Buying a house, getting married and starting a family, these changes in life stage could make it easy for us to overlook our need for financial planning. With many big ticket items to pay off in our 30s, we may inevitably find ourselves stretching our finances thin. This could lead to a lack of savings, falling into debt and being unprepared for rainy days.
Therefore, before entering your 40s, it is important to start thinking about your savings and finances. This is to ensure that you are financially prepared for your future and can avoid making decisions that would lead to future regrets. Moreover, with the increased financial obligations in your 40s, it is important that you have measures in place to ensure that you avoid making financial mistakes and are prepared for the unexpected.
#1 Not having savings
Entering the corporate world in our 20s, we may indulge in luxury purchases with our new found financial independence. This could cause us to spend excessively and not accumulate any savings. Spending frivolously may also lead to us cultivating an unhealthy spending habit that would be detrimental for our finances.
Without savings, we lack an emergency fund that could tide us through difficult times or emergencies. This would render us helpless and could put us in debt when faced with an unexpected problem. Therefore, it is risky if you do not have any savings and this a mistake that should be avoided.
To start planning your monthly budgets, try following the 50/20/30 rule and set aside your income accordingly. This means setting aside 50 per cent for your fixed expenses, 20 per cent for your savings and financial goals and using the last 30 per cent for miscellaneous items such as travel and entertainment.1 Following this rule would ensure that you do not overspend and have a sum set aside for your financial goals.
(See "Do you know that Medical Inflation in Singapore is 15% now? Part 1")
#2 Living beyond your means
Our desire for fancy items may result in us splurging on luxury bags, watches or the latest car. However, by spending beyond our means, this lack of financial prudence would quickly put us deep in debt.
With material items such as a luxury watch, bag or car being a depreciating asset, their value drastically drops the moment the purchase is made. Therefore, such purchases should only be made when you can comfortably afford them. Should you insist on indulging, it would only rack up your debts and lead you further down the financial black hole.2
(See "Why Getting A Degree Is Like Being A Penguin")
#3 Not protecting yourself
One common financial mistake is to wait until you are unhealthy before thinking of getting protected.
With health and medical conditions becoming more common as you grow older, your premiums would also become more expensive should you purchase insurance at an older age. Moreover, your pre-existing health conditions may result in the insurer's rejection and could prevent you from obtaining coverage. Therefore, it is important for you to consider coverage when you are younger and before you have any illnesses or injuries.
Additionally, if you have dependents reliant on your income, consider getting yourself protected in the event that anything unfortunate happens to you. Having protection would also give you peace of mind, knowing that your family's financial obligations would be taken care of should anything happen to you.
(See "The 3 Dangerous Mistakes You Don't Want To Make With Your Insurance")
#4 Being ill-prepared for retirement
Singaporeans typically start to prepare for their retirement at the age of 38, with many wishing to retire by the time they are 55.3 Therefore if you are in your 40s and have yet to prepare for your retirement, you would have less than 15 years to save for your retirement.
As written in our previous article, "3 Surprising Facts About CPF Life You Probably Didn't Know", CPF Life helps to kick-start your retirement planning by offering monthly pay outs after retirement.4 This is assuming that by the age of 55, you have enough in your CPF for the Basic Retirement Sum (BRS). However, with the rising costs of living, these monthly pay outs may not be enough for your retirement lifestyle. Past surveys have also shown that two thirds of your current monthly income is required for you to sustain your current lifestyle during retirement.5 Therefore, without adequate retirement planning, you may find yourself struggling financially in your retirement years.
(See "5 Amazing Countries You Can (Almost...) Retire With Your CPF")
How FSMOne can help you get on track
Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan, you can contact our advisers at advisory@fundsupermart.com.
Available Products on FSMOne Insurance |
Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment from Manulife, NTUC Income and Tokio Marine Life Insurance *Please check with our advisory team if the product you want is available on FSMOne Insurance |
3Source: http://www.channelnewsasia.com/news/singapore/retirement-planning-how-much-is-enough-8123970
4Source: http://www.channelnewsasia.com/news/singapore/retirement-planning-how-much-is-enough-8123970
5Source: https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life
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