Are you a driver, construction worker or other new economy entrepreneur?

With the rise of tech startups like Grab and Airbnb, many people have taken on new jobs in recent years, either as a full service or as a way to earn extra income. Although these jobs may be attractive especially in the face of rising unemployment rate and low revenue growth, they are not without their own financial pitfalls. If you’re considering becoming a “new economy” entrepreneur, like driving for Grab or hosting Airbnbs from your HDB apartment.

Open a personal line of credit

A rising tide lifts all boats. When companies like Grab and Airbnb grow like weeds, the people who participate in that growth can be immensely rewarded. Now Grab drivers in Singapore can expect to earn $26 per hour in Singapore. If you work 50 hours a week, that’s easily over S$5,000 a month in income, which compares favorably to national average of S$4,056, although there are other costs involved like paying for petrol. However, when you’re just starting out as an entrepreneur, it’s not easy to predict exactly how much money you’ll make or even how reliable your source of income will be. There will be days or weeks when you don’t get enough business.

So when you’re just starting out as an entrepreneur in the new economy, it might be a good idea to apply for a personal line of credit. Since the best personal line of credit deals on the market offer annual fee waivers, you can guarantee access to readily available financing in case you run out of money for a few days or weeks at a time. Although credit cards are usually the best way to pay when you don’t have enough money in your bank account, you can’t always rely on them, especially if you can’t pay off the balance as part of your current billing cycle (i.e. up to 30 days). A line of credit lends you money at a lower interest rate than a credit card, so you can still afford to pay for the things you need. When you’ve established a steady cash flow from your gig after a year or two, you can cancel your line of credit and avoid paying the annual fee after the fee waiver expires.

Cut out some of your weekly income to invest

Another disadvantage of having a job as a contractor is that you receive no CPF contributions or health insurance from your employer. However, just because you’re not getting these benefits doesn’t mean you shouldn’t have them. Therefore, you should really consider cutting some of your weekly income and setting it aside for investment so you can build a rainy day or retirement fund. Since most new economy entrepreneurs are relatively young in their 20s and 30s, investing in funds is a particularly attractive idea that can compound their net worth over a long period of time. To start investing today, check out our guide to the best online brokers in Singapore.

Compound interest and time

Take a look at the table above. here we feature two people who have invested $10,000 who are earning 10% per year. This means that after one year they would have $11,000 ($10,000 x 10% = $1,000 and $1,000 + $10,000 = $11,000). The only difference between Person 1 and Person 2, however, is that Person 1 started investing at age 20 while Person 2 started at age 30. Because of this 10-year difference, Person 1 has more than double what Person 2 has by the time they reach age 65. It’s like Warren Buffett said: The best thing you can do for your retirement savings is to start investing early.

Avoid incurring other forms of debt, except in an emergency

While you’re building your own “business” as a Grab driver or Airbnb host, you should try to minimize your reliance on debt. Borrowing to finance unnecessary consumption will only increase your financial burden as monthly interest payments begin to accumulate over time. However, if you encounter an emergency that you absolutely cannot avoid (i.e. large medical bills, etc.), you may want to consider getting a personal loan to help you deal with the immediate necessities.

Although personal loans are not the cheapest source of money, they still offer a decent interest rate, especially for things that cannot be secured by an asset; only loans like home loans tend to be cheap because the loan can be secured by the home of the borrower. When you need to borrow to pay your hospital bill, there is nothing a lender can receive if you default on your loan. Therefore, personal loans tend to cost more; however, they are still much cheaper than their alternatives like credit card debt, pawn loans, or payday loans.

Parting Thoughts

To succeed as an entrepreneur, you must be able to protect yourself from the unpredictable emergencies that life can throw at you at any time. Entrepreneurs have to deal with an unstable income stream and the lack of job security that a full-time job can provide, so it’s all the more important to be prudent about your finances. While a line of credit, personal loan, or investment can help you prepare financially when you might suddenly need a large sum of money, it’s always a good idea to get your expenses down to a minimum first. venue.

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