Saturday, 12 October 2013

Financial roadmap(III)

In this post, let's look at the typical financial preparation one can adopt for the 40s. At this phase, hopefully one has become wiser financially by learning from other people's mistake and try not to make the same mistake. For some of us, we were fortunate to experience the Asia financial crisis, high interest rate, dot com bubble, 911 incident, SARs and the last financial meltdown happened from the US. 'Fortunate' because there will be very few of us(the lucky ones) who would have the GUTS to have taken advantage of those situation and attain financial freedom thereafter. One small note which I was shocked when I spoke with my colleagues, the younger ones(below 30), they thought that the low interest rates is a norm. And this is probably the reason why we have cyclic downturn as people forget.

Savings. At this phase, most of us would have reached the peak of our career, income would have also risen over the years. However, you might not be able to save more due to growing family and other commitments such as car and new property, at least still try and save 10% of your income. Continue the saving plan for the kids education, this can also be in the form of Index ETF investment.

Investment. Your index ETF portfolio should have grown to a sizeable amount at this phase, continue investing and rebalancing. This is a mechanical way of buying low and selling high. For the adventurous ones, you might have also started your stock portfolio in your late 30s.
Continue your SRS contribution to take advantage of tax savings.

Retirement planning. One should also start planning for retirement financially. For this part of the equation, it is important to watch your debts and live below your means. With the investment strategy from the above, one should be on the comfortable start to retirement planning. Watching debts is critical as most of the time it is this that slows this part down.

Unfortunate events. In life nothing is certain. In this phase, we will be vulnerable in our job as companies restructure or move out of Singapore to a cheaper location, or that we are deem too expensive and can be replace by cheaper resource. If that ever happens, and this is the reason why in part I and II, the earlier you have started savings and investing, the more prepared you will be and lesser stress when it happens. I have seen colleagues shed tears when it happened to them, cause they have a young family or have just committed to a new property/car. My grandma always tell us when we were young to always be prepared for rainy days, it will come some day.

Continuous learning. Apart from learning skills for your job, it is also important to take up new ones such as investments, blogging, expanding networking, etc. This is not so much of helping you to get promoted in your job but rather for you to exit the corporate world if needed.

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