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Posted 12 January, 2017 by Clearly
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Your Top 7 Must-Have Financial Goals for 2017

A new year comes with new goals, fresh aspirations, and a renewed desire to strive for improvement.

Yet goals by themselves are worth little unless they are well defined, and are backed up with concrete, actionable plans to achieve them.

Zest Chia walks us through the top 7 goals that we should all strive for – and more importantly – how best to achieve them.

Read on only if you wish to attain financial immortality!

 

1. Manage your debt

 

Drowning in debt is never a good idea – learn how to get out of the water!

 

Debt is neither bad or good, it is simply a tool. For most of us, some level of debt is necessary or a practical necessity. However, problems will arise when debt becomes the master of the borrower. Stay in charge of your debt – always.

With any healthy financial plan, tackling debt would be the priority. Whether it is debt from student loans, a mortgage, or credit cards, it is important to have a plan in place to pay down your debt load as quickly as possible.

 

Below are some quick tips on managing your debt.

  • Take note of all your credit card balances and know the interest rates and any fees involved. Avoid them like the plague!
  • Budget your repayment amount monthly based on your cash flow, so that you avoid paying late fees.
  • Prioritize repayments by paying off high-interest debt first. If it is a mortgage loan, consider refinancing.
  • Avoid swiping more than you can afford. Lock up your credit card in your safe if you need to. Or cut it up with a sharp pair of scissors. You know the drill.

Bonus perk of being debt free – you can fire your boss anytime :)

 

2. Review / Improve your credit history

 

And you thought your O level results were important…

 

A positive credit history is important as it allows you to obtain credit when you need it and at a lower interest rate. Good credit is even sometimes viewed by employers as a prerequisite for employment.

To establish a good track record with creditors, make sure that you always make your monthly bill payments on time. Do not let credit scores to come back to haunt you. Consider the following implications if you have a bad credit score.

 

Difficulty in obtaining a home loan –  either a HDB Loan or a bank loan. With a bad credit score. two things might happen. Firstly, you may only qualify for a lower loan amount and you are forced to cough up more cash out of your own pocket. Secondly, you may get rejected for a loan entirely.

Difficulty in obtaining a car loan – Have you seen how COE has risen over the years? If you have plans to get your first car to start a family, a car loan can help take off some pressure on your pocket temporary. That loan also depends on your credit score. Certainly something to consider, if squeezing into packed trains is not your cup of tea.

 

Check your credit rating here

 

 

3. Create (and stick to!) a Budget

 

Tip: Fun way to balance your budget. Literally!

 

Follow the Singaporean government, they do a budget exercise once a year. Budgeting is far too important to leave to chance.

In money management, we can view it as cash inflows and outflows. In our younger years, we work hard, save and invest more, so hopefully we have more to spend in the future. Some may aim to increase their networth, enabling themselves to reach life’s most important goals. By sticking to the necessary steps laid out below it will provide you a roadmap to help you stay on track even in tough times.

Quick Tips:

Spend what is left after saving, not vice versa – If you are unsure of where your money is going, track your spending either through a spreadsheet or a budgeting mobile app for 1 month. Determine how much fixed expenses you have (eg. Mortgage, car loan,  and retirement savings etc) Always save first, then spend what is left over.

Find out your net worth – It is not complex to calculate your net worth, all you need to do is add up all your assets value (what you own) and subtract it off from any liabilities you might have (what you owe) to determine your net worth. What you should strive to achieve is to have an upward growth trend in your net worth especially your peak working years. If you are already retired, you should have a drawdown strategy to make your money last throughout your lifetime.

Plan ahead for big ticket items – If you already forecasted that you will be having a big expense like home renovation, or down payment for property, then increase your savings accordingly. You can put it in investment vehicles like short term certificate of deposits (CDs), savings account or money market funds. The idea is to keep it as liquid as possible.

Store up for emergencies – If you are still in your prime working years, consider saving up to 6 months of your living expenses in savings in the event of retrenchment. That way, you avoid having to sell when the markets are down or incurring any penalties by surrendering your existing policies that accumulate cash value.

 

4. Review your Investment Portfolio

 

Time for “That Talk” again

 

Things change all the time. Most of the time they change unexpectedly. Case in point: Even Trump gets to be president. So expect this sort of upheaval in the markets as well – which is the reason for this financial goal.

