Have A Dream Car In Mind? Here's How You Can Afford It

"Fail to plan and plan to fail" - this expression describes the need for proper planning to ensure that you are prepared for all situations. This could include predictable expenses such as the purchase of a house and a car or unforeseen expenses such as medical cost.

As the most expensive city for the fourth year running, living in Singapore is inevitably expensive. Being 20 per cent pricier than New York, the steady increase in prices makes it essential for us to have proper financial planning to prepare for future expenses.¹ For starters, it is important that we are aware of and understand the prices of some common expenses that we may incur as it could allow us to better gauge how much we require and our current shortfall. This could also better prepare us for emergencies and prevent us from racking up debts as a result of overspending.

(See "How Much Does It Cost To Live In Singapore 30 Years From Now?")

#1 Cars

With a Toyota Corolla in Singapore almost five times the price of the same car in the United States, cars are indeed exorbitantly priced in Singapore.² However, with cars symbolising convenience and status, this hefty price tag does little to deter potential car buyers.³ But with cars averaged at $100,000 in Singapore, does your finances allow you to comfortably finance this purchase?⁴

The key to being able to afford these big expenditures is to have ample preparation and planning. Start by calculating your current financial liabilities and the spare cash that you have on hand. Knowing how much you can afford for the upfront fees and the monthly instalments would also determine your budget and help to make a suitable car purchase.

(See "3 Tips To Get The Most Out Of Your Health Insurance")

#2 Housing

Known to be expensive, a 5 room HDB averages at $552,371 in Singapore as explained in our article "5 Unbelievable Properties You Can (Almost...) Afford With Your HDB". This inevitably leads to the comparison to properties abroad where a castle or private island cost less than our 5 room HDB. However, owning your own home is still an achievable goal with 90 per cent of Singaporeans being homeowners.⁵ This is because HDB's build-to-order (BTO) flats provide an affordable option for Singaporeans who are looking to buy their first home.

However, with options ranging from HDBs to landed properties, some may be looking to purchase a condominium or a landed property instead. Therefore, adequate financial planning is required in order for you to purchase your dream home. Having a budget in mind would also help as it establishes a long term goal for you to work towards. Alternatively, you could also consider using endowments. Seen as a disciplined way to save, this savings plan could also help you to achieve your long term goals such as the down payment of a house.

(See "Understanding Endowments in 5 Simple Steps")

#3 Raising a child

Raising a child in Singapore is indeed a costly affair with the estimated cost averaged at $360,000.⁶ While we can use our Medisave and the baby bonus cash benefits to help with some costs, parents still have to shoulder the bulk of these expenses. From hospitalisation and delivery costs to the day to day expenses and cost of tertiary education, a substantial amount is required. Moreover, with inflation driving up the cost of living, $360,000 may not be sufficient to raise a child. As such, calculating the potential expenses you may require for your child is important as endowments or other saving plans could then be used to help make up the shortfall.

(See "What Wikipedia Can't Tell You About Your Child's University Education")

#4 Medical Expenses

While commonly understood to be expensive, many are often unaware of the true costs of medical treatment. However, knowing the costs is a crucial aspect for financial planning as this would allow you to determine the amount that you should set aside as an emergency fund. As shown in a post that previously went viral, the hospital bill for a cancer patient came up to slightly over a million dollars.⁷ Therefore, it can be catastrophic if you are unprepared for these medical expenses.

To avoid burdening your loved ones with your medical bill, it is important that you are prepared for these unforeseen expenses. With healthcare expenses averaging at $51,410, health insurance thus comes in handy in providing the necessary coverage in the event of an injury or illness.⁸ With various types of health insurance offered, you could obtain coverage for different purposes. Be it hospitalisation fees, disability compensation or compensation in the event of critical illness, there are plans to cater to your various needs. Hence, it is important to ensure that you understand the terms for compensation and are comfortable with your coverage levels.

(See "Why Cheapest Isn't The Best (Policy)")

How FSMOne can help you get on track

Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan, you can contact our advisers at advisory@fundsupermart.com.

^{1Source: https://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-13}

^{2Source: https://www.numbeo.com}

^{3Source: http://www.straitstimes.com/forum/letters-in-print/owning-a-car-marks-ones-status-identity}

^{4Source: https://www.valuepenguin.sg/average-cost-cars}

^{5Source: http://www.singstat.gov.sg/statistics/visualising-data/charts/home-ownership-rate-of-resident-households}

^{6Source: http://www.todayonline.com/business/prepare-cost-raising-child-0}

^{7Source: http://www.theindependent.sg/1m-for-hospital-bill-healthcare-or-nightmare/}

^{8Source: http://www.aon.com/attachments/human-capital-consulting/2016_Med_Report_US_WEB.pdf}

Interested to learn more? Check out these articles:

What You Didn't Know About Whole Life Policies

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Is Your CPF The Ultimate Piggy Bank?

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