We all need to set our own goals as a guideline to our decisions in Financial Planning. Here are 10 rules to help you be more effective at Financial Planning. You’re welcome to modify it to better suit you.
1. Set Your Financial Goals
For example, your goal may be to “maintain my lifestyle during retirement” or “buy my first property 5 years from now” or “have enough money to travel the whole world”. It can be anything.
2. Review Your Finances
Every month, track your total income, spending, assets & liabilities.
If you have a partner, it would be best to get your partner to do the same, or review the household finances together.
If you have a financial planner, review with your planner every 6 months or every year.
3. Manage Your Debt
Pay off all debts, especially high interest debts.
If you have multiple debts, pay off the highest interest debt (or pay off the smallest one. It’ll be a good start) or consolidate your debts.
Watch out for things that get you in debt.
4. Create An Emergency Fund
Set up your 3-6 months emergency savings fund.
If you do not have emergency savings, you are very likely to fall into debt when something unexpected happens.
5. Pay Yourself First
After paying off necessities, save before spending money on things you don’t really need.
6. Invest Intelligently
Start setting up your own investments with the money you regularly set aside.
Balance between putting all your money into one investment & over diversifying (putting your money into too many investments). Keep your investments simple and only invest in what you understand. Balance low-risk & high-risk investments.
7. Insure Against Risk
Protect yourself and your family against loss (on life, home & vehicles) and hospital bills.
Find out what you need, get the right advice and protection.
8. Choose Your Lifestyle Wisely
Live in a way that makes you happy and still be able to spend within your means.
Only upgrade your lifestyle if you can afford to.
Think long-term. When faced with a buying decision which involves a lot of money, ask yourself, “Is this going to benefit me in the long term? Will I still care about this 3 years from now?”
Hope this gave you a few ideas to improve your finances! Check out our financial planning checklist here too.
