How to get started on financial planning

If you’ve only got a minute:

• Pull your financial data together using SGFinDex to have a holistic view of the current state of your finances
• Savings is the foundation of good financial planning
• Take charge of your financial future by managing any outstanding debts, getting the right insurance, and growing your money through investing.

Think about your life now. What changes do you expect to see within two years? Maybe a new laptop or a bedroom makeover? What about in five years’ time? Do you see yourself accomplishing bigger goals like buying your dream home and a fairytale wedding complete with a honeymoon in Europe?

Try stretching your imagination further. Years from now, will you be supporting your child through university or building your retirement nest? All that you have envisioned above are your financial goals for the short, medium and long term.

Financial planning is a personal journey as we have different financial goals and varying needs. However, it doesn’t have to be complicated as once you get started, everything will fall into place with proper planning. Here are the 7 steps to get started on your financial planning journey!

#1: Map out your financial journey

When was the last time you had a good look at your finances? Or have you been too busy at a new life stage – your first home or a recent newborn – to think of reviewing your financial roadmap? It’s not too late as now is the best time to get started.

Supercharged by SGFinDex, DBS NAV Planner takes in all your financial information from CPF, CDP, HDB, IRAS and other banks to give you a holistic view of your financial health. It also empowers you with personalised insights and tips, allowing you to make better, informed financial decisions.

If you need help or want a second opinion, do meet our professional Wealth Planning Managers for financial advice that will be aligned with your financial goals and circumstances.

#2: Saving is the foundation

After setting your financial goals, the first task on the list is none other than building savings as a discipline. This is the foundation from where financial planning starts.

As Warren Buffet once said, “spend what is left after savings”. It is prudent to adopt the “Pay Yourself First” approach to automatically channel a portion of your pay to a separate account once you receive your pay cheque, before you start spending. Depending on your goals and lifestyle needs, you should try to save at least 10% of your income and this savings ratio should be one that you are comfortable with.

You may be saving for many reasons, but do you know it is essential is to save for a rainy day? In the event of an emergency, you should have access to ready cash. It is recommended to have an emergency fund to cover at least 3 to 6 months of expenses or more if you have dependents. If you are self-employed, you may want to increase this emergency fund to cover at least 12 months of expenses.

Your emergency fund does not need to stay idle. DBS’s latest report “Are you losing the race against inflation?” showed that inflation is at an all-time high and that income growth is lagging for 40% of our 1.2 million retail customers. It is thus important to ensure we save smarter.

Customers categorised by income growth over the past year

You can grow your savings with the DBS Multiplier Account and enjoy an interest rate of up to 3.5% p.a. You can also stash your funds in other liquid assets including saving deposits, fixed deposits, Singapore Savings Bonds that can be readily liquidated without incurring penalties or a loss in value.

#3: Keep tabs on where your money is going

Budgeting involves tracking your cashflows and planning how to spend your money. It may seem challenging for some and a simple way to begin is to break down your expenses for a better understanding of your needs and wants.

Our report indicated that customers are now generally spending more relative to their income. Specifically, expenses grew 2 times faster than income on aggregate.

Expenses to income (%) of an average customer in May 2021 vs May 2022

Tracking your expenses makes it easier for you to re-prioritise your spending and cut down on “wants” such as fine dining and recurring expenses incurred by telco bills, gym membership, beauty and spa packages. Being conscious of your daily expenses helps as you may be unknowingly spending a few hundred dollars every month, no thanks to your daily indulgence of a cup of artisanal coffee.

#4: Protect your future

We are mindful of the need to protect ourselves and loved ones from the unexpected. But many postpone or avoid dealing with insurance because injury, illness, accidents, disasters, and death are taboo topics we’d prefer not to dwell on. However, financial planning is incomplete without a discussion on your insurance coverage. Insurance safeguards you and your loved ones so there is enhanced peace of mind – and you can focus your energy on living more!

But with so many types of insurance plans out there, how do you even begin to shortlist your options? This article can help you get started on your insurance planning and decide which policy is suitable for you.

If you still need help, you can speak to our Wealth Planning Managers to identify and close any gaps between your current and ideal coverage.

#5: Manage your debt

From personal to housing loans, most of us will come face-to-face with debt at some point. As such, managing debt is the cornerstone of prudent financial planning. When taking up a home loan, source for a suitable package that meets your needs. If you have an existing home loan, you may be able to reduce it through refinancing. Home loan options include fixed-rate, floating-rate or a combination of both. So, sourcing for an appropriate deal can go a long way in helping you save.

If you are struggling with debts, we can help you work your way out of the endless pile of bills. Rather than having debts with multiple banks, the DBS Debt Consolidation Plan can help you consolidate all your debts under one bank and potentially allow you to save on interest payments.

#6: Make your money work hard for you

If you want to succeed in this financial planning journey, you can’t be working hard alone. Your money must work hard for you as well through investments. Besides growing your money, investing helps to fight inflation. Once you have covered your savings and insurance needs, you should channel any excess money into investments for a higher rate of return. The earlier you start investing, the higher the potential of wealth accumulation, thanks to the power of compounding and by riding out the market volatility over time.

Investing is especially important during periods of high inflation as the value of money declines more rapidly. Merely holding cash in bank accounts earning a deposit interest rate of 1-2% is not sufficient. This is because the rate of inflation outpaces that of the returns earned on bank deposits – translating into negative real returns on our cash. Excess cash, if uninvested, is at risk of seeing its value erode at a more rapid pace.

Real value of money under 3 scenarios

You don’t need a large capital to start investing. You can invest in a regular savings plan with Invest-Saver from just S$100 a month. You can also leave it to our DBS Investment Team of experts by investing in managed portfolios via our robo-advisory platform digiPortfolio. Start with just S$1,000 for the Asian portfolio or US$1,000 for the global portfolio.

If you prefer to build your own stocks portfolio, opening a DBS Vickers account would provide access to 7 key global markets.

Fight inertia and start checking off some items right now to be on your way towards building a robust financial plan.

#7 Stress test your finances

Most financial plans assume an inflation rate of 3% when projecting future income flows to determine retirement adequacy. Plan for higher costs of living by assuming different inflation scenarios of 3%, 4% or 5 % and work out how these different rates impact your future cash flows and retirement planning, via the Map Your Money feature in NAV Planner.

Financial planning can help you achieve your life goals and protect your loved ones in times of need. It may seem daunting at first but by taking baby steps, you can build financial resilience and enhance your financial wellness.

Ready to start?

Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.

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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.

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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.