When it comes to handling money, we often think of a financial plan as this ultimate destination we need to reach. But what if we told you, it’s more like a never-ending road trip full of twists, turns and unexpected detours?
That’s right! Financial planning is about the journey, not just the end goal because this will change as you go through your life. The process of creating a strategy to manage your money to achieve your life goals is key.
As you go along, remember to have some check points; they’ll reel you back on track to help you achieve your goals on time.
KEEP IT ‘PERSONAL’
Financial planning aligns your money decisions to your personal aspirations. By personalising your financial plan, you take charge of your future. And there is no “one-size-fits-all” approach to financial planning. This journey will be as unique and nuanced as you are!
You start your journey with a thorough assessment of your current financial position. Evaluate your cashflow (what’s your income? what’s your expense? and how much are you spending on servicing debts?) and net worth (offset assets against liabilities) for a clear picture of where you stand.
Next, list out your financial goals. Remember, they need to be realistic and achievable. Now, bucket them as short- (less than three years), medium- (three-10 years) and long-term (10+ years) objectives.
Once you’ve bucketed your goals, assess the money and time you’ll need for each goal.
At this point, you need to familiarise yourself with concepts like inflation, rate of return and compounding. Add a little bit of math to the equation, and you’re already halfway there.
ESTABLISH ACCOUNTABILITY AND REVIEW ROUTINELY
Once you’ve invested and created a portfolio, you’ve only sown the seeds; now you’ll have to nurture it to see it grow.
For this you’ll need a routine around accountability and review of your plan and strategy.
This will ensure your investments continue to grow and your journey stays relevant. It‘ll also make sure that there are no unpleasant surprises. Ask yourself these questions every year:
• Have your goals changed?
• Are you on track to achieve them?
• Is your family protected from risks?
• Do you have sufficient funds for emergencies?
• Are you still preserving your assets?
• Is your money continuing to work while you sleep?
EMBRACE LIFE’S TRANSITIONS
Life is constantly changing! Some changes are expected, while others can throw unexpected curveballs.
Some key life transitions include getting married, becoming parents, switching jobs, owning a home, dealing with illnesses and retiring. Each of these transitions have different and long-lasting implications on your financial situation.
You’ll be required to review your entire journey in some cases. In most others, you’ll have to only accommodate the changes, course correct and continue your journey.
So the key takeaways from this are that, there is no ‘one-size-fits-all’ in financial planning. Personalisation is key! You need to establish a simple, yet robust investment strategy and always align your investments with goals. Remember, simple is sustainable. Lastly, monitor and review your financial goals and strategy regularly. Make sure your journey stays relevant, if they aren’t, feel free to refine your strategy.
This article is for general information purposes only and while the information in it is believed to be reliable, it has not been independently verified by us. You are advised to exercise your own independent judgement with the contents in this article. – Standard Chartered Bank
