Financial planning is a vast and confusing topic for many. The good news? You don’t have to be overwhelmed by the process anymore! There are 6 steps here for those starting their own financial plan or need some direction understanding what they should do next before making any decision.
Assess Your Current Financial Standing
Before making any financial decisions, start by evaluating your current financial situation. If you’re a working adult, you’re likely not starting from zero. List out all your financial assets, including:
- Income sources: Salary, side hustles, passive income (e.g., rental income, dividends).
- Savings and investments: Emergency funds, fixed deposits, stocks, bonds, retirement accounts.
- Existing financial protection: Employer-provided insurance, health coverage, CPF contributions (for Singapore residents), or other pension plans.
Understanding what you already have will help you identify areas where you may need additional financial support.
Define Your Financial Goals
Clearly defining your financial goals is crucial for making informed decisions. Think about:
- Short-term goals (0-3 years): Paying off debt, building an emergency fund, or saving for a vacation.
- Mid-term goals (3-10 years): Buying a home, furthering your education, or starting a business.
- Long-term goals (10+ years): Retirement planning, wealth accumulation, or legacy planning.
When considering financial protection, determine how much coverage you and your dependents need. Compare different options, considering the benefits, costs, and limitations of each.
Identify and Quantify Coverage Gaps
Even if you have some level of financial protection, you may not have enough coverage to safeguard against unexpected events. To ensure maximum protection, evaluate your current policies and determine if they meet your needs.
Some common areas where people may have gaps include:
- Health insurance – Does your plan cover major illnesses, hospital stays, or critical medical conditions?
- Life insurance – Will your family be financially secure in the event of your passing?
- Disability insurance – If you’re unable to work due to injury or illness, do you have income protection?
- Retirement planning – Are you saving enough to maintain your desired lifestyle post-retirement?
Regularly reviewing your policies ensures that you remain well-protected as your life circumstances change.
Identify, Reallocate, or Remove Excess Provisions
Having too much financial protection in one area while lacking in another can lead to inefficiencies. Take a proactive approach to reviewing your expenses:
- Analyze unnecessary expenditures – Are you paying for insurance you don’t need?
- Adjust allocations – Redirect excess funds from over-insured areas to fill critical gaps.
- Simplify your financial plan – Consolidate policies where possible to avoid duplication and reduce costs.
This step helps optimize your financial strategy, ensuring you get the best coverage while staying within budget.
Budget Your Spendings
Budgeting is essential to financial stability. It allows you to:
- Track your expenses – Identify where your money is going.
- Prioritize savings – Ensure you set aside money for your financial goals.
- Avoid overspending – Keep your expenses in check and prevent unnecessary debt.
A simple budgeting rule to follow is the 50/30/20 rule:
- 50% for necessities (housing, food, insurance, transportation).
- 30% for discretionary spending (entertainment, shopping, dining out).
- 20% for savings and investments (retirement, emergency fund, wealth building).
Budgeting helps you take control of your money rather than letting it control you.
Allocate Surplus to Fill Financial Gaps
If you have extra funds after budgeting, prioritize using them wisely:
- Increase your emergency fund – Aim for at least 3-6 months’ worth of expenses.
- Boost retirement savings – Take advantage of employer contributions, CPF top-ups (if applicable), or private retirement plans.
- Enhance insurance coverage – Fill any gaps in life, health, or disability insurance.
- Invest for long-term growth – Diversify your investments to build wealth over time.
By allocating your surplus strategically, you ensure that financial emergencies don’t take you by surprise.
DISCLAIMER: The contents including images, videos, audio and written texts found on the author’s social media page and other platforms does not constitute a research report and it does not have regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this message. All material and content are strictly for informational purposes only. The contents posted should not constitute financial or investment advice and should not be considered as an offer, or solicitation, to deal in any of the securities or investment instruments mentioned in this message.
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