Your Tools for DIY Financial Planning

DIY Financial Planning Guide

Fans of do-it-yourself projects share several traits. First, they’re confident about what they’re doing. Second, they’re resourceful and know how to find the answers to any conundrum that puzzles them. Third, they’re economical thinkers. Who needs to hire someone to do what you’re perfectly capable of doing yourself? That’s why you, smart and resourceful woman, should consider doing your own financial planning!

Careful planning is critical to building a successful financial future. Hiring a financial adviser to help you with this may not always be necessary. You can also create that basic roadmap to success yourself with some dedication, time and effort, and the right tools. Start here and now with these seven steps.

1. Set goals.

Financial goals are the building blocks of a sound financial plan. If you do not know where you are going, you won’t be able to make a plan of how to get there.

Reflect on what you want to achieve for yourself in the future. Work out how much money you’ll need to accomplish those achievements, and assign a timeframe to each goal. Your financial goals should include short-term, intermediate-term and long-term objectives. The short-term may involve stowing away money for six months in an emergency fund, paying off your student loans over the course of a year or purchasing a medical insurance policy this month.

Intermediate-term might mean completing a 4-year course of study to get a second degree, saving up for your dream wedding or finding and buying your dream house. Long-term could include funding your child’s college education fifteen years down the road or feeling comfortable with the money you expect to have contributed to your retirement fund by the time you are 60 years old.

2. Assess your current financial situation.

Create a list of all your assets and resources including your fixed salary, bank savings, investments and government financial schemes. Also create a list of all your liabilities and expenses such as debts, credit card balances, insurance premiums, taxes, household expenses, family expenses, holiday expenses and average daily expenditures of other kinds.

Taking these two lists to hand, you can work out your net cash flow statement. Then assess whether you have a cash surplus or a cash deficit. The Institute for Financial Literacy provides a spreadsheet that’s easy to fill out and edit.

3. Tackle your debts.

If you discover from your net cash flow statement that you’re actually spending more than you’re earning, then it is time to cut back on your spending categories and prioritise your debt management. Start by making payoffs to high-interest loans like credit cards. Or you might choose to completely pay off your smaller debts first to keep yourself motivated to reduce the total you owe.

Read: Retirement Plans by Age 20, 30, 40 and 50

4. File your taxes.

Maximise your deductions when filing your taxes by familiarising yourself with potential deductions such as donations, reliefs and rebates. The Inland Revenue Authority of Singapore outlines allowable deductions for individuals at their website. Alternatively, you can get assistance from a Certified Public Accountant to help you sort out your taxes.

5. Protect yourself.

Ensure that you have an emergency fund to fall back on in case something unexpected happens, like serious illness, accident, job loss or even a market crash. Save three to six months’ worth of income to minimise the financial impact of such unforeseen situations.

Make sure that you have sufficient insurance to cover contingencies such as sickness, disability and hospitalisation. Whole life insurance, for example, provides you and your family with lifelong financial protection in case of death, critical illness or permanent disability. Be sure to purchase insurance coverage for assets that you cannot easily afford to replace your home and your cars. As you enter new life phases, remember to update your insurance coverage to reflect your current situation.

6. Create a Will.

Not a lot of people want to think about it, but death is inevitable. It is important to have an updated will. According to the Law Society of Singapore, once you turn 21, you can write and revise your own will without the assistance of an attorney. Nevertheless, consider consulting an attorney for advice regarding the rules and how they may apply to you.

7. Create more money.

Make your money grow and outpace inflation by learning how to invest. Start by educating yourself about basic investment account types and assessing your risk tolerance. Investment options include stocks, government bonds, treasury bills, unit trusts, exchange-traded funds, gold shares and real estate properties, among many others. Understand the importance of diversification.

Read also: How to Protect Your Assets in a Stock Market Crash