8 Dec 2023
SOURCE: CPF Board
As the year draws to a close, it’s time to take stock and chart a plan for the year ahead. To do this, it’s important to ask yourself two questions: (1) what you have now, and (2) what you wish to achieve?
“What you have now” is about your current financial situation. How much savings do you have? Do you have any outstanding loans? How much do you earn or spend every month? These are some basic questions to evaluate your current financial situation, and know what you have to work with.
“What you wish to achieve” means setting yourself some realistic goals to work towards. These goals should include both long-term and short-term goals that motivate you.
You are now at the starting line! Planning your finances should be a conscious effort, and it definitely pays to do so! Proper review and execution of your financial plan can pave the way to your desired retirement lifestyle. Here are some pointers to help you get going:
1) Remember to take stock
When charting your path forward, it’s important to project ahead and keep your focus on the future. However, you should also take stock every now and then. While your future is important, so are the steps you have taken to get this far!
It is always good to learn from past experiences, including the decisions you had taken and changes that had occurred up till this point. Having a good idea of what you had done to reach this point provides you with a clearer of picture of what worked and what didn’t. This allows you to learn from successes and failures alike, avoiding the pitfalls that may trip you again. A strong financial plan is one that charts the path by building on your existing foundation, not one that depicts a castle in the clouds.
2) Be self-aware
Being self-aware is a tricky thing. At a glance, it sounds easy, but it can be a lot more difficult to pull off than you would expect. When it comes to financial planning, self-awareness is likely to encompass more than you would initially think!
To be self-aware is to understand and accept your financial situation on its own merits, without excessive comparisons. What this means is that you plot your own paths and goals based on what is accessible and achievable to you, and celebrate your successes, big or small. Don’t let your opinion of your current financial situation be influenced by factors beyond your control. Just because someone you know was able to accumulate enough savings to buy a house twice as expensive as yours does not mean you need to be at the same height to be happy.
In being self-aware, you avoid unrealistic goals and methods that may result in more risks and/or disappointments, which is a common pitfall when comparing yourself to others. Everyone is unique, and this uniqueness applies to your financial situation as well. Since everyone has different characteristics and faces different situations, it’s important to acknowledge that what worked for one person isn’t guaranteed to work for someone else. If you want to understand more about being financially self-aware, here are three tenets of financial self-awareness to get you started!
3) Setting goals
Goals are frequently mentioned, but what does it mean? What kind of goals should be set, and why should you set them?
Broadly speaking, goals can be split into long-term goals and short-term goals. In general, everyone needs both long-term and short-term goals.
Long-term goals are larger aspirations, which provide you an inspiring endpoint to strive towards, like saving enough to buy a house. It provides you the drive to keep you going for the long run. However, having only long-term goals is insufficient. Having goals far off in the distance without any smaller, attainable targets along the way can make it feel like you’re lost and demoralise you.
That’s where short-term goals come in. Short-term goals, which can include achieving a certain amount of savings by the end of the month, are there to make sure you take steady steps towards your long-term goals, by acting as milestones along the way. Having goals that are achievable in the short term also provides you with even more motivation, as these goals are easier to achieve and adjust, and thus incentivise action. With a combination of short-term and long-term goals, the foundation for a good plan towards your desired retirement lifestyle is laid. If you’d like more tips on how to set such goals in your life, this handy video on SMART goals gives you some useful pointers to get yourself started.
Planning for the future isn’t something that can be achieved in a single day. With steady efforts and proper knowledge of your financial situation, you are on your way towards the retirement lifestyle you wish to have. If you would like to get more useful tips and resources to make better financial decisions to reach your life goals, check out the Be Ready with CPF page today!
The information provided in this article is accurate as of the date of publication.
