There are straightforward steps we can all take to begin to take control of our finances. One of most overlooked costs when planning our finances is the cost of delay. Often individuals simply feel overwhelmed and put off taking action. Many people can make an initial assessment of their situation on their own, alternatively, you can get assistance from a financial planner in Singapore.
- Financial goals
Before you make a financial plan, you need to decide what you would like to achieve — whether you’re designing a plan yourself or working with a financial planner in Singapore, your plan should start with a list of your goals, from small goals to your ultimate life goals. Organising your goals by their time horizon can help.
- Short-term goals are those you hope to achieve in the next five years—such as paying off debt or buying a new car.
- Medium-term goals are those you hope to achieve in the next five to 10 years – such as the down payment on a home or starting your own business.
- Long-term goals are those that are 10 or more years away – including arranging university fee planning and, of course, retirement.
The more specific your goals, the easier it is to measure your progress toward them. Try and specify a dollar amount for each goal.
Any time is a good time to establish a financial plan.
Ideally, you start investing for financial goals early in life, but any time is a good time to check in on your current financial situation and assess how you’re doing—Are you still on track? Do you have other goals you hadn’t previously considered? Having a financial plan helps you assess where you are today and where you want to go next.
- Net worth statement
Every plan needs a baseline, so next you should determine your net worth. Make a list of all your assets (bank and investment accounts, real estate, valuable personal property) and another one of all your debts (credit cards, mortgages, student loans). Your assets minus your liabilities equals your net worth.
Don’t be discouraged if your liabilities outweigh your assets. That’s not uncommon particularly when you’re just starting out—especially if you have a mortgage and student loans.
- Budget and cash flow planning
It can help you determine where your money is going and where you can cut back in order to meet your goals.
A budget calculator can help ensure you don’t overlook irregular but important expenses, such as car repairs, out-of-pocket health care costs, and real estate taxes. As you’re compiling your list, separate your expenses into two buckets: must-have items such as groceries and rent, and nice-to-haves such as eating out and gym memberships.
When considering how your goals fit into your budget, you may want to test it using “what if” scenarios: What if you want or need to retire earlier? What if you downsized your property?
- Debt management plan
Not all debt is bad debt. A mortgage, for example, can help build equity—and boost your credit score. High-interest consumer debt like credit cards, on the other hand, weighs heavily on your credit score and your pocket. Every dollar you pay in charges and interest is one you can’t put toward other goals.
If you have high-interest debt, make sure you create a plan that can help you pay it off as quickly as possible. If you’re not sure where to start, a financial advisor in Singapore can help you prioritize, then determine how much of your budget should go toward your debts each month.
- Retirement plan
An old rule of thumb says you’ll need approximately 75% of your present income in retirement. However, this assumes that retiring will free you from any work-related expenses and taxes, that you’ve paid off your mortgage, and that your children will be financially independent.
It’s also important to keep in mind that your medical insurance may not cover everything, and health care expenses that your health insurance plan doesn’t cover—such as long-term care—can add up quickly. You also might spend more on other things in retirement, like travel, dining out, gifts, or financial support for your children.
Don’t count on the 75% rule
- Emergency funds
When something unexpected happens—you lose your job, for example, or get hit with an unexpected medical bill—an emergency fund can help you avoid tapping your long-term savings to make ends meet or having to take on high interest debt.
It’s generally a good idea to save enough to cover at least three months’—but ideally six months’—worth of essential living expenses (e.g., groceries, housing, transportation, and utilities). Save this money in a highly liquid current or savings account so you can access it in a hurry should the need arise.
- Insurance coverage
Insurance is an important part of protecting your financial downside—but neither should you overpay for coverage you don’t need. In general:
- Health insurance: Without it, even routine care can be extremely, while a serious injury or hospital stay could set you back tens of thousands of dollars. As you get older, you may want to consider long-term care insurance, as well.
- Disability insurance: This coverage protects you and your family in the event you’re unable to work.
- Auto and homeowners’/renters’ insurance: If you own a car or home—or rent and can’t afford to replace possessions out of pocket—make sure you’re adequately protected.
- Life insurance: This is generally a good idea for those with dependents. Work with an financial planner in Singapore to understand what type of—and how much—coverage makes the most sense for you.
- Estate plan
At a minimum, you should have a Will, which states your final wishes with regards to your assets, dependents, and who you want to administer your estate (the executor). You should also keep the beneficiaries of your insurance policies and retirement accounts up to date. Also consider establishing powers of attorney for financial and health care decisions, in the case you become incapacitated.
If you would like information on any of the above areas or any other areaa of financial planning, please contact.
Matt Baker, Managing Director, Singapore Expat Advisory
Email: advice@singaporeexpatadvisory.com
Tel/Whatsapp +65 9432 8781
www.singaporeexpatadvisory.com
Singapore Expat Advisory is an agency for Promiseland Pte. Ltd and are authorised and regulated by the Monetary Authority of Singapore (MAS).
General Information Only This article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any products (including funds, stocks) mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser regarding the suitability of the investment. This article has not been reviewed by the MAS