Managing your finances as a freelancer

What comes to mind? Oh, ok, Botanic Gardens. That's one but also more significantly those good schools, big bungalows, basically everything that's out of my price range. Certainly an elite part of Singapore. Let's not lie to ourselves. Yes. Ok. So Bukit Timah is going to go through some changes, not now, but in about 20 years from now, M and D has announced that 15 to 20,000 public and private homes are being planned at

the future turf city housing estate. This is the first time in about 40 years that there's going to be public housing in Bukit Timah. So for the flats. Experts are saying that they're likely to be under the prime location, public housing model and make up no more than 40% of the new home. Ok. No surprises there, obviously because it's a prime location. So let's talk numbers. How much would these cost? Obviously,

it is hard to pinpoint now. But according to experts quoted by CN A four room flats are likely to be about 600,000 sing dollars. Can't wait to see how it's all going to shape up what's next? Ok. In keeping with the homes theme H DB has announced a new type of flats will be piloted in the upcoming Kallang WB project and they are calling these white flats. Ok. What exactly are white flats? When you're invited to pick your flat, you can choose a white flat which won't come with

partitions or beams. So basically, it's an open concept flat, one big space for the living room and the bedroom, right? Do you think this is a good idea? I think it is because there tends to be this pattern of especially younger folks where they want these open expansive spaces in an H DB flat. And I think this way they immediately get to see what it looks like. But the thing is it's about having options also, right. So what if you want the beam back at that space? Exactly.

So Minister Desmond Lee has said that this will cater to young people who want more flexibility in the way they renovate their homes. But of course, it remains to be seen what the price difference will be between the white flats and their traditional counterparts. So if you've been following me on Instagram and tiktok, then you would know about a new feature of the Money Talks podcast and that's the money talks challenge. So for the first Money Talks challenge ever, my producer Juna

challenged me to take public transport throughout the month. Here's a disclaimer. I only need to think about the ride home because my right to work in the early morning because I host the morning show on radio that's covered by the company. So just to give you an idea, a cab ride home from work for me is roughly $20. And if I have errands to run, which is mostly in town, a ride home is about 17 to $18. But that fee, it buys me time and that's priceless because that journey

takes me just 20 minutes. So in contrast, the average fare home via train and bus because that's just what my journey home entails is a nifty 2 to $3. Then while it saves me money, it's also a one hour 45 minute journey home. Almost two hours. That's a long time spent and it's time I can't get back.

So while this has been a wallet friendly experiment, it's also taught me things that have absolutely nothing to do with money, proper planning, multitasking on the go even taking the chance to slow down and refresh my mind with a podcast or even catching up on articles for work. Well, the conclusion now is do the intangible benefits outweigh

the benefits? I see in my bank account. Not always, but I believe they are worth counting anyway because let's face it, carrying three heavy bags of groceries after work on a long train and bus journey is just not the most efficient nor comfortable, is it? So that's it. The very first money talks challenge. Let me know what you think if you want to find me on social media. I'm on Instagram and tiktok, Andrea heng.cn. A

welcome back to the Money Talks podcast. I'm Andrea. He now for some people, the 9 to 5 job just doesn't cut it right. Getting dressed jostling with crowds, endless meetings. That could have been emails. You know what I mean? Right. So freelancing can be an empowering option because it lets you choose what you want to do and how much you want to do. Plus you can work any time

anywhere and wear anything you want. In fact. Mm. Data shows that over 221,000 residents engaged in own account work as a regular form of employment as a mid 2023. But as Eleanor Roosevelt once said, with freedom comes responsibility. That's right. The trade off for that flexibility is discipline, discipline in the work but also in your finances because no one else is going to be doing it for you. You'll also be missing various

safety nets, right? Like insurance and health care and here in Singapore, regular CPF contribution. So is there a way for freelancers to be financially secure, not just for the now but also while building a financially sound future? One of those ways is to get advice from Chn Ting whereby she is the CEO of Money Owl. Welcome to Money Talks. Thank you, Andrea. So happy to be here. So there seems to be this common perception that people without a salary have a more precarious financial situation.

