Set specific targets & timelines for the results you want to achieve.

Each financial decision you make can affect several other areas of your life e.g. a decision about your child’s education may affect when & how you meet your retirement goals. Remember that all of your financial decisions are interrelated.

By developing good financial planning habits, such as saving, budgeting, investing & regularly reviewing your finances early in life, you will be better prepared to cope with changes & handle emergencies.

Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, buying a home, or change in job status. Revisit & revise your financial plan as time goes by to reflect these changes, so that you can stay on track for your long-term goals.

Financial planning is simply a sensible approach to managing your finances & reaching your life goals.

It cannot change your situation overnight; it is a life-long process. Remember that events beyond your control, such as inflation or changes in the stock market or interest rates, will affect results.

If we have dreams & hopes, then we must have financial planning. Financial planning is indeed a powerful tool to safeguard our ambitions & dreams.

After we have made our plans, we should live with passion.

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Note: A man is not a financial plan.

While women are generally “good savers”, they do not take the initiative to do financial planning & do not do as much for themselves as they should.

Most women are intimidated by financial jargon, & they get so busy with their families & children.

Financial experts agree that while the steps of building an effective money management plan are the same for men & women, the latter must be even more diligent than men because their risks of financial insecurity are greater.

“Women not just in Asia but also around the world live longer than men & almost invariably have fewer resources than men,” said Insead’s Professor Sarah Mavrinac.

Here are some interesting facts:

• Women have a longer life expectancy than men. According to research, Singapore women are expected to live to 80.4 years old, half a decade longer than Singapore men.

• Women have shorter careers. A woman’s average working period with the same company is 20.6 years, almost a decade shorter than the average man’s of 29.5 years. Women are more likely to have worked part-time because they take time off to attend to family needs.

• Women earn less than men. The average female in Singapore earns 25 per cent less than their male counterparts. Just before retirement, males have, on average, 1.69 times more money in their Central Provident Fund (CPF) balances than females.

• The divorce rate gets higher each year. After a divorce, the average man’s standard of living goes up 23 per cent while that of the average woman goes down 10 per cent.

OCBC’s vice-president of Wealth Management, Ms Anne Tay, emphasised that women should have their own insurance policies, including those that cover medical needs. They should build their own nest egg over & above any joint savings or investment they may have with their husband. This is also prudent in the event that their husband is declared bankrupt or owes huge debts.

Prof Mavrinac added that besides being more diligent than men in their basic money management, women must also be careful in managing risk, e.g. a woman with children who relies primarily on the husband as the breadwinner must be adamant that an insurance policy covers him.

Too often, older women find themselves in poverty because the family’s savings have been spent on medical care for the husband in his last years. They are then forced to learn how to manage the family’s financial affairs & to make tough decisions on running the household on their own.

To aggravate it further, women are also generally less willing to take risks with their money.

It is not surprising that endowment insurance plans - which come with guaranteed amounts at maturity - are commonly bought by women for wealth accumulation as opposed to equity type investments. As such, a large proportion of women also tend to place their money in fixed deposits & savings accounts.

However, the returns on such instruments are low & may not necessarily help them to achieve their financial objectives.

More women should think about growing their money more efficiently, take more calculated risks & take a longer-term view for their investment.

In short, women should make an effort to be financially savvy. We should strive to be in the know on the latest trend on how to invest & manage money rather than take a back seat & be concerned about cooking or looking after the family, because we think money management is a man’s job.

People make 3 common mistakes on retirement planning.

1) One, they put off retirement planning until it is too late.

It is human nature to pay less attention to long-term goals while focusing on more immediate needs or wants such as starting a family, saving for a house, buying a car, upgrading to a bigger property & so on. Or, you may be too caught up in the rigours of career-building to notice how quickly time slips by. Whatever the reason, early planning is essential; if you want to enjoy a comfortable retirement.

The later you start building your nest egg, the less time you give your money to work for you & the less financial resources you will have for old age.

2) The 2^nd common mistake in retirement planning is saving too little.

Just how much do Singaporeans save apart from CPF? The answer is not very much. A large portion of Singaporeans’ CPF savings is used up for housing. This means that unless we are prepared to downgrade to smaller properties for retirement, we may well end up being asset-rich but cash-poor.

3) The 3^rd common mistake people make in retirement planning is investing too conservatively or aggressively.

Some people equate prudent investing with putting all their money in the bank. This is a mistake because interest on bank deposits seldom keeps pace with inflation. Over time, inflation erodes a large portion of the money kept in your bank account.

When deciding what to invest in, you should take into account your age, risk appetite, investment horizon among other factors. The younger you are, & the more secure is your job, the less conservative you should be in your investment policy.

It is also possible for one to make the mistake of being overly aggressive at the wrong time. The closer you are to retirement, the more conservative your investment policy should be. Your priority then would be to preserve the wealth that you have accumulated in your younger years.

