Earn, save, invest. It’s a simple formula for financial wellness that we all know, but yet others end in up in debt or are off the mark with their goals. It raises the question: why?
One’s spending habits are most likely the culprit, a default answer we’ve been programmed to accept. However, the reality is that financial management also requires various abilities – and the least talked among these skills is timing. One needs to know what to do and when to do it.
Giddy up – here’s a decade by decade checklist to get you on your way to wealth goals and financial wellness
In your 20s
Aaah, the first paycheck! There’s reason to splurge, reward yourself, and cross out one item off your bucket list. After all, you have lived a simple life during months of unemployment, successfully passed a rigorous job screening and interview, and dealt with an office bully in your new work jungle.
But after the booze and the shopping spree, it’s time to buckle down and get serious. One of the first critical things you should do is develop a sound foundation on how to manage your money.
- Learn how to budget. Your 20s is when you try to live life to the fullest and embrace a new lifestyle that might include building your work wardrobe and professional image, spending on subscriptions for professional development, paying on your own for entertainment and networking, among others. Whatever you decide to do, you need a spending plan or a budget. You have to face the reality that your income must go to your needs first (household obligations, loans, meals and groceries, utilities) before your wants.
- Pay yourself first. Get in the habit of investing at least 10% of your income for your future. When you see your money grow, it gives you more confidence to save more and plan for your future.
- Pay down student loans and credit card debt. Don’t wait to earn more until you can pay off your student loans. Pay these with as much as you can (at most 35% of your gross monthly income) as early as possible, so you wouldn’t have to carry a burden in the next decade of your life.
- Spending less than you earn, but investing in quality items. There are things you can buy off for cheap, but there are goods that are just worth the spend. For example, home appliances that save you on the cost of electricity.
- Manage your credit card. If you cannot pay off your credit cards in full every month, you can’t afford it.
- Invest in insurance. It is cheaper to buy when you are young.
- Seek advice on financial wellness. Don’t decide on your own as you can’t possibly know everything. Seek the help of professionals, family and friends. Also, read up on financial literature. Studies show that those who educate themselves financially are better at saving.
In your 30s
You have reached a milestone and are ready to take the step up. In your 30s, chances are you will be getting married, buying a home, raising a family, or furthering your studies – all of which add to your financial responsibilities tremendously.
- Get comfortable negotiating for higher salaries. Salary increments can go for as 10% to 30% in Singapore – and if you are confident you can deliver in a new job offer, use it to your financial advantage. Others may choose to stay with their current employers. If you are one of them, work for a substantial merit increase and promotion.
- Start planning for retirement. A survey conducted by Aviva in 2016 revealed that “about 44 per cent of Singaporeans surveyed had not started saving for retirement.” If you are one of those, you are entering a danger zone. It is overwhelming to plan for retirement, but the more we know our state of financial health, the better we are at finding solutions for a potential shortfall.
- Invest wisely. You should start building your asset portfolio. Learn to seek the help of a trustworthy financial advisor. But at the same time, be wary of investments promising quick and high returns. Don’t fall for a scam.
- Review your financial plans and goals regularly. If you are invested in the stock markets, make sure you follow a process in selecting stocks for investment as this one thing could make the difference between good returns and not so good returns.
In your 40s
Midlife presents another set of financial challenges – caring for elderly in the family, sending children to university, while our medical and health condition starts to decline.
- Review your life and health insurance and make sure it fits your current situation. The 40s are a more vulnerable time for everyone. In this age, we discover how much we have damaged our bodies – and one slip up can wipe out your entire savings. Make sure you have more life and medical protection.
- Cut on costs and save more. Start with reviewing your utility bills and subscription plans. Re-evaluate your upgraded lifestyle expenses and your holiday plans.
- Make sure you have an emergency fundequivalent to 6 months of your salary.
- Don’t be embarrassed and afraid to ask for financial assistance.
- Contribute more towards your retirement.
- Live a healthy lifestyle.
In your 50s
Finally, the sunset years. Some people start to retire at this stage either by choice or “enforced”. Hence in your 50s, the goals are:
- Clear off all debts.
- Save as much money as possible.
- Look for retirement homes or a smaller apartment, and consider it in your retirement planning.
In your 60s and beyond
- Don’t get ripped off with scams targeting retirees.
- Enjoy life with how much you have saved for all these years.