Is that really true though? Well, Andrea, like you say, with freedom comes responsibility and if you look at the mom survey, those that the one that you talked about, actually, it seems that over 90% have said that they choose this, they choose to be freelancers because of flexibility and all that. It's just that you do not have these structures that are quote unquote

imposed on you. You, you come to work, you get your salary in your bank account every month and you have the CPF and there are already basic structures that are there. So in Singapore, for freelancers, there are some basics or mandatory things that make you do the right thing that is good for you, for example, the Medisave contribution, but you need to build the rest yourself. So it is not necessarily that you can't have those structures to support

your financial resilience and adequacy. You just have to be more aware and know how to go about doing it. So, are there common financial issues that freelancers actually run into? What do freelancers tend to get wrong when it comes to planning their finances? I think the first thing is that they don't plan. Right. So I'm not sure if it's fair to make this extrapolation. But perhaps people who like freedom and you know, I want to do things my way and all that become

more creative. People maybe not so structured. So criticism perhaps because I'm not naturally very structured myself. And that's why maybe by some irony or destiny, I had to do this financial planning thing and I tell people all the time, build your systems, build your habits and all that because I, I know it really helps us. So the first mistake

is really not planning, right? The second one I think is really just ignoring reality, like trying to, ok, where's my, I'm going to get that big break and it's all dependent on something you can't control. Yeah. And you can ignore reality, but you can't ignore consequences of reality. You got to be prepared to answer to those two. Yeah. That's right. Yeah. So you need to face the facts, right? Face the facts and then do something according to what you can control because hope

is not a strategy. It's not strategy, right? And theyre not strategy, but it doesn't mean that you can't pursue your dreams. It doesn't mean any of that. You just have to really get started and at least get a basic frame. Yeah. Yeah, I think that's really good advice. And I think more importantly, it acknowledges the need for certain people to have no structure. You still need to have some kind of basic rundown of what you need to do, especially

financially and especially in Singapore. Ok, assuming we've decided to go freelance, secured maybe two or three gigs. What do we need to set up in terms of accounts, for example. Ok, I think perhaps let me suggest a way of thinking about your income, right? Because if you go back

to that 2023 survey. So what are the main concerns that people have are the main challenges of these own account workers and over about 20% it is really uncertainty of finding sufficient work and the lack of sufficient work in general and then the health care, their retirement and and all these concerns, right? So one is really about income and the other one is about expenses and long term expenses. So I I think one way of thinking about it is this your income is

very lumpy. So sometimes you have, sometimes you don't have and all that, but let's say you're already a freelancer. You need to find what is the equivalent that you are actually earning in a year. Ok, let's say you say that, ok, I'm actually bringing in 50,000 a year, right? This is not the same as 50,000 of a full time employee. You know why? Because no CPF there's another 17% or so for most people from the employer, then there's, of course, then the interest

on that CPF. Then on that's a retirement side insurance, there's at least basic like workman's injury compensation. You don't have sick leave you don't have, right? So you easily need to like almost like discount what you have by, let's say 20% right? And then think about it this way. So let's say you're talking about, let's say if you 3000 a year, what you are talking about is every month, you are actually earning about $4000 a month. Ok? And some months you will get 1000, some months, you will

get 30,000. Ok. So how do you think about it? So think about it as you are generally earning about 4000 a month and then set up a system for yourself to make sure that your expenses are within a certain amount, make sure that your savings are in, set up. So what is the first thing you do? So 4000 a year you should be saving at least I think for freelance we got 15 to 20%. So set it up, set up a standing instruction ok, so you have one account in which you get all your money, right?

Then you set up another account in which you save all this money, right? And it is called the Do not touch it. Is it is the saving or investment account, right? And then you automate it right? You automate it. So you pay yourself first. So the first thing that comes in, you do that now, but it's a bit hard if really you have zero balance right, then it comes down. So ideally before you even start, you should really have

a certain level and then you do this. But if not, then what you need to do is that you say, ok, I will save towards something and let me call this the so called emergency fund. You know, a lot of people don't understand what emergency fund is. They think it's really for emergencies, but actually it is for the emergency of lacking income. Yeah, exactly. So now that we're facing more retrenchments, people understand this actually tied you over time to income. So set that one up first and

then accumulate in that account until you have a certain amount. Ok. So what is this amount for most employees? People say? Six months, 3 to 6 months. Yeah, freelancers, I would just say 12 months. Ok. So fill up this bucket of your emergency fund in savings and always top it back. So that's the first thing that you need to do. And I think as a freelancer, you can already do that. You are already in a very good space, then we can talk about investments later. Right.

