Insights on Financial Planning at Different Stages of Life

Despite the large number of financial advisers in Singapore, many are still unaware that personal financial planning goes beyond some discussions with a financial adviser and is, in fact, an essential part of leading a fulfilling life. The list below highlights different stages of a person’s life and gives you an insight on what should be noted when making financial decisions at these life stages.

1) Graduation

Some banks in Singapore allow lenders to start repaying their education loans after the lender has completed his/her course. Depending on the education loan you have applied for, your graduation may mark the beginning of a loan repayment period that could last up to 10 years. Planning to repay your debt as quickly as possible is tempting, but it is also important to set aside some money for emergencies to prevent any surprises from derailing your plans.

2) Home Ownership

Property prices in Singapore are pretty high. For most of us, buying a home also means taking up a huge loan that could easily last 30 years. In addition, many home buyers take up renovation loans as well. Loan repayment always weighs down on the family’s finances. Balancing between saving, spending and loan repayment is tricky, which is why there is a need to put in place, among other defensive finance measures, a Mortgage Reducing Term Assurance (“MRTA”) – an insurance policy that pays a lump sum upon the death or total and permanent disability of the insured individual servicing the loan. A properly structured MRTA will help to safeguard the finances of the surviving spouse.

3) Marriage

Effective financial planning for a couple takes into account the wants and needs of both partners. This can be easy or complicated, depending on the spouses’ willingness to accommodate each other’s preferences, needs and financial habits. Here are some questions spouses could consider in their planning process:

• What kind of marital home should be purchased?
• How does the couple renegotiate their loans and/or mortgage now that they have two sources
  of income?
• When does the couple start a family?
• Does the couple share the same thoughts on the retirement lifestyle? If so, what is the best
  retirement plan for them?

Note that it is important to address these questions early on as the longer you wait, the more opportunity cost you’d have to bear.

4) Parenthood

It is well-known that raising a child can be expensive, especially in a country like Singapore where the living expenses are high. Moreover, having children is a long-term commitment, and should not be regarded lightly. For more information on this, please read our blog article, How to Spend Wisely on Your Child in Singapore.

5) Retirement

The common perception is that one should save and invest money throughout one’s working life, then live off those savings upon retirement. Generally, that is true. Here is where one’s visualisation of one’s retirement becomes important. There are many retirement activities to think about – travelling the world, volunteering, gardening, babysitting grandchildren, etc – and the amounts needed to fund these activities differ. Hence, one should always set up their retirement funding plan early.

Do you have any questions or thoughts on personal financial planning? Comment below and share with us!