Have You Ever Thought Of Financial Planning?
If you ever met with an accident, do you have the capabilities to meet your financial needs?
Do you think that you have the financial ability to provide education to your children without having to scrimp on every cent or to get a bank loan?
If you answered no to any one of the above question, then chances are you have yet to do Financial Planning.
What is Financial Planning?
So what exactly is a financial plan? If I was to define it, I believe the definition should be, a step-by-step process to help you achieve your monetary goals within a given time frame.Well simply put, a financial plan is to help you see the bigger picture and set long and short-term goals, a crucial step in mapping out your financial future. When you have a financial plan, it's easier to make financial decisions and stay on track to meet your goals.
Why should I do Financial Planning?
This question would probably pop up in your head the moment you read about financial planning. In order for you to understand this concept better, picture this scenario: Mr Adam and Mr Sandler, both age 25, are executives working in a MNC company, both doing well in their respective careers. The difference is, Adam from young has been doing financial planning for himself and know a thing or two about the sustenance of his income, he has gotten quite a bit of insurance and did his own financial plans. Sandler on the other hand is more focused on his work, and has no time to understand and explore financial planning.One day, as both of them grew older, both of them start to have health conditions from their stressful and demanding lifestyles. Both Adam and Sandler has been diagnosed with stage 1 prostrate cancer. They racked up enormous hospital bills, which is entirely covered by Medishield Life and respective rider from insurance companies. But the main problem is not the enormous bill they face. It is the stoppage of income from their respective jobs. Being unable to work due to their medical condition, both of them have a temporary stoppage of income from their companies.
Sandler slowly but surely realized that the hospital bills was largely manageable from his Basic Health insurance. But his loss of income was not covered. Not only was he unable to have an income, he suffers from a deficit every month, meaning, the mortgage, the car loans and his children education loans. His quality of life is affected in every way. Due to his previous high income tax, he is unable to seek financial help from the government, and the process of getting these aids are unbearable. He wants to try other treatments, aside from those at the hospitals, but he feels he is unable to support such decisions as the money in his bank is very precious now. He now feels that "What if i had started planning for such a mishap, none of these things would have mattered right now, i would have a peace of mind"
Participating in financial planning is like taking Vitamin C before we get sick. But how many of us is disciplined enough to take a Vitamin C everyday to prevent ourselves from getting sick. Due to the different composition of our body and our lifestyles, we may need different kind of vitamins and supplements to enhance our health; as such,we require a thorough financial planning as to ensure that we are able to maintain our current quality of life and in fact may even improve it!
Is CPF Life enough for your retirement?
Government says and denotes that the CPF Life has been enhanced to adequately meet our retirement needs. That is true, based on the lifestyle of an average Singaporean. However, everyone's requirements are different, therefore to maintain your current lifestyle, we need to take into account and map out our current finances. How far are we from our retirement goals?
This is an estimation of your CPF Life monthly payout. The Life Standard provides higher monthly payout with lower bequest while the Life Basic provides lower monthly payout with higher bequest.
Based on the above chart, if your Retirement Account(RA) has a sum of $100,000. You are entitled to a monthly payout of $816 - $901 AND this is with the fact that it's based on the Life Standard plan, which provides you with a higher monthly payout. Now, you might think that your expenses isn't a lot since you probably have fully repaid any loans or bills that you made before you hit your retirement age.
Yet, we still have not taken into account, inflation and other expenses such as utilities and cost of living. Based on inflation alone is a killer, a bowl of noodles used to cost $2 on an average 10 years ago, Now, a bowl of noodles would easily cost $3.50 - $4 on average and its only within a 10 years time frame. Therefore, do you think $900/month is enough for survival given 20 or 30 years into the future?
Now, if you have done proper financial planning with 20 or 30 years to spare, you would be able to cope with your basic necessities without having to scrimp and save every single cent even on your retirement age. If you had saved $100/month for a minimum of 20 years, you would have gotten an additional $24,000 for you to spend during your retirement years. $24,000 with only $100/month!!
Who should do Financial Planning?
This is definitely a no-brain question. Everyone of course! In case, your brain is replaced with grass, let me explain to you. If you require food, water and a roof above your head for survival then you definitely need money. What better ways to have additional cash to fulfill your needs without scratching your head every single time?
Where and How should you do Financial Planning?
Now, this might seem skeptical but I would definitely recommend getting a Financial Planner. The reason is simple, you are technically getting a secondary income. Do you think you have the additional time and effort to manage an additional source of income while at the same time managing the stress from work and looking after your family?
A Financial Planner's primary job is to help you in such a situation, to help you manage your secondary source of income without you having to spend much effort.
Benefits of having a Certified Financial Planner
The keyword here is Certified, not some Tom, Dick or Harry to be hired and be your Financial Planner.
You can definitely do Financial Planning on your own but here are some benefits to hiring a professional planner:
- Want to better manage your finances, but aren't sure where to start
- Don't have time to do your own financial planning
- Want a professional opinion about the plan you've developed
- Don't have sufficient expertise in certain areas such as investments, insurance or retirement planning
- Have an immediate need or unexpected life event
If any of the above questions apply to you then, it might be time for you to hire a Professional Financial Planner.
So what are you waiting for? It's time to plan for your future, be it to live while having to scrimp and save every cent or enjoy your retirement years like the way you deserved it.
What Is Financial Planning? (Video)
Hello! My team and I would like to share and discuss topics on financial planning especially on the topic of necessity, and how financial planning interlinks with our daily hectic lives in Singapore! Feel free to ask us any questions and we will do our best to answer any of your queries!
