If there anything that the COVID-19 pandemic has taught us, it’s the fact that life can be so fragile and unpredictable.
Who would have thought that a virus that is about 500 times smaller than the size of a hair can wreak havoc around the world and bring entire industries to its knees?
With many losing their jobs and careers even, I would reckon that there would be a good number of people who had to start over financially from zero without any savings.
There is also no predicting what life can throw at us, with many reasons why people are forced to start over. Things like bankruptcy, divorce, and prolonged unemployment due to retrenchment come to mind.
Or maybe you have been living paycheck to paycheck and have not saved anything until now.
And I feel you, it is never easy having to start over at any age.
But not all hope is lost. Many humans before us have done amazing things when forced to start again from scratch.
I cannot tell the future, but it could be the best thing that ever happened to you.
Regardless of whatever the cause, here are some tips to forge ahead if you are forced to start over financially from zero.
TL;DR: Ultimate Guide to Starting Over Financially When You Are Older
If you are starting your personal finance journey from zero with little or no savings when you are older, fret not, you still have quite a bit of time to work towards a healthy retirement.
But you have to start taking things seriously ASAP.
Start things simple and get the basics right:
- Find a job, then find your Ikigai
- Reduce your expenses
- Build up your emergency fund
- Start investing but avoid speculative investments that sound good to be true
- Don’t start your CPF Life payouts too early
You can do this!
1. Find a Job, Then Find Ikigai
If you still have a job now, please hold on to it as this source of income is one of the building blocks on which your bright future will be built.
However, if you do not have a job, your top priority will be to find work and get started.
When you are still young and have 40 to 60 years till retirement, holding out for a more ideal job might make more sense.
But, if you have less than half the time left, things are more urgent.
Not to mention the pressing day to day expenses you have to contend with.
This may mean that you will have to take up a job that is less than ideal or even something you hate.
But, all hope is not lost. You can still find fulfilment at work at your job if you make the effort too.
Or at the very least, make things might bearable as you find another job.
Check out our guide to feeling more fulfilled at work which should help.
Here is an excerpt from the article.
Ikigai (生き甲斐) originates from Okinawa, which is home to one of the highest percentages of centurions in the world.
Iki means life, and gai means value or worth.
The following Venn diagram encapsulates the meaning of ikigai.
Once you’ve reached that tiny sweet spot in the middle, you’d have attained ikigai, or found fulfilment in whatever you’re doing in your life.
The beauty of ikigai is that it does not depend on what your job is – you could be a cleaner in a school or a CEO at a big company, as long as you can find pleasure and satisfaction in what you do, you’re good at it and can make a living out of it, you will achieve fulfilment in life.
This point is really important. I will touch on this more later.
2. Reduce Your Expenses
The next step would be to tighten your belt and reduce your expenses.
You will need to adjust your lifestyle and learn how to live happily on less.
The aim will be to save as much as you can as quickly as you can by cutting down on unnecessary spending and reducing spending on your necessary expenses.
This could mean giving up things like subscription services that you don’t use much and choosing to cook your own food at home instead of eating out.
3. Build Your Emergency Fund
Now that you are saving more, what’s next?
Building an emergency fund of course.
The main benefit of building up an emergency fund is so that you can avoid having to take up high-interest rate debt that worsens your financial situation to deal with urgent and unplanned life events.
Time is of the essence here as you get older you cannot afford to get into debt as you have less time to overcome it.
Here’s a comprehensive guide to the emergency fund if you want to know more.
4. Start Investing But Avoid Speculative Investments That Sound Good to Be True
After building up your emergency fund, the next thing to do will be to start investing to grow your wealth.
I know, it can be tempting to take more risk with your investing and throw all your money into risky investments like meme stocks, cryptocurrency or whatever is the flavour of the day is to catch up financially.
But, this approach is dangerous as there’s a higher possibility for you to lose the money you really need right now.
As Warren Buffett would say:
“The stock market is a device for transferring money from the impatient to the patient.”
Good investing is a slow and steady process where you invest in quality investments that make slow, steady and reliable growth.
You won’t want to invest in investment products that not skyrocket to the top and more often than not crash down to earth too.
Instead, you should learn more about investment risk, do your due diligence, and choose your investments accordingly.
Don’t know where to start?
This guide to how much investment risk you should take based on your savings should help:
5. Don’t Take Your CPF Too Early
I’m no government shill but I find that Central Provident Fund (CPF) has done a pretty good job in helping Singapore Citizens (SCS) and Permanent Residents (PRs) prepare for our retirement.
More specifically, I am talking about the CPF LIFE scheme: a life annuity scheme that provides a monthly payout from retirement age for about as long as you live.
As you can see from the table above, your monthly payouts will get higher the more savings you have in your Retirement Account (RA).
Although you can start the CPF Life payouts from age 65, it may be better for you to defer your CPF Life payouts as for every year you defer, your payouts will increase by up to 7 per cent due to the magic of compound interest.
FYI: You can only defer your CPF Life payouts until age 70.
This is part of the reason why finding work you love is important as you might have to work longer since you are starting over financially.