Take Control Of Your Finances In Just 5 Days!

Like many Singaporeans, you probably consider money as a top source of stress, even if you save money regularly and stick to a budget. You might also feel as though retirement and other goals are out of reach, despite having good financial habits. Don't worry, you're not alone. Getting your finances on track is simpler than you think. Here's a 5-day plan to help you manage your money and meet your goals, no matter what they are. Take it one day at a time, and you’ll see a big improvement on how you spend and save.

Day 1: Find Out Where's Your Money Going

Before anything else, create financial awareness and understand where your money is going. Do this exercise to see if your spending matches your priorities today.

1. Look back at the last 3 months and add up your monthly income.

2. Look at your bills for the last 3 months and add up your monthly expenses, including debts you have.

3. Subtract your monthly expenses from your monthly income.

If you have at least 20% of your income left after subtracting your expenses, you’re on the right track! If there’s less than 20% left over, see where you can cut down, especially on leisure such as going out for dinner every week. You should ideally be saving 20% of your income for retirement and other long-term goals you may have. Consistently spending less than what you earn helps to build your wealth steadily. If you’re unsure about where your money is going, look through last month’s debit and/or credit card statements and try to categorise your spending (e.g. groceries, utilities, leisure). Still unclear about your expenses? You can start from scratch and track every payment or purchase you make for a month.

Day 2: Decide What You Want to Save For, and How You’ll Do It

Today, you are going to daydream. What do you want to achieve in the next 2 years? 5 years? 20 years? Make a list of everything you want to accomplish, or items you want to purchase. When you know what you want, making the right financial moves becomes easier. Once you’re done writing, let's take a step further and make your dreams a reality. Identify which dreams come with a price tag and research how much it costs. Then define your goal by assigning a target amount, as well as a timeframe for saving this amount. Once you have your target amount, decide on the most effective way to meet it. A long-term goal like saving for university can be better met through financial instruments that will make your money work harder over time, such as a regular savings plan. On the other hand, goals you’d like to achieve in the next year or two can be funded through disciplined monthly savings or finding alternative sources of income. Not sure what you’d like to achieve? Here are some ideas:

Short-term goals (1-2 years)

• Clear credit card debts

• Build an emergency fund (3-6 months’ worth of expenses)

• Renovate the home (around $58,000 for a 4-room flat)

Mid-to-long term goals (5 – 15 years)

• Save for children’s university fees (around $58,000 per child for a local university)

• Upgrade to a condo ($250,000 cash down payment for a $1 million condo)

• Save for a comfortable retirement (from $1,000 per month)

Day 3: Review Your Savings and Investments

Today, take a critical look at your existing savings and investments. Are you on track to meeting your goals? Are your investments still meeting your changing needs? It’s good to review your savings and investments annually so you don’t miss anything critical to your financial well-being. Do this on your birthday each year, or pick any other date you won’t forget. Here are the things you should cover:

Life changes

Have you welcomed a new child, changed jobs, or started supporting your retired parents? Each of these changes have an impact on the bigger financial picture from your last review. Consider how these events affect the goals you defined yesterday.

Emergency fund

You should have 3-6 months’ worth of living expenses saved in your emergency fund. This helps you to weather any unexpected crises without hurting your financial security. Does your emergency fund have less than 3 months’ worth of living expenses? Try to see if you can divert a bigger portion of your salary here. Have your monthly expenses increased since your last review? Consider topping up your emergency fund to cover any new financial obligations. Is your emergency fund now at the level you need? Congratulations! You can invest more into other financial goals now.

Retirement Savings

Evaluate how much you’ve saved for your retirement so far. Look at the accounts and investments you’ve set aside for retirement, including your CPF savings. Do these assets meet or exceed the amount you need to fund a comfortable retirement? If the answer is yes, keep topping up your retirement accounts so you can stay on track. If you’re behind, determine how much more you need to close the gap and see what changes you can make to increase your contributions into this specific financial goal.

Other Investments

It’s important to make sure your investment portfolio keeps up with your changing needs. In general, you want a well-diversified portfolio with a risk level that meets your circumstances and your goals. You also want to make sure that your portfolio isn’t too dependent on a specific investment or asset class. If reviewing your portfolio sounds overwhelming, you don’t have to do it alone. A financial advisor can help you to understand your portfolio’s performance and suggest more effective investment strategies as needed.

Day 4: Getting Properly Insured

Take today to review your insurance policies and see if they’re giving you and your family enough protection. Major life changes also have an impact on your insurance coverage. While reviewing your insurance policies, watch out for protection gaps – the lack of financial protection against the consequences of disability, critical illness, and other unfortunate events. Having a protection gap means you’ll struggle to cover living expenses or debts, and be unable to maintain your lifestyle during a crisis. In general, you're recommended to have the following:

Hospitalization plans

• Hospitalization plans for your children

• Hospitalization plans for your parents

Life insurance

• In case of death, you should have resources of at least 9 times your annual income

• A Critical Illness rider that gives you at least 5 times your annual income

Personal accident plan

• Claims for medical expenses that arise in case of an accident

• Accidental death, where your family receives 100% of the sum insured in case of death due to an accident

• Total permanent disability, where you get a payout in case of a permanent and total disability due to an accident

• Partial permanent disability, where you get a payout in case of a partial permanent disability due to an accident

Day 5: Explore Your Options

By now, you’re clear about the financial goals you’d like to achieve, the enhancements you want to make to your savings or investments, and what gaps to close in your insurance coverage. Next is to look at your options and find the best products that fit. Making a choice can be overwhelming when it comes to insurance plans and financial products. But remember: you don’t have to manage your finances by yourself. If you’re unsure about what to do next, discuss with a financial advisor.

Taking Control of Your Finances Can Be Simple!

Congratulations for making it this far! Over the last 5 days, you’ve made major improvements in your financial management. Take it to the next level and set these calendar reminders, so you remain in control of your finances throughout the year.

• Review monthly expenses, once per month

• Adjust financial goals, once per year

• Review emergency fund, once every 6 months

• Review investment portfolio, once per quarter

• Review insurance policies, once per year

If you’re behind on your financial goals, one way to get there faster is by increasing your income. Consider negotiating a raise, taking on freelance work, or looking into other financial instruments that give higher yields. With these good habits and structures in place, you’ll always have a financial safety net no matter what life throws your way.