Knowing how to optimise your money is the first step to achieving early retirement. Most folks choose to put their hard earned money in the bank but is that really the best way to put your money to work? At this current saving interest rate, I would say no.

For the non financially savvy folks, the best thing to do with your money is to clear your housing loan, be it hdb loan or bank loan. The logic is simple if we look at the interest on housing loan as a form of returns. Currently, it is around 1% in Singapore. Comparing this 1% with the savings rate of 0.25%, it is better to use the money to clear the loan so that you are at least ‘achieving’ 1% returns, rather than 0.25% interest rates.

However, if you are financially savvy or are willing to learn, I suggest you use the money to create passive income streams first, rather than repaying your hdb loans. 1% return per year is not hard to beat. I have already highlighted some of the better financial instruments in Singapore that can easily allow you to achieve 4% returns on your investment. Some of these include:

• Buying dividend paying shares
• Buying Singapore REITs
• Buying Singapore corporate bonds
• Buying traded endowment polices
• Buying websites

The list is not exhaustive as there are plenty of other options that I am not familar with. When dealing with the above, it is important to know what is your risk tolerance level. I am generally aggressive but I still divide my portfolio into lower yield but safer investments (reits, dividend stocks etc) vs higher yield but risky options (websites, domains etc).

The bottom line is this: if you can achieve higher than 1% returns on your investments, dump your money into that first. If you are not a savvy investor or you don’t like risk, use your money to repay your loan. At least you can guarantee that you will be ‘earning’ higher than what the current savings account is giving you.