And then if you want to, you can also take up all your other, like, fixed expenses that you already have and you can actually gyrate from a different account if you want, you can have three accounts. Right. So that only one is left to spend on. Right. Yeah, it's possible. But I think at a minimum, the first thing that you should have is actually this saving because not many people can handle three accounts. So at least two, at least two, in my opinion, at least. Ok.

So what about setting up an account for business? Is that something that's worth thinking about or do you think that's just too many components to consider? No, I think it's good because it gives you a discipline to say actually, how much are you spending on your business, right. So you can actually replicate this thing about like, even when you're self employed you're paying yourself. Right. So this is actually your salary, like I said, $4000 right? This is your salary and then

that you pay yourself first into your savings. In fact, one of the things that I think freelancers after a while you can consider is actually to incorporate in the business, right? Because when you incorporate business, there are certain advantages, most freelancers that I talk to who don't do this, don't do it for no other reason than a bit lazy to go and find out. And it's a bit late.

But there are, of course, if you are, in fact, the, a little bit more enterprising, there are also these start up grant and the government gives quite a bit for enterprise Singapore and you can really go and all you need to do is register your business, right? Register it and then you start to get grants. And if you are really a company, like a private company, you can also have certain sme financing and all that and you make your, what you bring to the world actually replicable and sustainable

as exit business, right? But of course, that's not for everyone, right? So, but it's something to consider, at least to look into, I would say when you are at the stage, when you're about to pay income tax, that means you probably might be but do look into it because there's quite a lot of support on that part. Yeah, exactly. And it's something that individual freelancers don't really think about

or it doesn't really come to their minds. It's not top of their mind because they think of themselves as individual workers, not necessarily a business. Ultimately, you are a business because you're offering a set of services, right? Even though you're just one person. So I wanted to talk about what you mentioned earlier, a couple of times the salary. That's right. Right. And I know it's important to pay myself. But how do I define this? Especially when, as we said, some days,

we're earning 1000, some months, we are earning $30,000. And yes, while we should be planning with the year's salary in mind, how do we actually pay ourselves monthly then as a salary when that income generated is inconsistent? How do we tackle this? Ok. I think that the main reality you need to face is that how good are you as a freelancer such that and how much income

can you actually generate? And it's actually a mindset that is not to do with the income side, but to do with the expense side if you spend say 25,000 a year. Ok. On your basic expenses, you should be able to generate income of 50,000 before you even go there. I'm not even talking about C PM and everything right now. Ok. So basically if you can't achieve that, you're going to be very stressed. So when

I say think about your salary, let's say 4000. I'm not saying that how you cash flow wise, manage to extract this and you can keep it aside because your bank account is going to look very weird. It's gonna be like it's gonna be, let's say you earn 30,000. Then after that it's going to minus minus go back up, right? Yeah. So that is the minus minus, you need to know. Right.

So that means that if you really think that in one year you're going to earn 50,000 and you should have a good sense of that, then you should not be spending more than, let's say, 2000, 2000 a month. Right. And if you can't do that, then perhaps you should delay your entry into this space. Right. Yeah. Something also to think about. Right. Freelancers actually can lose work at any given time. Projects can end abruptly and

in an instant one source of income is gone. How do we manage our finances at the current going when this happens when this abrupt end happens? And obviously my projection is gone now. Right. So, what do I do? Yeah. So that's what the emergency fund we talked about is there. So, so unlike others, these emergency fund might actually be drawn down on a little bit more so, or you can get sick, right? And you

cannot work to eat, right. Yeah. So that's why I say 12 months because for, for employees, we might say six months or even three months. Right. But it's the in between living with uncertainty is part of being a freelancer, but at least you're having that buffer, you know that you're ok, you know that you're ok for on paper, it 12 months. But in reality, it's more like six months, right? But you need to understand that this is why you're doing it right. It's not that you can don't work for

12 months. Right. You need to understand that you're talking really that 12 months for others is effectively a kind of 3 to 6 months buff of. And it's from that mindset, I think that it's really about entering into freelancing. You need to know when the right time to enter so slow months can really be quite full for freelancers. I mean, it really was painful for me and it will be

tempting at this point to lean on credit. How can we prevent our credit or debt from spiraling out of control when we are freelancing and and when we get the slow months, like I was saying that we have to build this buffer, right? So even if it's hard that during your good months, then build even more of it. I was saying that you treat yourself as always saving that, let's say 20% a month. But let's say you have a good month and you're not bringing just 4000, right?