In conclusion, how well you live during your retirement depends on how you save & invest while you were working. Remember that it is never too early to start planning ahead. With time on your side & a systematic retirement plan, a carefree & comfortable retirement can be within reach.

Some of us simply choose not to, others never meet the right mate. Whatever the reason, singles are a demographic group that can only grow in significance. But singles still need to make financial plans for their future, even if somewhat differently.

The question, then, is: What is special, if anything, about drawing up financial plan for lifelong singles?

The general approach for singles is not dissimilar, in principle, from those with families, but there are a number of specific issues that singles might want to take note of, the most important being dependency.

Many singles who do not need to support their parents or siblings have no dependants at all. But this also means they have no one but themselves to depend upon in their old age. You are your own dependant. The main thing that you need to insure yourself against is the “living death” syndrome where disability or disease strikes & you can’t support yourself.

And the risk of income loss is higher for singles as they don’t have the flexibility of spreading the risk of unexpected income disruption between 2 earners, unlike dual-income married couples.

Therefore, singles should set aside an contingency fund equivalent to between 3 & 6 months’ salary. They should also make sure that they buy enough insurance cover for critical illness or disability. As for retirement, they will need to factor in the cost of engaging long-term domestic help or staying in a nursing home.

Fortunately, many singles have the added advantage of being able to start building retirement nest-eggs earlier in life. They have less competing financial demands than a married couple with children, so they can benefit more from compounded growth & smoothing of investment volatility. But the flip side to having fewer financial obligations is profligate spending. Many higher-earners among singles used to a more carefree life often lack basic financial discipline.

A 2^nd key issue facing singles is what happens to their assets after they die. In the absence of specific instructions, assets go automatically to a parent or a sibling. This may not be acceptable to many singles, some of whom have life partners they are not married to by law. Other singles may also want to leave their money to a specific relative or donate it to a special cause.

In the absence of proper estate planning, it causes a lot of inconvenience to distribute your assets after you pass away, even if there is an obvious next of kin. The solution is to draw up a will that states clearly how assets should be divided among parents, siblings, close relatives or a living partner.

Lastly, singles should also review & modify the will with the occurrence of events such as the passing of parents, changing of a relationship with a life partner & so on. At the same time, give someone power-of-attorney. In the event that you are disabled or too ill to perform daily tasks, someone needs to be authorized to act on your behalf, pay your bills & so on.

Retirement planning is absolutely essential if you want to achieve the lifestyle you want in your golden years. It involves determining how much you need in order to retire comfortably, identifying the best ways to accumulate savings as well as making decisions about how you live your life today.

To ensure that you save sufficiently, it is important that you start planning early for it. This allows a longer period for accumulation & hence, more time to save, as well as invest.

Many Singaporeans are still uncertain as to how to go about achieving their retirement objectives. As a result, they are usually financially ill-prepared after they leave the workforce.

According to the National Financial Literacy Survey commissioned by the Monetary Authority of Singapore (MAS) last year, many Singaporeans are not saving adequately, nor are they saving early enough for retirement. While the majority of Singaporeans consider personal & CPF savings to be their most important sources of retirement income, less than 1 in 3 Singaporeans are actually aware of how much CPF funds they will have when they reach 55 years old.

The reality is, CPF savings alone may not be sufficient to support your desired lifestyle during retirement. With the increasing use of CPF funds for non-retirement purposes e.g. housing, education, etc, your CPF funds may not even be sufficient to meet all your basic retirement needs.

To enjoy your golden years, you should start saving early & consider alternatives beyond CPF to accumulate adequate savings for retirement.

To ascertain how much retirement income is needed, it is important to first identify your retirement goals. You should try to envision the type of lifestyle you aspire to have, at what age you expect to retire & most importantly, establish what retirement means to you. Being realistic & having specific & measurable retirement goals can also help provide a more accurate assessment of how much money is needed.

As a general rule of thumb, most would require 50 to 70 per cent of their last drawn annual income to maintain their current standard of living during retirement. However, bear in mind that you have to take into account the impact of inflation & if you aspire to have an active retirement lifestyle that includes traveling & hobbies, you will require more savings.

Whether retirement is decades away or around the corner, now is a good time to begin planning for it.

You can fund your child’s university education without burning a hole in your pocket if you start early & regularly set aside a reasonable sum. Depending on your risk appetite & investment view, you can build a university fund through insurance savings plans, unit trusts or a combination of both.

Insurance Education plans - these are savings plans with some guaranteed cash component. Yields are limited because a large portion is invested in mainly fixed income, rather than equities. The person insured receives the sum assured at the end of a specified period. Some plans allow proceeds to be withdrawn in 3 or 4 annual instalments to coincide with course fee payments.

Advantages:

1) The plan will not be affected if the parent dies prematurely, suffers total & permanent disability, or is diagnosed with a critical illness.

