Professional advice is key for Financial Planning
This article was first published on The Straits Times on 26th September 2021
When it comes to financial planning, family and friends are good sounding boards, but professional advice is key to achieving goals.
In today’s fast-changing world, which has now been hit by a pandemic, Mr Peter’s (not his real name) story is not unique. He is a good example of someone whose goals have changed over time.
When he was young, he wanted to be a restaurant chef. To understand the industry, he began working as a part-time waiter when he was 14.
But as he grew older, his goal changed. He subsequently studied viticulture — the scientific study of the process of growing grapes — at an overseas university hoping to eventually qualify as a winemaker, but found it difficult to get a job as most vineyards globally only need one winemaker.
Unable to secure a job, he returned to Singapore and began to work in sales, but it was not exactly the career he had dreamt of when he was pursuing his university studies.
Now in his early thirties, he is exploring moving to a different industry, but will likely need to go back to university to acquire new knowledge.
Also, one of Mr Peter’s life goals is to travel to space. This currently costs at least US$200,000 (S$268,122) according to American spaceflight company Virgin Galactic — and seats are already sold out.
For now, Mr Peter will have to dip into his savings to pay for further studies, and also postpone his plan to buy his own home.
However, without dependants and no mortgage, it should not be difficult for him to take a year off paid work.
The key to being financially ready for every stage of your life lies in planning and starting to save early.
As you progress through life, your goals could evolve, or you may take a longer detour to achieve them. So you need to adjust your financial plans accordingly.
Today, it is not uncommon for young people to change jobs and venture into a new field as digital disruptions take away existing career opportunities, though that could potentially set back one’s finances.
However, despite the uncertainties in the world, not everyone is like Mr Peter.
Even at a relatively young age, some people map out their future with timelines on reaching certain milestones such as buying their first car or getting hitched.
Others have vague ideas on how they see their lives unfolding, or see life goals as tackling challenges such as climbing Mount Everest.
Whatever the case, it is a good idea to set a tangible financial target like saving a minimum sum once you begin working. Such savings would be useful for buying one’s first home, or paying for that Mount Everest dream.
How can financial planning help with changing life goals?
It is often daunting to build a financial plan in line with your life expectations, and it becomes even more difficult when these change. But there are resources available that can help you.
Help can come in the form of a self-directed holistic financial planning tool that can empower you with customised insights and solutions, or a wealth planning manager if a human touch is preferred.
For example, there is the DBS NAV Planner — a digital financial and retirement advisory tool — to set life goals and how to achieve them financially.
Family and friends can serve as a sounding board but they may not be objective or qualified to give financial advice.
You may sometimes need encouragement from someone close to take your first steps towards saving. But when it comes to advice on other aspects of your financial plan, it is best to get professional help. - MS LORNA TAN, head of financial planning literacy, DBS Bank
These aspects include the ability to assess your financial situation (analyse your cash flow and personal balance sheet).
It also involves setting up a realistic budget, managing cash flows well, insuring adequately, investing in line with your risk profile, building diversified portfolios, as well as home, retirement, and estate planning.
Advisers have no personal stake in your decisions
Bear in mind that financial advice can be partial when it comes from someone who has an emotional stake in your life.
Friends and family members may think they know what is best for you, but their advice may be impacted by their own experiences and lack of financial know-how, said Ms Tan.
“Furthermore, they may have expectations for how you should live your life which may not be aligned with your life goals, needs and wants.
"You can hear them out, but don’t stop there."
A digital financial planning tool or a wealth planning manager, however, has no personal stake in your decision.
The job of the tool or the manager is to remain objective and enable you to achieve your short and long-term financial goals.
Goals have a direct impact on your current and future cash flows, whether you are looking to buy your first home or funding your children's further studies.
The DBS NAV Planner’s goal planning feature — Map Your Money — is the first in Singapore to help people plan for their life goals taking into account all money streams.
These include cash and investments, money flows and balances in the Central Provident Fund Ordinary Account, Special Account, Retirement Account, and Supplementary Retirement Scheme Account.
All the user needs to do is to input his goals and the planner will instantly calculate if they are achievable and the impact on his current and future cash flows, said Ms Tan.
This will help users right-size the goal if needed, and save and invest towards achieving it.
Seeking professional advice is wise
Among those who rely on financial advisers are people like Mr Peter’s grandmother.
As she approaches her tenth decade, she is focused on getting through her daily routines, staying healthy and continuing with her philanthropic work.
Before the 2008 Global Financial Crisis when some aggressive investment products were widely sold by banks, her private banker — who was rather conservative — told her that they were not suitable for her.
The banker also advised that setting up a trust was very expensive and not in her best interests.
For as long as Mr Peter can remember, his grandmother has donated regularly to a wide range of charities, and this is another of his life’s goals.
For a start, he volunteers occasionally with a non-governmental organisation that helps foreign workers.
In the past year, he has helped deliver basic items to foreign workers who are confined to their dormitories as part of Covid-19 safe management measures.
The writer, an ex-Business Times journalist, has found that the hardest thing about financial advice is acting on it.
Things to consider when working with a financial adviser
A good financial adviser should be able to help you build a comprehensive personal balance sheet so that you can see how one financial decision impacts other areas of your financial plan.
• Why is he recommending those specific products?
• Understand your financial commitments before buying any products and are they sustainable in the long term?
• What is the free-look or cancellation period of the products?
• Make note of the costs and fees you will be paying for the products. Are there alternative ways to buy them in a cheaper manner?
• What are the risks of the products? Is your capital guaranteed?
This is the fifth of a seven-part series in partnership with DBS
Ready to start?
Speak to a Wealth Planning Manager today for a financial health check, and how you can better plan your finances.
Alternatively, check out NAV Planner to analyse your real-time financial health. The best part is, it’s fuss-free – we automatically work out your money flows and provide money tips.
Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability
All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.
Disclaimer for Investment and Life Insurance Products
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