You're bringing in 20,000, right? And you know that you also got target annual income is 50,000 then instead of using the money going to be a big party and all that right? 10,000 away it up, look it up. Ok? So one of the advantages of being a salaried employee is CPF contributions and also income tax filings, insurance is done automatically as well. CPF especially it's a big plank of retirement adequacy, right? So what do freelancers need to be conscious about here?

I know you mentioned that the Medisave top up contribution or rather the Medisafe contribution monthly needs to be there as a freelancer. But what else do we need to be aware of? So that's by law, right. Medisafe and all that and many people don't know that by the way, a lot of answers actually don't know. I didn't know actually at the time that I was supposed to call, contribute to my Medisafe, even if I couldn't afford contributions

to my O A. Yeah. So actually a lot of freelancer, friends of mine didn't know this and they got penalized as a result. So please take this as a PSA if you are a freelancer, you need to at least contribute to your Medisave. But yes, what else should we be aware of for CPF is really for the long term and it's really for your retirement, right? And if you look at what the employees actually contribute to their CPF, I think that's a good starting point.

So I think when you start, and I'm talking about special account because special account is really the retirement and I think the younger folks will start at 6% of their salary, right? And then goes up seven. So can you contribute at least that? Right? As if you were an employee? And remember I said that you have 50,000, right? Then you can go and top up. Right. I think in the case of special, don't do it all at one go. Yeah, you, you should save all at one

go that 10,000. But at least take that step of saying that, ok, I'm not worse off than if I were an employee because I've taken this step myself and I've seen people who have done that because they appreciate that 4% will compound and it's really a big difference. Yeah. And don't say to yourself that I'm only going to start later when I am in this stage because time is your friend and you just delay 10 years and you have to save, I think of an eye and you

have not much to begin with. That's right. Yeah. And especially in a freelancer, you're dependent on your own labor, your own health, your own, you know, so unless you build an editable business, you will depend on yourself and one day you will no longer be able to earn and you will still have to spend. And that is the reality. This is why they say health really is wealth without health. You can't work, but you can't control some things, right?

You can't control something. Yeah. Correct. I wanted to go back to insurance and the same thing when I was freelancing for something like over a decade, my insurance agent or my financial planner at the time said, ok, now that you're freelancing, I think you should consider

the different kind of plan. So for example, a plan with stronger income protection because if anything were to happen to you physically and you won't be able to earn the same that you're earning now that income protection will be in place to make sure that you're covered. So, is that something that we should be thinking about as well? The type of insurance plans that we should be looking at? Ok. Yeah,

know where that's coming from, right. So there are roughly speaking, two types of risks that you need to guard against, right? One is the big bills and those are almost always medical bills, right? So if you're going to hospital and all that, right? So the good thing is that we all have a Medishield Life, right? We do recommend that you take an integrated Shield plan because they there are limits to Medishield Life and this integrated Shield plan is not expensive. Yeah, we're talking about a few

$100 from your Medisafe. Don't do the private one or at least do the B one. Yes, correct. And the main thing you are insuring that is your insurability and because if you start too late by the time you want to do something you can't. So this is one type of insurance, right? Then the other type is actually income protection, correct? Loss of income. Yes, that's why. Yeah. So there are actually three types of things that can cause you to lose your income or three types of

risks which you can't control. One is death. Yeah, obviously this only matters to you if you have dependents and the under the CPF scheme, as long as you have some money in the O A for them to deduct, to premiums for the dependence protection scheme gives you 70,000 sum assurance coverage. But it's not for you. It's for your dependence because it's there. right? You'll be gone. But yeah, it depends a lot

on your dependents whether you have dependents. Sure that if you do and you need that, then the other option that you can consider is uh besides that if you are an NS Man or NSF, the SF group insurance or ma mh A group insurance is very good value and it, that's the most important thing. It is portable. So I like a lot of group insurance. What do you mean by portable means? You, in this case, you don't have to be a min employee on NSFNS Men in order to continue with it.

My first career was with Mindef as a civilian officer, right? So I actually hold that plan still to today. Wow. So, so even if you had not been a mind dev employee for a long time after you just need to continue, right? And so that applies to like half the population because everyone is an NSF, right? So then you just continue as an NS man and and pay that part because during your ns days, Minde pays for that, that portion of home team pays for that portion. This is one of those tricks

because nobody will sell you guys. There's no commission to check with my husband about his. Yes. Yes. And then he can cover, you can cover you. Right? Yeah. Yeah. So, so there's a low cost way. So DP si mean they have mh a group insurance but if not, then there's a direct purchase insurance, purchase insurance. You don't have commissions and all that. You can even go online and all that.

