non-rated The House highlighted the company after seeing strong 1Q earnings which they think are sustainable driven by a recovery in oil prices, reduced production costs and renewal of 20 year PSCs for oilfields in Indonesia. The House has a 20 year DCF valuation range of $0.29-0.40, as RH Petro trades at 7x FY2021F PE based on share price of S$0.173.

HR Net

•Maybank; Initiate with BUY and TP S$0.99 HR Net is one of the largest Asia Pacific based recruit companies outside Japan, operating in 13 Asian cities. The House has a TP of S$0.99 based on 18x FY22F PE, a slight premium to global peers average due to HR Net’s more superior ROE and strong net cash position of S$332m (42% of market cap). At share price of S$0.78, HR Net trades at just 9x (ex-cash) FY21F PE

Tech Manufacturers

UOBKH picked UMS, Innotek and Aztech as their top picks for the tech manufacturers sector in Singapore with better chances of earnings pick. Their channel checks suggest factory utilisation remain elevated across Singapore, Penang and China for companies under coverage. In particular, the House highlighted Aztech, UMS, Frencken and Innotek who could surprise on the upside as demand for end products benefit from resilient demand. 

As featured on Straits Times

Singapore-listed mm2 Asia announced on Wednesday (July 28) that it has received an offer for its Cathay cinema business from local financial investment firm Kingsmead Properties.

mm2 Asia operates eight Cathay cinemas in Singapore and 13 cinemas in Malaysia, as well as a movie film distribution business.

It entered into a non-exclusive binding term sheet with Kingsmead Properties for the proposed sale of at least 80 per cent of the cinema business.

As featured in Dollars and Sense

In the early days of the COVID-19 pandemic, stocks of glove companies (both the supplies and the shares) were in hot demand globally. As healthcare providers rushed to stock up sufficient supplies of personal protective equipment (PPE) including gloves, investors rushed to buy the stocks of glove suppliers. In fact, the top performing stock on SGX for 2020 was Medtecs International, a supplier of medical consumables and PPE, with a stock gain of 2600%. While it has been more than a year since the start of the pandemic, the continued surge of the virus (including the more infectious Delta variant) has ensured that the demand for medical PPE has remained high.

It is in this environment that Enviro-Hub (SGX: L23) has repositioned its business focus to recycling of e-waste and supply of medical supplies, especially specialty gloves. In June 2021, Enviro-Hub received FDA regulatory clearance for its nitrile medical-grade examination gloves, which means that the company will be able to export their medical-grade gloves to US, where they command a higher price. This allows Enviro-Hub to join the estimated 20% of glove production that has obtained the 510(k) FDA certification.

Additionally, the company has been streamlining their business operations and have been divesting business segments that are not line with their new business focus: the synergistic segments of recycling e-waste and supplying medical PPE. This includes the sale of their property investments which were used to generate rental income. With the divestments, the company expects to double down on sustainability through their e-waste recycling operations and enter the new business segment of medical supplies.

For interested investors who expect the glove industry to continue its strong performance, here are 5 things to know about Enviro-Hub’s business.

Read on here.

 What happened in markets this week, and what are analysts talking about?

Koda Ltd

•Phillip Capital; Initiate BUY with TP S$1.32 The House thinks valuation are attractive given that after stripping out net cash of US$13.7m, Koda trades at just ex-cash PEs of 3.3x/2.2x FY21F/22F. Cataylsts include higher exports to US and increase in production capacity. The house thinks FY21F PATMI may almost double with a boom in furniture demand as more people stay at home. Founded in 1972, Koda is a leading ODM of all types of home furniture. 

Dong Agro International

KGI; Initiate Outperform with TP S$0.64 Don Agro is one of the largest agricultural companies in Russia’s Rostov region with a stable track record of profitability over last 5 years, and a record net income in 2020. The House believes Don Agro can outperform on the back of strong commodity prices for wheat and corn, which is at the highest since 2014. TP of S$0.64 is based on DCF with WACC of 11% and terminal growth rate of 3%. Don Agro is trading at just 6x FY32F PE. 

Elite Commercial REIT

•DBS; Initiate Coverage at BUY with TP GBP 0.80. The House thinks Elite Commercial REIT offers attractive yields of 7.6%/8.2% for FY21F/FY22F, as it functions as social infrastructure given its 99% exposure to the UK government. The house likes its resilient and counter cylical portfolio with 100% occupancy and WALE of 7.2 years offering strong visibility to distributions. 

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When I first started working, I could not seem to get my finances in order. I could not save more, spend less. After one year of work and a few impulse buys later, my bank account was less than stellar. Initially, there was a lot of internal guilt tripping when I couldn’t reach my finance goals, and not to mention the anxiety I felt looking at my peers advance ahead with their finances at a much faster rate than me.

It’s easy to see why money can be such an emotional topic for some. But we all know that money and emotions is never a good combination. So what can we do to hack this cycle of spending and saving?

I’m happy to report that after a few years of adulting, and many tips from many finance bloggers and vloggers later, that I live by these 3 personal finance rules to help me reach my goals on time (or faster).

#1 Build an emergency fund

The first rule of thumb is to have an emergency fund. Its importance should be abundantly clear, seeing how the global economy was turned upside down in 2020. Uncertainty is still in the air today, but really when is it not?

The recommended emergency fund should cover 3-6 months of expenses, or 6 months of your income. Personally, I prefer having 6 months of income as backup, simply because it gives me much more room to work with. But you decide what is realistic for you.

