Everybody’s needs are different – it’s important for you to first recognise what you need to achieve (as
distinct from want to) before you start to figure out how you can do it. Some want to save; others want to invest their savings. Some are looking at education; others at wealth accumulation. Some want to ensure a comfortable retirement; others want to maintain a great lifestyle. Figure out what your priorities are and exactly what you can afford to lose and what you can comfortably save without compromising essentials in your current lifestyle. Are you planning for the short term or long? Assess the market condition at the time of planning and figure out what you can earn without risk. Risk and return go hand in hand but the risk you take in investing could cost you your hard-earned money, so assess your risk-taking capacity yourself first before any professional does it for you. Never take more risk than your assessed risk appetite and only risk your capital to the extent you can afford to lose (this depends on individual’s total financial situation).
 Accept what you cannot control. And understand what you can. While planning, clearly understand what you can control, and
accept what you cannot. If you come across investments that
can beat the market, think twice. Many investors try to predict
the market, interest rates, inflation etc but unfortunately these
are all factors beyond our control. Instead, focus on things that
you can control or predict like keeping your costs of investing
low, maintaining a tax-efficient portfolio etc. Take maximum
advantage of every little savings opportunity that comes your
way – for instance, plan ahead and buy tickets online or during
a NATAS Fair for the scheduled school holidays than at the last
minute when prices are at their peak.
Be well informed and sure of what you need.
Soak up information whenever and wherever you can. When you’re waiting at the bank, chat up with the
officer to find out what is happening in the market. If you are not in a hurry, stop to check out the road
shows at MRT stations or shopping malls held by insurance agents or banks – they can provide valuable
insights on your financial planning needs. But before you sign on any document make sure it fits your plan.
If you are not sure, consult your Family Financial Planner (it has just started in Singapore, but is a common
practice in the US ,UK Australia etc.) and don’t commit to anything until you are 100% comfortable and
sure about the risks involved.
The concept of the friendly family financial planner, prevalent the West, is fast catching on in
Singapore. But even if you get someone to manage your money, it is important for you to be
in control. Financial advisor Mamt a Singh helps you get a handle on what sensible financial
planning is all about.
FINANCIAL PLANNING
Risk and return go hand
in hand but the risk
you take in investing
could cost you your
hard-earned money.
Assess your risk-taking
capacity first before any
professional does it for
you.
Earn while you are young and relatively free of family commitments.
If you are not saving anything currently you should seriously consider increasing your income by taking
up a second source by way of MLM, parttime work, tuition, or whatever your skills allow you to do. Make
sure that the additional income goes only towards savings and not meeting any of your lifestyle needs.
Remember, when you are young you have the energy to take on extra work and in all likelihood, family
commitments haven’t kicked in yet. The effort and time you put in now will earn you more family time
later when you have gained more control over your finances and your life. And you can’t ignore Death,
the eternal truth. Whether it will happen too soon or too late is something none of us can predict but we
definitely can prepare for by planning now.
Plan for your retirement before you plan for your children’s education.
Remember, there are no retirement loans. There are education loans for students but you can’t ask a bank
for money after your hair turns grey. It is very important for you to have the confidence of leading your life
on your terms and not being dependent on your children for your old age needs. Besides, education loans
have been seen to motivate students to earn for their own education and thus become more responsible
and independent individuals. When you are young you can take risks only if you can afford to do so. Prepare
your nest egg (in a lump sum) for retirement which if invested in risk free product (like fixed deposits,
treasury bonds) can earn enough to provide for your monthly expenses during retirement. Generally, the
retirement years are longer (20-35 years based on current life span statistics) than education years (3-5
years).
Till you are building income-generating assets you must insure your future income.
If you support a family you must make sure that you have enough insurance or assets to take care of
your family even when you are not around. Even if you are single you need to insure your future incomeearning
capacity which can be affected due to serious illness or accidental disability. Till you are building
income-generating assets, the most cost effective way to insure your income is by having term insurance
and personal accident cover (most people depend only on company benefits or credit card promotions
which are neither permanent nor comprehensive). Insure your future and invest in your present for future
security.
Small steps today can make big differences
tomorrow.
Spend just an hour a week or even 15 minutes everyday to assess
your finances. It will improve your financial life dramatically and
you will notice a big change in your life. Suddenly you’re in
control. Don’t wait for the perfect plan. Start right now and
you will at least have some good results rather than nothing
at all if you wait. Sooner you begin the better it is – saving
$100 every month for ten years is easier than saving $200 a
month for 5 years. Do a simple calculation – how much will an
amount of $10,000 grow in 10, 15, 20 years, earning a 2%, 4%
and 6% interest per annum. See for yourself the difference that
a compounding effect can bring to your savings.
Do a simple calculation
– how much will an
amount of $10,000
grow in 10, 15, 20
years, earning a 2%,
4% and 6% interest per
annum. See for yourself
the difference that a
compounding effect can
bring to your savings.
Travel insurance to cover for expenses of repatriating you or your loved ones
when they are injured or sick overseas.
When you travel you should have travel insurance to cover the expense of repatriating you or your
loved ones when they are injured or sick overseas. Travel insurance not only helps to provide baggage
damage, loss of belongings and travel inconveniences claims, but also covers medical expenses incurred
while you are overseas. Just the peace of mind that should anything untoward happen in a foreign land,
you don’t have to be cleaned out to pay for expensive repatriation under special conditions.
Protect yourself and your spouse should any major illness strike.
Do you have your health insurance in place to protect yourself and your spouse should any major illness
strike especially during old age. But if you don’t want to pay for the insurance policy, do have enough
assets/savings which you wouldn’t mind using to pay for any such hospitalization and other related expenses
that could happen to anyone. Also, ask your GP for information on Advanced Medical Directive
– it could save your loved ones from a lot of trauma if you happen to be very sick and unable to decide
for yourself.
 Involve your spouse in all your financial decision-making
and appoint a guardian of your choice for your children.
Take note of the life span in your family so far and plan your retirement
income accordingly, presuming you live longer. You must make a will and
revocable trust to ease the transfer of asset from your estate to your
beneficiaries as per your desire. Appoint a guardian of your choice for
your children while you are still in control. Do make sure that you and
your spouse are taken care in your old age in terms of lifestyle and medical
benefits.
And last, but not the least, women, statistically, outlive men so it’s important
for women to be in control of finances. So I urge women to get into the
driver’s seat and take charge of the family’s financial decisions. As I said
before,15 minutes a day is all it takes.
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