Now the recommendation is nine times your income or you can do a better what your family need and all that kind of thing and it actually can be very cost effective. So that's one way. So the first thing about income protection is really death, right? And then the second thing is critical illness. Now the critical illness is basically cancer, heart attack and that kind of thing and the basic critical illness is to cover you in the

late stage, right? And so so people think that oh, I need this to cover for my expenses actually. No, for chemotherapy dialysis, all this outpatient stuff is actually covered by your shield plan, right? So what is this for? This is in case you cannot work. So that could have been what your financial planner was saying you have a critical illness. That's right. That's right. Yeah. But the thing is that nowadays with screening and all

that we detect early critical illness quite a lot. That's right. And most of these plans do not cover early critical illness. But if you buy early critical, it's very expensive. So the thing is that you have to balance, right. So we usually say go at least for the late stage one because that's when you really can't work a lot of people during the early stages of cancers and all that, they can still work. In fact, they just

take MC and go and then they go back. So what you need, you need to cover your hospital bill, then you need to be able to get back and do that and then do your chemo that right? So what you can do is because most early stuff is actually have cancer, most of most cancer, correct? Yeah. So you can get very cheap cancer plans that cover you. So that's that. So that's the second type. So the critical illness recommendation including MS basic financial planning is about four times your

income for your annual income. That is actually for recuperation because why four times because when you get a late stage critical illness, it tends to be that either you survive beyond four years or you don't. So that's the recommendation. So this to the third one is what you call occupational disability. So sometimes you get something, it could be an early critical illness or it could be, let's say a presenter and the

loss of your voice or whatever. Yeah. And the cancer, the critical illness insurance is not going to pay out. You're not gonna pay out, but you might also suffer in some cases like depression and all that. These are all good to have. Yeah, but at them up, right. Add them all up. MS Basic financial planning guide says all your insurance should not exceed 15% of your take home pay. Ok. So I would say that even 10% sounds a bit much because 15% here then

you need to save, right? Isn't it bad? I rather you have as much in savings as well, then you need to eat right? So 50% of that insurance and then accumulation for the future and remember that you don't have CPS. So it's not 100% another 70 before you know it, all of it is used up and allocated already. That's right. Yeah. So I think insurance really pay as little as you can maximize your coverage.

Use term insurance, use, use nice hacks like S a group insurance, use direct purchase insurance and then all the other fear and uncertainty or that, that that might be used on you. You just have to have that enough knowledge and literacy to, to say, look, I have to focus on my financial plan must be based on my being able to earn, being able to thrive, not based on me dying. And that's exactly the literacy is exactly why we are

doing this episode. So, Chun Ting, thank you very, very much for walking us through all of that, very comprehensive indeed. And you know what, I wish I had this advice when I was freelancing all those years ago. But you know what, it is still beneficial even if you are a salary employee because you never know what's going to happen. Now, before we let you go, there's a segment here on the Money Talks podcast. It's called Questions from Ahead.

And that's exactly what it is. I'll just need you to pick one hand it to me and I ask you the question. All right. Ok. And your question is, oh, what do you spend the most money on? Ok. Let's put aside kind of mortgage and all that because I think that's probably one of the biggest. Yeah. So I think I spend the most money on my Children, Children stuff and all that. But even I have to look at it and say actually what they want most from you is probably your time,

your attention to bond with you. We don't always have to go for that expensive restaurant and all that. Yeah. So it's a good reminder to myself to think about what really matters. That's what's priceless, isn't it that time? And that energy and that love with the kids, it's priceless. You can't put a dollar sign on that lovely answer. Chun Ting. Once again, thank you so much for being

on the money. Thank you for me. Yeah, and listener, I hope this episode assures you that it actually is possible for you to achieve good financial habits and health. While freelancing, there are ways for you to survive and also thrive as a freelancer. If you have any thoughts or questions about this episode, please send us a message we'd love to hear from you. This podcast is available on Apple podcasts and Spotify as well as youtube music. Don't forget to rate us if

you are enjoying this podcast. My thanks to the team, Joanne Chan Tiffany, Ang, Christina Robert, Juani Johari and Sai Ye Wint. I'm Andrea Heng. Thank you for listening to the Money Talks podcast.