Friday, 27 September 2013

Financial roadmap(I)

I am sure most of us when we looked back at our financial journey, we wished that when we first started there is some form of a do's and don't list to guide us. Most of us learned the hard way, either by lots of reading and attending seminars(which you are not sure if they even practice what they teach) or by trial and error through making investments mistakes. And some of these mistakes can be costly. Fortunately, there are few blogs(here and overseas) which are worth reading and thanks to the effort that they have put into the writing. Hope this one will help as a guide to the start of your financial journey as well.

For the 20s to 30 - This is where most of us would have just started working. 
Savings, savings and savings. This is the phase where one needs to save and save hard. Unfortunately, to grow money, you need to have first pot of money first. And there is no way other than saving. It is important to start early as most professionals preached, otherwise, your later part of life will be harder.

Most of the fresh graduates starts with around $3000, and if you are able to save 30% of the salary which is $900, in 5 years time, you will have accumulated $54,000. At the age of 26, you will be able to start your investment using this pot of money, part of it into ETFs and the rest as opportunity fund when the next crash(like in 2008) happens. There are other blogs which talked about the merits of investing into a permanent portfolio using ETFs, which I will not repeat here.

Debts, debts, and debts. During this phase, and in fact at every stage of life, there will be financial temptations. Is it necessary for that expensive trip to Europe or US, do we need a new mobile phone or a car, must we own an expensive condo in the city fringe. Whatever it is, keep debt low, remember leverage can go both ways.

Insurance. While you are still healthy, remember to upgrade your medical plan such as the shield plan. Keep it simple by just getting a life insurance since your parents might depend on you now. There has been alot of debates on ILP, personally, I would avoid as mine is still under water even after 12 years. And if you are investing using ETFs, then, there is no need for ILP.

In the next post, I will talk about 'for the 30s to 40'.

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