How to Build Wealth in Singapore: Lessons from Dave Ramsey's Financial Philosophy

So i've recently came across an article which sparked me to create one that's more relevant to the Singapore context. Reference: https://www.benzinga.com/personal-finance/24/11/42026823/this-is-how-you-get-wealthy-dave-ramsey-details-how-one-move-could-make-you-5-million-by-retirement

  Photo by Jingming Pan on Unsplash

Key Insights from Dave Ramsey

1. Start Early and Leverage Compounding: Ramsey highlights the importance of early investment. He notes that investing $100 per month from age 25 to 65, with an annual return of 12%, can grow to over $1 million. While 12% may be optimistic in Singapore's market, consistent investments in diversified portfolios such as ETFs, REITs, or unit trusts can yield significant long-term gains.
2. Avoid Debt to Build Wealth: Ramsey strongly advocates eliminating all debt except for mortgages. Singaporeans, too, should focus on avoiding high-interest debt, particularly credit cards, where rates often exceed 25% annually. Paying off such debts quickly is equivalent to earning a high, risk-free return.
3. Allocate to Retirement Strategically: Ramsey recommends investing 15% of household income into retirement accounts. In Singapore, CPF contributions are a built-in advantage. However, beyond CPF, consider Supplementary Retirement Scheme (SRS) accounts for tax benefits and further investments in retirement funds.
4. Emergency Savings: Ramsey advises saving 3-6 months of living expenses in an emergency fund. This is crucial for Singaporeans as well, given potential economic uncertainties and the city-state's high cost of living.
5. Home Ownership: Ramsey promotes paying off mortgages early. While Singapore's public housing (HDB) offers affordable options compared to private properties, prioritizing manageable loans and early repayments can save significant interest costs over time.

Applying These Lessons in Singapore

• Maximize CPF: Your CPF is a cornerstone of retirement planning. Ensure you are maximizing contributions and consider transferring funds from your Ordinary Account (OA) to your Special Account (SA) for higher interest rates.
• Strategic Investments: Some of us may not have CPF (self employed) while others may not want to wait and wish to retire earlier than the CPF withdrawal ages. While Singapore doesn't offer 12% annual returns for most investments, you can still grow wealth through diversified portfolios of local and international stocks, REITs, and Unit Trust Funds handled professionally by expert advisors. Such instruments allow for more flexibility to decide when you'd like to withdraw them, and it is usually earlier than the CPF retirement age.
• Mind Property Costs: In Singapore, owning a home is often seen as a form of financial security. However, it’s essential to avoid over-leveraging on expensive private properties that can strain cash flow.
• Cultivate Discipline: Just like Ramsey suggests, financial discipline and living below your means are universal wealth-building strategies.

Final Thoughts

As Ramsey states, "If you retire broke, it's your fault." Singaporeans have the tools—a robust financial system, and relatively low taxes—to build wealth systematically. By combining Ramsey's core principles with local strategies, it’s possible to achieve a financially secure retirement, even amidst Singapore’s high cost of living.

For a detailed look at Dave Ramsey's advice, check out these additional articles by Dave Ramsey:

https://www.benzinga.com/personal-finance/24/06/39316291/dave-ramsey-tells-americans-if-you-retire-broke-its-your-fault-explains-how-to-retire-with-1-mil

https://www.benzinga.com/personal-finance/24/02/37164431/dave-ramsey-tells-mark-cuban-75-of-wealthy-people-not-your-broke-brother-in-law-say-this-is-how-

Sources gathered and rewritten by:

Winifred Tan (Wini)
B.Sc (First Class Honours)ChFC (Singapore) | AEPP | IBF Advanced Level 2CFA (Singapore) - L1 | CIPM (Int’l) Level 1
Court of the Table | Int’l Dragon Awards (Bronze) | APAC Financial Services Star Award
Top 20 GE Executive Financial Consultants | Entre-Planner