While you’re filling up your PDA with “eat better, exercise more and work less!” New Year resolutions, it’s also a great time to take stock of money matters and determine what kind of financial shape you’re in.
Says Annette King, chief marketing and strategy officer, AXA Life Insurance Singapore: “You’re fiscally fit if you have enough cash on hand to pay for regular expenses for the next three to six months, the basic financial protection (insurance coverage for death and disability, critical illness, hospitalisation, etc) for yourself and your dependants, as well as a savings plan to meet mid- and long-term financial goals”. Not quite there yet? There’s no better time than now to face your money demons and get your financial house in order.
1. Reflect on your finances
Build a rough balance sheet of assets (cash, savings and checking accounts, investments, property, car, etc) and liabilities (credit card debt, housing and loans, study loans, etc) to know where you stand. While doing this, dig deep and be honest when posing these questions to yourself: Have you met your financial goals the past year? Are your current spending and saving habits helping you achieve financial freedom? Do you need to keep a better rein on expenditure?
2. Don’t go crazy with your annual bonus
Before you blow the year-end bonus and salary increment in one place, set aside some of it towards your savings and investments. It’s a commitment as good as any to getting serious about your money in the New Year. If you have debts to pay, seek the expertise of a financial planner so that he or she may help you to develop a loan repayment plan that optimises your assets and resources, advises Annette.
Says Annette King, chief marketing and strategy officer, AXA Life Insurance Singapore: “You’re fiscally fit if you have enough cash on hand to pay for regular expenses for the next three to six months, the basic financial protection (insurance coverage for death and disability, critical illness, hospitalisation, etc) for yourself and your dependants, as well as a savings plan to meet mid- and long-term financial goals”. Not quite there yet? There’s no better time than now to face your money demons and get your financial house in order.
1. Reflect on your finances
Build a rough balance sheet of assets (cash, savings and checking accounts, investments, property, car, etc) and liabilities (credit card debt, housing and loans, study loans, etc) to know where you stand. While doing this, dig deep and be honest when posing these questions to yourself: Have you met your financial goals the past year? Are your current spending and saving habits helping you achieve financial freedom? Do you need to keep a better rein on expenditure?
2. Don’t go crazy with your annual bonus
Before you blow the year-end bonus and salary increment in one place, set aside some of it towards your savings and investments. It’s a commitment as good as any to getting serious about your money in the New Year. If you have debts to pay, seek the expertise of a financial planner so that he or she may help you to develop a loan repayment plan that optimises your assets and resources, advises Annette.
3. Set goals for the next three to five years
Assess your current situation and see if your financial or lifestyle goals have changed. Perhaps you’re considering taking a year off work to travel, or plan to do an MBA in two years. Or you may be planning to start a family or buy a new home. Says Annette: “These changes will have an impact on your cash flow and you will need to start setting money aside to meet these goals.”
4. Determine your retirement goals
A clear message that has emerged from all the talk surrounding this year’s CPF reforms is that it’s never too early to plan for your retirement. If you’re envisioning your silver years filled with frequent travel or the pursuit of particular passions and hobbies, monetise each of these goals so you’ll know how much you’ll need when you get there, as well as how much to set aside now in order to fulfill them. It is worthwhile consulting with a financial advisor to work out your retirement goals and help put together a savings and investment plan that matches your needs and your risk appetite.
5. Organise a budget
If your spending habits in the past year leave much to be desired, it’s high time you came up with a budget for yourself – and stick to it. To do this, keep a daily record of all your spending for a month. At the end of it, break down your spending into different categories such as fixed, entertainment, shopping, food, and transportation expenses. Once you have a clear idea where your money is going, it’s easier to decide which areas you can cut back on and how to channel the excesses to your savings and investments. Seen this way, a budget isn’t so much a restriction on your spending as it is a clearly mapped out strategy for where your money should be going. Finally, even though you should make it a point to review your financial situation on an annual basis, you don’t have to wait another 12 months to revisit the books. “You’d consult the doctor each time you feel ill. The same principle applies to ‘spring-cleaning’ your finances,” suggests Annette. “Make it a point to meet with your financial planner whenever there are any major life changes.”
Source: Man's Health
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