Being a global financial hub and with a population that is among the most financially literate, Singaporeans are in a good position to make better money decisions for themselves and their families.
However, not everyone can claim to have the confidence in their financial knowledge with 1 in 3 Singaporeans not investing to grow their retirement nest egg*. There is also a significant group of sandwiched Singaporeans who continue to struggle with their monthly expenses, being ill-equipped to navigate financial emergencies and longer-term retirement needs.
To help you stay in ahead of your finances, here are 10 things to tick off your money checklist.
#1 Review your cash flow
You need to know exactly how much income you or your household is bringing in each month. This is typically 80% of your salary, and to be even more prudent, you may also deduct your tax commitments for the year.
You also need to know where your money is going each month, whether it is being used towards essential expenses such as your home loan, transportation, groceries, mobile plans, insurance premiums, utilities or more discretionary spending on eating out, cab rides, shopping, gym memberships or other forms of entertainment.
#2 Create a prudent, but feasible budget
After understanding your broad cash inflow and outflow each month, you are equipped to draw up a more prudent budget. You may not be able to influence your inflow too much, but you will be able to visualise where your money is going each month, which provides an opportunity to cut back on certain areas.
If you are spending too much when you go grocery shopping, or that your utilities and mobile plan is higher than your peers, it can be prudent to cut back on them as well.
As a rule of thumb, you can use the 50/30/20 budgeting rule to get you started.
#3 Build and maintain an emergency fund
As you build a monthly budget that you are comfortable with, you should include other important areas of your finances, such as building an emergency fund to provide a financial buffer during unexpected situations that may arise in life or give you the financial flexibility to adopt a lifestyle you prefer in the future.
#4 Protection for yourself and your family
The next thing you need to do is ensure that your spouse, young children or elderly parents are able to live on the prudent budget that you have so meticulously drawn up, even if you have to cope with an unexpected medical emergency, are diagnosed with a critical illness or are no longer around to provide for them.
#5 Prioritise your debt repayment
Once you have an adequate safety net in place, you should look more closely at all the debt that you have. Work towards paying off all your high-interest debt. These are usually those that incur an annual interest of more than 7% to 8%, which is higher than what you can realistically earn by investing.
Typically, your personal loans, interest or fee-bearing instalment plans for household appliances and credit card debt are the ones you need to target. You don't have to be too worried over lower interest debt such as your home loan or car loan, as you can consider investing to earn a better return.
#6 Monitor your credit score
While getting your finances in order, you should also get to know your credit score. This is primarily because a poor credit rating will affect your eligibility for a future loan or credit card application as well as your interest rates.
#7 Plan for upcoming big ticket expenses
Everyone will have some form of big ticket expenses that they have to plan for. For those who are younger, a wedding, home purchase and home renovation could be on the agenda, while those slightly older may need to fork out for their children's university fees. If you're at the tail-end of your career, retirement is your upcoming expense as you may no longer be drawing a salary.
Even if you don't have any of these expenses coming up in the immediate term, you will still have expenses such as a holiday or car purchase to plan for carefully.
#8 Plan for retirement
You need to think about the retirement lifestyle you want to lead in your golden years, and invest towards it. Starting younger will give you more time to grow your investments and navigate market volatility. If you're nearing retirement, you need to ensure that your funds are exposed to less volatile investments as you may need to start drawing down in the near-term.
AIA Platinum Wealth Elite is a plan that gives you tailored investment solutions with three different portfolios – AIA Elite Conservative, AIA Elite Balanced and AIA Elite Adventurous – depending on your risk appetite. This plan can also double up as a legacy to your loved ones with a guaranteed protection in the first 15 years, regardless of the performance of the investments, in the event of an unforeseen situation.
#9 Review protection and investment goals
As you achieve new milestones in your life or move into a new stage of life, your insurance and investment needs may change drastically. This is why it can be important to conduct a yearly review of your goals and needs with a trusted financial advisor. Even if you know what adjustments you may need to make, this review can also be helpful to ensure you don't have any blindsides.
#10 Ensure you have a legacy plan
Another important component of your money checklist is the distribution of your assets and possessions. You need to create a will, and do a CPF Nomination to avoid potential doubts or even conflicts within the family.
You can consider purchasing sufficient life insurance, which can also act as a cash asset, giving you greater flexibility in leaving your properties, investments or businesses to those who need it more or can manage it better in your family.
Beyond this, you should also consider leaving clear instructions pertaining to your end-of-life care by creating an Advance Medical Directive, in the event you are incapacitated or unable to make such decisions. You should also consider making a lasting power of attorney, appointing the people you trust to act on your behalf pertaining to your Personal Welfare & Property Affairs in the event you lose your mental capacity.