If you’re anything of a math dummy like me, it would be best to create a second savings account that acts as a deposit for your monthly savings. Money Smart has an excellent summary of the best savings accounts in Singapore.

A quick google search will lead you to several savings strategies, the most popular one being the 50-30-20 rule. In short, the 50-30-20 rule states that you should divide your finances to 50% to needs, 30% to wants, and 20% to savings. You can tweak this to fit your lifestyle, I can do 60% expenses and 40% savings comfortably.

#2 Track your expenses

Nobody likes sitting down after work counting receipts. But this is the best way to get things in order if your expenses always seem out of control.

This rule is a no brainer. You could do it on a good ole’ spreadsheet, or use an app to track each transaction you’ve made. Just, literally, write all incoming and outgoing money down.

What you get at the end of the day isn’t just a glorified receipt. It’s data, which will point you in the direction of how you can better manage your money. And that’s immensely better than drowning in guilt and shame.

Start with just tracking your expenses first (though the side effect of writing down everything is that you’ll be more conscious about your spending too). After the first month, you’ll get a sense of where you’re overspending and how you can cut down on that.

In no time, you’ll be optimising your finances like a true finance wizard!

As featured in Dollars & Sense

Singapore is internationally recognized as one of the world’s top maritime ports, accorded as the world’s Top Maritime Centre for 8 consecutive years by the Xinhua-Baltic International Shipping Centre Development (ISDC) Index and the world’s Top Leading Maritime Capital Of The World for 4 consecutive years by Menon Economic’s Leading Maritime Capitals Of the World report. With such accolades, Singapore is home to many marine and shipping companies. While most Singaporeans are familiar with Sembcorp Marine and Keppel O&M, Singapore is also host to many smaller players in the marine industry that all play a part in our bustling port.

One of these marine companies is Marco Polo Marine (SGX: 5LY) which has been listed on the SGX Mainboard since 2007. Macro Polo Marine operates regionally, with a significant presence in Indonesia. The company focuses on integrated marine logistics and engages mainly in shipping and shipyard operations. Their shipping operations involve the chartering of Offshore Supply Vessels (OSV) for deployment in regional waters and the chartering of tug boats and barges. As of 1HFY2021, they have 11 OSVs and 2 Maintenance Work Vessels (MWVs) in operation. For shipyard operations, the company has a shipyard located in Batam, Indonesia that can undertake projects involving mid-sized and sophisticated vessels.

In June 2021, the company also announced its plans to extend their dry dock 1 which would increase its capacity for ship repairs by 20%. This is scheduled to complete by January 2022 and expected to contribute to the bottom line from 2QFY2022. The company also announced in May 2021 their plan to increased their stake in one of their Indonesia listed entity – PT BBR to 72%. This would increase Macro Polo’s presence in Indonesia.

Aside from expanding their ship repairs capacity where they seen growth in recurrent customers and their main focus on shipping and shipyard activities, Macro Polo is also diversifying to renewables by leveraging their existing capabilities to enter into the sustainables sectors. This includes securing contracts to construct 2 smart fish farms as well as deploying vessels to work on windfarm projects.

For those interested to find out more about the marine industry or interested to invest in marine companies, here are 5 things to know about Macro Polo’s business.

Read on here.

As featured on The Edge

Singapore-listed Enviro-Hub Holdings — known for its forays in the recycling and property investments — has diversified into a new business: Glove making. The company, led by executive chairman Raymond Ng, is in the midst of acquiring Ipoh-based glove maker Pastel Glove. The target was set up last September by Law Siau Woei and Choo Kuan Ping — who hold stakes of 97% and 3% respectively — to meet the surge in demand for rubber gloves during the Covid-19 pandemic.

What happened in markets this week, and what are analysts talking about?

Marco Polo Marine

•UOBKH; Maintain BUY with higher TP S$0.036 The House noted the rationalised oil & gas offshore support industry showing resilience over the COVID-19 pandemic. The House likes MPM for its lean operations and a successful transition to new revenue sources would be a key turning point for the Group. TP of S$0.036 is based on 1.1x FY22F P/B in line with +2SD of its 5 year historical P/B on improving charter rates, better utilisation rates, and an already impaired book value of S$0.03/share. 

Silverlake Axis

CIMB: Maintain Add with higher TP S$0.35 The House think that FI’s investment appetites for capex and tech spending are returning, and Silverlake’s project implementation is not constrained due to MCO. The House thinks that operational headwinds are bottoming and core banking deals are on the horizon.

mm2 Asia

•DBS; Maintain HOLD and TP S$0.067. The House believes the recent highlight by the auditors of “material uncertainty related to going concern” based on FY March 2021 financial statement were already in existence since the Group was affected by COVID-19 last year and view it as a prudent measure on the part of auditor. The Group has placed several initiatives to pare down debt since FYMarch 2021 including spinoff of cinema business, merger of cinema business with GV, launch of rights issue which was completed in April 2021 and entry of strategic investor to deleverage. The Group has also been engaging with various lenders for refinancing of its existing loans and to seek new credit facilities to secure financial sustainability where negotiations are still in progress. 

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Rationalisation of the offshore service vessel industry, signs of recovery in the traditional oil and gas sector, and diversification to offshore renewables are providing a tailwind of recovery for listed Marco Polo Marine (MPM).

UOB Kay Hian has noted these trends and upgraded the marine support services company’s stock to “buy”, with a target price of 3.6 cents.

The shares, which have been trending upwards in recent days, closed at 2.8 cents yesterday.