We all understand the importance of having a yearly medical checkup; to ensure your health is sound and to start any preventative measures if there is sign of illness. But do you regularly check in with how you are doing financially?
Just like our physical health, our financial well-being is important, it’s about being secure and in control. Knowing that you can pay the bills today, deal with the unexpected tomorrow, and ensuring you are on track for a healthy financial future.
The 7-step financial health check below is a great way to reflect on what you have already achieved and to identify areas that still need to be worked on.
Moving budget planning to the top of your to-do list can result in a boost to your savings account and even improving your credit score.
To get started on your budget you’ll need to work out how much you spend on bills, groceries, transport, entertainment and holidays. You can set up a budget using a pen and paper, an excel spreadsheet or utilising online apps such as YNAB, Mint or Wallet.
Mapping out where money is coming in and going out of your account is often an eye-opening experience for those new to tracking finances. Once you understand where your money is going you can start to cut out the expenditure that doesn’t add value.
For many households, domestic bills make up a large proportion of spending; could you be making savings by switching electricity provider or internet/mobile service provider?
2. Face up to your debts
Once you have got on top of managing your income and outgoings, it’s important to address any loans or money you owe on credit cards, if you are not already. The earlier you deal with your debts, the easier they are to manage. Credit Counselling Singapore offer debt management webinars/courses and counselling sessions.
3. Check in on your emergency fund
An emergency fund is a financial safety net for those unexpected costs that hit each of us at some stage, irrelevant of how lucky or unlucky we are!
An emergency fund takes away the worry surrounding unexpected costs and prevents you from getting into debt at every financial bump in the road. It’s recommended to have 3 to 6 months of expenses in your emergency fund.
If the past year brought you property repairs or costly car repairs, make sure you get your emergency fund back to where you started before you start thinking about spending online or buying the latest iPhone.
4. Make saving a habit
Once you’ve got a hold of managing your money, you’ll be able to identify your potential to save. If you’ve got money left over at the end of each week or month then great, you’ve already got your starting point. You’ll be able to save this amount and maybe even more.
But even if there’s usually nothing left, it doesn’t mean you can’t save, – it’s not easy to change how much money you have coming in but most people can change how much goes out.
The easiest way to regularly save is to set up a Giro from your current account to your savings account monthly. The best time to put a bit of money aside is just after you’ve been paid, so set up your Giro to go out on, or just after pay day.
5. Check in on your insurances
Life insurance, critical illness and income protection cover, just like health insurance, are there to protect you or your loved ones during or after an unfortunate event.
As you move through different stages of your life, your insurance needs will change. Has your family grown in the last year or two? Ensuring that you are sufficiently covered is an important part of your financial health check.
6. Looking at your long-term goals
If you already have a retirement plan, it’s important to regularly review it, to ensure that you are on track. Take some time to check in with your pensions or CPF fund. Are your goals still the same or have they changed within the last year? Consider arranging a Retirement health check to help you gain clarity and get your retirement plans back on track.
If you don’t have a retirement plan in place, this would be the perfect time to start and set this as one of your goals for the year ahead.
7. And finally, review your estate planning
If you have a Will in place, is it current and still follows your wishes accordingly? You should also consider putting in place a Power of Attorney.
If you are an expatriate, you are likely to have assets in at least your home country and your new location. You may also have to consider different jurisdictions if your partner was born in a country other than your own. These circumstances require Wills that are valid and effective in all the countries that you are concerned with.
You may feel that all of this is somewhat daunting but taking the time now will give you a much clearer picture of your financial standing and your goals for the year ahead and even further.
If you would like any guidance or would like to arrange a financial health check review, contact us today for a free financial planning consultation and get all your financial affairs in order.
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