Make sure you do an annual review of your investment portfolio, to ensure that it is still on target and the investment vehicle does not pose too much risk to your portfolio returns. You may start evaluating by asking yourself these questions:

  1. Has my investment horizon changed?
  2. Has my risk appetite changed?
  3. Do I need an increased in my liquidity?
  4. Does any investment in my portfolio represent too large/small part of my portfolio?

It may sound like a lot of work, but it sure beats losing half your capital due to negligence. No one said it was going to be easy!

 

5. Plan for early retirement (Never too early!)

 

The beach is a great place to visit. It is also a great place to retire!

 

When I took my degree in finance and managed to grasped the concept of time value of money and the wonders of compound interest, I was very determined to make every day count by actively investing my money, making it work hard for me.

As cliché as it may be, it holds a lot of truth in wealth management. Retiring early need not be just a dream if you know how to effectively use time and your assets.

Even if you are a person who loves your job and doing what you do for a living, planning early for retirement is one of top priority financial goals that all of us must have.

You might ask why retire early or even plan to retire early?

  1. Retirement might come later than you think, because preparing for it can be arduous and challenging, especially in such a volatile market environment. Planning early allows you some buffer time in the event you hit a few snags along the way.
  2. You might fall ill (seriously ill) during your working years and it might make a serious dent in your retirement plans.
  3. People in this era are time poor,  and some family circumstances often require more of your time. An early retirement gives you the flexibility to control your time according to your needs.
  4. Better to possess the option to retire early, than having no such option at all.

 

To illustrate the difference between the returns on investment of 10 years vs 25 years:

To accumulate $500,000 in 10 years @ 5% interest per annum requires you to save a daily average of $104.

To accumulate that same amount over 25 years at the same interest rate requires a daily average saving of $27.

Again, it will never be too early to start!

 

6. End any Addiction (Or at least control it)

 

Retail Therapy is for the weak

 

We all have our indulgences – it keeps us sane. Be it chocolate or PCs, handbags or model toys – there is literally a hobby or habit that we splurge in (just a matter of looking long and hard enough!).

But these indulgences become an addiction when expenditure on it spirals out of control. And by spiraling out of control, I mean the addiction is placed on a higher priority than your financial essentials (savings, insurance, investments)

An addiction to stuff can be a financial parasite that devours even the soundest of plans to leave you financially starved and malnourished.

Here are some potential problems of a material addiction:

  1. You need more storage space, depending on your type of indulgence.
  2. It ties up your money and generally speaking, they are sunk costs which do not provide any financial benefits.
  3. While luxury items can give you the sensation of leading a luxurious lifestyle, only income producing assets can improve your financial standing. (Buy those luxury items AFTER you settle the important financial milestones!)
  4. In times of financial turmoil, you might be more concerned with maintaining your purchases, which is not something you should be focusing on.

It is quite alright to have an indulgence or two – but make sure you are in charge, and not vice versa.

 

7. Ensure you have enough Insurance to cover contingencies

 

Don’t think we forgot all about insurance – just saving the best for last!

 

Insurance is something that majority of us would not think about or even be bothered with. Many Singaporeans don’t have nearly enough insurance coverage, while others could be paying too much for the coverage they have.

 

Having the right amount of cover is definitely a worth-while financial goal.  How then to achieve that? Here are some points to get you started on the right track:

 

  1. Ask around your friends/family/colleagues who have a similar background or share similar values as you, how much insurance coverage they got for themselves and family.
  2. Seek a second opinion from financial advisers working for various insurance companies or an insurance broker (a.k.a Independent financial adviser).
  3. Simply calculate the monthly income you wish your family to receive after your passing or when you are critically ill.
  4. Use the Discover tool here!

 

This article is intended to give you more insight into the world of Financial Planning, such that we may one day achieve Financial Freedom.

Financial independence in life has nothing to do with luck or magic. It does, however, have everything to do with hard work, discipline, having sound financial goals and a concrete plan to achieve it.

 

Wishing everyone a Financially Fantastic 2017!

 

www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.

This article was proudly contributed by Zest Chia. He represents an Independent Financial Advisory Firm and has no problem following his own advice, other than Step 6. RFID helicopters are his weakness. To contact him regarding Financial Planning or to learn about the joys of flying a model helicopter in an open field, he can be reached at 9675 9587.

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