Over the past weeks, we have briefly looked through all aspect of financial planning as shown in the above overview.
What we have gone through for the past 30 days is not a comprehensive treatment of financial planning. I’ve only covered less than 20% of the material. Here is a brief recap:
1. Set your financial goals from the beginning. Put a dollar value to it. Make it a point to desire to achieve financial independence. Do not be afraid to set goals such as to have a million dollars at your retirement.
2. Maximize your cash flow by maximizing your earnings and minimizing your expenditure. If you are not earning enough, seriously consider getting another education to change industry.
3. Do not spend too much on personal-used assets which do not have any long-term value. Do not over leveraged and be careful in committing too much in mortgage loans.
4. Always remember to have standby cash called emergency cash.
5. Be careful in your credit rating by ensuring you pay off all debts in time. Your credit history is recorded.
6. Ensure you have sufficient insurance so that you will not face any catastrophic financial lost if you have a major illness or disability. But please avoid insurance that has no value such as ILPs, anticipated endowments, group insurance, etc. If you are paying large premiums for your insurance, you are likely underinsured because pure insurance cost very little.
7. If you are planning for a tertiary education for your children, aim to get them to local universities. Do not save up for tertiary education just merely by buying a product. Incorporate this saving plan into your retirement plan.
8. When saving for retirement, use expense method.
9. Ensure you are familiar with your existing weighted average return of your entire wealth. Use Exchange Traded Funds (ETFs) if possible. However, be careful of newer ETFs as they contain dangerous derivatives.
10. Tax planning can be easy but there are schemes which you take action to enjoy tax savings. Since everybody pays tax via GST, it makes sense to be familiar with which companies have GST and which do not have.
11. Ensure you give your assets to the right persons when you pass away. No point having so much wealth only to be given to the wrong people. Chances of death is 100%, so estate planning is not an option.