Recently I went for a 3h talk on a sat afternoon with a couple of friends and 1 of the speaker, Dr Sarah Mavrinac was covering on the topic of Facing the Facts - Defining our financial priorities.
Some of the insight I gain are..
A good life consist of Good health, Meaningful relationship and Financial security.
We need to be facing the facts of defining our financial priorities.
The present & future generation face the crisis of short sightedness of money management.
As of 2007, 11% of GDP is made up of consumer debt. ( Thats quite a huge amt. Imagine the recent surplus of the GDP of with 10% is made up of our own loans and debt)
The process is broken down into 3 steps.
Step 1: making and doing the job of managing my money the #1 job.
Step 2: taking stock of what you have.
Step 3: making priorities explicit.
What is keeping us away from taking step 1 could be analysis paralysis / lack of time / fear of change. ( cause it be sad if we realize we spend wat we earn and a bit more of our saving)
We must realize the impact of consumer spending and bemoney conscious, take the less indulgence approach.
Commit to saving for the future by managing money today. Government promote self reliance as what they provide is basic support.
Step 2 involved taking stocks, getting yourself organize.
What do you have and where is it? (No point having money everywhere and not being able to find it.)
Budgeting 101 - Know where your money is. If not, don’t save.
How much can you invest?
Have a check list of the following for easy accessing.
1. Emergency contact information.
2. Health Records.
3. Degree / Diploma Certs.
4. CV / Resume.
5. Bills, statement from Bank / CPF.
6. Insurance.
7. Wills.
Its good to know that expenses are not created equal.
They could be
a. Mandatory (income tax, cpf contribution) Vs Non mandatory.
b. Essential ( grocery ) Vs Non essential (Handphone , Mp3 player)
c. Fixed Vs Variable ( handphone bill)
d. Regular Vs Irregular (anniversary present, friends weddings)
e. Expected Vs Unexpected ( Medical Cost)
Keep track of our money expenses on a daily basis for even the smallest purchase. A excel spreadsheet, 5mins at night to consolidate all expenses. This simple action over time will allow us to identify which area can be trim and where all our moeny is going to.
Step 3: Specifying priority.
Dream Big, Hope for the best & plan for the worst then pick out from the list 3 most important and start working on it. Discuss it with your spouse / financial planner.
The list could be something like,
1. Debt reduction ( loan , credit cards )
2. Create a short term cash saving fund.
3. Insurance purchases / rebalancing.
4. Home purchase / renovation.
5. Retirement saving.
6. So on so forth.
One common myth is that we plan short of our retirement needs. We normally need more money then assumed. (Inflation and low interest rates) We have to be realistic and get help. Be ready to change and adjust our plans and expectation and remember our spouse and accept that there will be trade off but recognize that time is on our side.