All About Financial Planning – What Is It And How To Start?
Financial planning provides you with a guide map for your money and helps you to attain your goals. It can be done with professional help from financial advisors.
A financial plan is an overall view of your current finances, your financial goals and any schemes you’ve created to attain those goals. A useful and reliable financial plan should include details of all your financial liabilities including your cash flow, savings, debts, investment, insurance etc. All About Financial Planning – What Is It And How To Start in Singapore
What is financial planning?
Financial planning is a continuous procedure that will help to eliminate stress about money, support your current needs and assist with building a nest egg for your long-term goals such as retirement or even education funds for your children in the future. This is essential because it helps to maximise your assets and makes sure that you meet your future goals. You don’t have to be wealthy to do financial planning; everyone needs to plan out their finances. You can do it yourself, or get professional help from financial advisors or online services like robo-advisors these days, making it a lot more convenient and accessible to get help. All About Financial Planning – What Is It And How To Start in Singapore
6 Steps to Financial Planning
1.Set financial goals
You have to have financial goals to guide your financial plan. If you start on your financial plans with the thought of what money can do for you, you will make saving feel more intentional, which motivates you to work according to your financial plan to reach your goal.
Inspire yourself – how do you envision your life in 5, 10 or even 20 years? Do you want to own a car, or a house? How many children do you want? How will your life be after retirement?
Starting with your goals encourages you to move on to the next steps and provide a guide map as you work towards your journey to make your goals a reality. All About Financial Planning – What Is It And How To Start in Singapore
2. Trace your money, and reset the direction towards your goals
Understand your monthly cash flow – what is coming in and going out of your accounts. A clear image of your finances is essential when it comes to financial planning and can provide more ways to save more or clear your debts. Having an accurate view of your cash flow can assist you with developing immediate, medium-term, and long-term plans.
An example of immediate plan is to develop a budget for yourself. A popular budget principle is the 50-30-20 budgeting. Set aside 50% of your salary for your monthly needs such as housing, utilities, transport and other recurring bills, 30% for your monthly wants like dining out, entertainment and shopping, and 20% to your savings and paying debts. Medium-term plans can be reducing any high-interest debts, and long-term plans are like planning for retirement.
3. Set aside emergency funds
The foundation of financial plans is to set aside some money for emergency expenses. Start by saving small amounts to cover small emergencies and repairs to ensure that you will not encounter an unforeseen expense that runs up your credit card debt. Slowly increase your emergency funds to a little more money and so on.
Another method to protect your budget is to build credit. Having a good credit gives you options when you need them, and can also increase your budget by getting you cheaper rates on insurance and letting you skip deposits.
4. Eliminate high-interest debt
An important step in financial planning is to eliminate high-interest debts, like credit card balances, bank loans etc. Some of these interest rates can be so high that you end up paying double or even triple of what you borrowed.
Debt management plans or debt consolidation plans may help you with combining various expenses into one bill at a lower interest rate.
5. Invest to grow your wealth
Investing may sound very intimidating and only for the wealthy or people with established careers, but it is not the case. There are different types of investments, some are riskier while some are simple and straightforward. You could use a financial advisor with variety of investment tools to assist in your financial planning, depending on your goals – retirement, housing, education, business or even leaving a legacy for your family member.
6. Build a moat to protect and grow your wealth
By following these steps to creating a seamless financial plan, you are building a moat to protect you and your loved ones from financial setbacks. As you stabilise your finances and grow your wealth, you might want to consider improving your moat by:
- Increasing contribution to your retirement savings.
- Increasing your funds in your emergency expenses to 3-6 months of essential living expenses.
- Purchase insurance to protect your financial stability so that you and your family will not have to bear a huge sum of expense due to unforeseen accidents or events such as critical illnesses or even death.
At TN Advisory Group, our services and expertise can be used to assist interested parties in relation to the various fields of finance. Some of these sectors include investment, insurance, retirement, corporate pensions, group employee benefits, business continuation, as well as general insurance purposes.
If you wish to know more about financial planning or any other enquiries, please contact us through Whatsapp or Email to schedule an appointment. We will get back to you as soon as possible.