Financial planning is always advocated but little has been said about how exactly to really reduce financial burdens in life. What we should be taught is to go to school mostly, get a good job, cut costs, and arrange for pension. This is not wrong and plus it’s a very important first rung on the ladder in financial planning but what’s next?
Today, I will attempt to discover a new way of financial planning which will definitely relieve your financial burdens in life. Actually, you’ll realize that is just how that the government in Singapore has been handling its finances to create a financially sustainable Ecosystem as Singapore has little to no natural resources to start with. If we can imitate this and deal with our personal or family finances in the same way, the money we’ve can perhaps last many years to come. There is a complete great deal of knowledge to how the Singapore federal government manages it budget.
They do not simply create income and then spend it. This is definitely not a financially sustainable way to manage money. The way they manage money is to make funds and use the eye produced from the funds to hide a few of the expenses that are needed. This can range from public to assist with healthcare as well as the net investment come back contribution (NIRC) which was talked and discussed quite substantially through the budget earlier this season. There is a complete great deal we can learn from this method which I will elaborate later. Let’s dive deeper into the government’s way of managing money so we can learn from it.
The pursuing is a paragraph from the Ministry’s of Finance website which gives a good summary of how the federal government creates a sustainable budget from its reserves. How do Singaporeans benefit from the investment earnings from our reserves? The investment returns from our reserves provide additional resources for Government spending to benefit Singaporeans.
This includes Government investments in education, health care, transport infrastructure, R&D, and the areas to boost our living environment and to grow our overall economy. The ability to touch our reserves in a sustainable manner is a significant financial advantage for Singapore. In Singapore, the federal government is instead in a position to ingest money from the investment earnings of our reserves to supplement our Budget on a sustained basis, commensurate with the procedures in the Constitution. The few other countries where Governments are able to derive online investment income for public spending are typically those with significant reserves of natural resources such as oil.
The investment results of our reserves to complement the annual Budget through the web Investment Returns Contribution (NIRC). 14.1 billion in Financial Year (FY) 2017, or 17% of our budget. There are always a complete great deal of debates to the NIRC, which I will not get into in this article. A good example on what investment returns are used to purchase is the social assistance schemes under the Ministry of Social and Family (MSF).
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57.5 Million in interest to pay for various community treatment programs to help the low income and the ones who need it too. Once we can see, the interest income produced from the fund is used to fund the various cultural programs to help the needy in Singapore. How exactly we can create a fund to alleviate our financial burdens?
We can also definitely set aside a finance and generate interest income to pay for some of the expenses inside our life. Currently, what is being advocated in the financial planning world is just to put apart your money to invest for retirement. Most of the products out there only secure our money for many a long time before we can utilize it for retirement. Some people end up surrendering their policies early because they could not pay the premiums anymore.