2) You can rest easy knowing that, once the plan matures, a certain sum will be available when your child is ready for university.

3) Such is plans is good for parents who have difficulty saving regularly, are risk-averse, & are content with the yields from these plans.

4) Annual returns range from 3 to above 4%, so the yields may be nothing to boast about, but they usually exceed those from plain vanilla savings deposits.

Disadvantages:

1) Upside is minimal compared with the potentially higher gains generated by other investment instruments such as unit trusts.

2) If you terminate the plan early, you are likely to get less than the premiums you have paid as most of the maturity proceeds come from the bonus declared on maturity. And if you surrender the plan in the 1^st year, you get nothing back.

Unit Trusts

Advantages:

1) A well-diversified unit trust portfolio can offer potentially higher returns than education plans, particularly if there is a long time horizon of, say, 15 to 20 years.

2) Unit trusts offer more flexibility as there are no exit penalties for early withdrawals.

3) They offer more transparency as you decide which markets & asset classes you want to invest in.

Disadvantages:

1) Your unit investment could suffer if there is a downturn in the market due to bad news & this happens when the money is needed for the child’s education.

2) Chances are the investment plan will not be continued if the parent dies prematurely, suffers total & permanent disability, or is diagnosed with a critical illness; henceforth jeopardizing the child’s education fund.

3) Some advisers encourage customers to “Buy Term & Invest the Rest”. Unless you have a systematic & disciplined way of investing, you may end up doing “Buy Term & Spend the Rest”.

Generally, education plans are suitable for parents who typically have more than 10 years to put away cash, while those with a 5-to-10-year horizon can rely on a well-diversified investment portfolio of unit trusts. Alternatively, diversify into both.

It is never too late for you to learn how to make smarter moves with your money. There are no stupid questions, only stupid decisions.

2) Acknowledge that your retirement is a reality.

Your retirement will be a reality, even if it may be 30 or 40 years away. It will cost you more money than you could possibly imagine. You wouldn’t want to wait & see if you can play catch-up.

3) “Someday” will be “No day”.

Don’t procrastinate. Do something now. It is entirely up to you to take care of yourself. Commit to saving & investing a small portion of each pay cheque for your retirement before you can spend it.

4) ALWAYS Pay Yourself First.

Treat your retirement as another line item taken out of each pay cheque. If you don’t have the discipline to keep to it, find a system of saving or investing where the money is deducted automatically from your bank account.

5) Never despise the days of small beginnings.

If you think you can’t afford to save, you are probably wrong. Even saving as little as $100 a month will help you begin to accumulate some serious long-term wealth. It is not the amount but the habit that is more important. Rome was not built in a day.

6) Time is of the essence because of The Power of Compounding Interest.

The best investment decision you will ever make is to start saving & investing your money AS EARLY AS POSSIBLE. The younger you are, the more your money can work for you. It is certainly no coincidence that Albert Einstein says The Power of Compounding Interest is the 8th Wonder of the World.

7) The best help you can get lies in your own hands.

No matter how much help you think you might get when you retire, don’t count on it. The only sure things in life are death & taxes. Don’t leave your retirement to chance. You can’t afford to lose.

There is a saying: Life is a journey. Can I suggest that Wealth Management is a marathon, not a sprint? The power of compounding kicks in only after a period of time…be patient. Wealth Management is indeed for everybody.

When such a trust is created, it CANNOT be revoked or extinguished, EVEN IF you make a will. Therefore, writing a will to change the beneficiary would be ineffective.

What are you to do then if you are going through a divorce?

1) Get the consent of your spouse to being removed as a beneficiary. Unless he/she consents to the removal, the named spouse cannot be removed as a beneficiary, even if you divorce thereafter.

2) Make an application to the Family Court to ask the court to remove your former spouse as a beneficiary. Your spouse, however, is at liberty to contest the application. The court will look at all the circumstances of the case & may then grant your application if it deems fit, especially if granting the application would be just & equitable under the circumstances.

Note: Advice provided in this column is NOT meant as a substitute for comprehensive professional advice. Please seek legal advice for more details.

1. I have a Will to distribute my assets to my loved ones according to my wishes.

2. I have life insurance coverage of at least 10 times my annual income.

3. If I were to lose my job now, I have enough savings to provide for at least 6 months of my monthly expenses.

4. I have started building my retirement fund of at least 10 times my annual income.

5. I have critical illness insurance coverage of at least 2 times my annual income.

6. My health insurance plan will take care of my medical & hospital bills without any out-of-pocket expenses from me.

7. I have a trusted financial professional who looks after my financial well-being.

8. I have started to plan for my children’s university education funding.

9. My house will be fully paid for in the event of my death or permanent disability.

10. If I were to sell my house now, I would have more than enough money to pay off the outstanding mortgage.

How many smiling faces do you have?