Financial planning is about taking charge and managing your finances to ensure your financial well-being.

It may be helpful to view financial planning as comprising six different areas:

Financial planning involves three key steps:

Identifying your immediate (short term) and longer term needs (like getting health insurance; paying for your household expenses) and goals (like saving for a home or for your retirement)

Identifying your immediate (short term) and longer term needs (like getting health insurance; paying for your household expenses) and goals (like saving for a home or for your retirement)

Managing the resources, e.g. using a budget and having a plan for your savings and investments to help you reach your goals. There is a range of financial products to choose from to help you with your needs and goals. Choose something suitable for you.

Get started or update your financial plan today by reviewing the three steps:


Setting Goals


Assessing your financial situation


Managing your resources Budgeting

Setting Goals

The first step is to know what you are planning for. Make a list of all your needs and goals. Managing day-to-day living expenses comes first.

Other needs and goals could be:

Work out how much you need for each goal or need. For some, it could be an amount that you need to pay regularly, e.g. home loan instalments, health and life insurance premiums. For goals like retirement savings, it could be a lump sum amount at your desired retirement age. If it’s paying for your children’s tertiary education, you might find that a combination of savings and loans works best for you. When projecting future values, take into account current prices and projected inflation.

Next, look at how much you have to start with by assessing your financial situation.

Assessing your financial situation

List out all the resources you have, such as your salary and wages, any bank savings or investments like shares or unit trusts. If you have any insurance products which are bundled with investments or savings, like whole life participating policies, investment linked plans or endowment plans, do list out how much protection you are getting and the value of the investments portion (do note that the projected values in your benefit illustration are not guaranteed).

Also make a list of all your liabilities or outgoings – there are household expenses to pay, debts you owe (e.g. home loans, car loan payments), credit card balances, health and life insurance premiums, taxes and so on.

Next, look at how you can manage them to pay for those needs and goals.

Managing your resources Budgeting

Use a budget to help you manage your income, spending, debt and other liabilities prudently. The aim is to take care of your basic living expenses as well as put aside amounts for savings and investments to meet your other goals.

If you have an existing budget, review it from time to time to make sure it still works. If you are new to budgeting, look up the MoneySENSE budget calculator to help you get started and read these tips:

Where did my money go?
You can’t cut down on some expenses, for example, your taxes, conservancy charges and utilities bills. Once you have incurred a debt or committed to an insurance policy, you will need to keep up with repayments or insurance premiums. So think hard about what you really need and can afford before you commit to either of these. Remember you should avoid taking on excessive debt. As a guide, try to limit your debt ratio to 35% of your monthly income. In the case of life insurance, consider getting basic life insurance like term insurance if you want to keep insurance premiums manageable.
On the other hand, you might be able to reduce some basic living expenses, e.g. you could change to house brands when shopping for food or basic household items. You can also reduce discretionary spending like on clothes you don’t really need or going out for a meal.
It is important to be able to distinguish Needs from Wants. Needs are goods and services you require in your life. Wants are those things you desire – they could also be more expensive (but not necessarily better) substitutes for your needs or just non-essential.
Planning your savings and investments to help you reach your goals
Here are some tips to help you put your plan together:

A financial plan should grow and adjust depending on the life stage you are at. Generally, the earlier you take action, the more time you have for your savings and investments to grow.