It's just before Lunar New Year, the period of time many Singaporean families spring clean their homes. The purpose of this Chinese tradition is to get rid of any residual bad luck from the previous year so that there is room for new blessings ahead?ut with the old, in with the new!
Similarly, we should all take this opportunity to clean up our finances and investments so we can enter the new year freshly organised and with updated plans that are aligned to our personal goals. Here are 3 things you can do to start your financial new year fresh:
Close unused savings accounts
Many of us Singaporeans are fond of hunting for the best deals available. These can come in the form of savings account that gives the highest interest, the most attractive credit card sign-up offer, or the cheapest brokerage account. As we enroll in these promotions, we create a mess of accounts, memberships, and plans that we rarely use -- and often no longer provide us with those attractive initial perks at all!
The issue with having too many accounts is that it creates both physical and mental clutter. We have to take note of annual fee waivers for credit cards, get rid of paper mail for account statements, and also remember passwords for all the different websites.
For your financial spring cleaning, you should categorise (or "Konmari") your different accounts into saving accounts, credit cards and investment platforms/brokerages. Within each category, pick the most used and/or best platform for long-term use (focusing less on any temporary promotions), and then close any accounts that are not used.
And if you can't give up the deal-hunting (we certainly can't!), cleaning up these old and defunct accounts can give you back some bandwidth to learn more about the best new offerings out there.
Sell your losers - be it unsuitable stocks or irrelevant financial products
Just like how not all furniture and appliance purchases work out for us, there will be investments that we have made previously that no longer serve us. Remember the USB cup warmer that you got for Christmas 2017 that's gathering dust?
These could be the stock punts that we made previously on market rumours, a savings plan or an Investment-Linked Policy (ILP) that we were pressured into buying when we first started managing our finances.
We often hold on to these investments because of loss aversion. We feel more strongly about making investment losses than gains, and consequently, we are less willing to cut losses, even when there is an option to invest in something better. Research by Yale School of Management shows that investors who exhibit the behavioural bias of loss aversion have lower returns, and the best way to overcome it is to be educated and self-aware about it, then take concrete action to remedy it.
Another way to look at it is to ask ourselves whether we would still choose to invest in that same savings plan, listed security, or ILP today. A decision to hold on to a bad investment is no different than making a bad investment. If it is not sparking joy for your finances after careful deliberation, sell it.
Put up your best financial plans for the new year
After clearing out the old, unused appliances and furniture, we often give our home a makeover, planning for and purchasing any new furnishings for the year ahead.
Similarly, for our finances, we can start the new year right by looking at what we need for our financial goals in 2022. From putting your money in shorter-term cash accounts like Endowus Cash Smart, to investing your CPF in the most diversified, lowest cost advised portfolio for retirement, there is a relevant solution that Endowus can offer for any goal.
Advancing toward your financial goals is a fully guided digital experience at Endowus, so you can save your physical and mental energy for spring cleaning. Happy New Year and have a great year ahead!
Get a head start on financial literacy & general investing by watching our Investing 101 with Endowus 4-part series here.
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