Having good financial planning is critical in a country like Singapore, where the cost of living seems to be mounting with each passing year.
However, the world of financial planning can be quite confusing and the first step to having greater control over your finances would be to have an investment plan.
What exactly is an investment plan? And really, is there any importance of financial planning in Singapore? (TLDR; yes!). Read on to find out more about financial planning in Singapore and the type of investment plans that are out there.
What Is An Investment Plan?
An investment plan is a plan that allows you to allocate your funds to different investment platforms so that you can reach your financial goals through various financial instruments.
For you to have an effective investment plan, you need to consider your current financial situation, have a concrete financial goal, and set a timeframe to achieve this goal.
Financial planning in Singapore can look very different for two individuals due to the varying financial goals they have.
A good investment plan is one that considers and weighs risks. This is important as it’ll allow you to understand what exactly happens to your money when the financial markets are not performing optimally.
It can also prevent you from withdrawing your assets when the markets appear volatile as you would already have been prepared to face such risks before investing.
Furthermore, based on your risk appetite, you can come up with a financial plan that you are comfortable with.
Now that you know what an investment plan is, here are the top seven reasons why we believe creating an investment plan in Singapore is important.
1. Achieving Your Financial Goals
In our capitalistic society, it’s necessary to have financial goals. For some, this may be an early retirement and for others, this might be the dream of property ownership.
No matter what your financial goal is, having good financial planning is pivotal to achieving your financial goals.
Most milestones are expensive, be it a wedding, house, or car and as such, it’s important to have strong financial planning to ensure that you can successfully attain these financial goals!
Sourced from PropertyGuru
2. Keep up with the cost of living in Singapore
The next reason why financial planning in Singapore is important is because of inflation.
Inflation usually occurs at a steady rate every year but with global food shortages and supply chains being affected, inflation has also been affected.
Monetary Authority of Singapore (MAS) has projected Core Inflation in 2022 to be between 3.0-4.0% this year which is a spike from earlier forecasts of 2.5-3.5%.
By leaving your money in the banks, you are ultimately losing money every year.
The interest that you’re earning by leaving your money in the banks ranges from 0.05% to 2.25%, which is significantly less than the returns you could get through well-thought-out investment plans in Singapore.
Your chicken rice, bubble tea, and clothes increasing in price are a result of inflation. Though inflation is inevitable, proper financial planning in Singapore can decrease the pinch that you feel on your wallet.
3. You Can Save For Retirement
Sourced from Gilbert Koh
Retirement can be an enjoyable time for you if you have a good financial plan.
Although you get to enjoy more free time, you will also experience a drastic decrease in income.
This could make it difficult to enjoy the fruits of your labor because of the worry of expenses.
Hence, having a well-thought-out financial plan where you consistently save a proportion of your income and place it into a retirement fund can be useful.
You could also place a sum of your money into your CPF Retirement Account every month, which gives you an interest rate of 4%.
4. Improves standard of living for you & your family
Another less tangible perk of having an investment plan would be that it can greatly improve the standard of your life for your loved ones too!
Money is one of the biggest considerations in decision making, it limits how much you can provide for yourself and your family.
Wouldn’t it be nice to go on a nice holiday every year, spend lavishly on and provide the best experience for your family?
With a good financial plan, You get to dote on them without stressing about every single dollar because you can be assured that you have the financial capacity.
Being unencumbered by such worries about financial planning can therefore allow you to spend time on the things that truly matter to you, such as your family and hobbies!
5. Keeps you level-headed & Less Emotional
Have you ever felt your heart break as you watched your shares take a nosedive? Have you ever found yourself monitoring the market helplessly?
Although your investments seem very pragmatic, it is inevitable that your emotions get involved. This is especially so when you are not meeting your financial goals in the short term.
However, this can be an experience that you can avoid with good financial planning in Singapore.
Investment plans allow you to be more in control of your emotions because it accounts for your risk profile.
Based on your risk profile, your investment advisor can come up with a financial plan that suits your needs.
Everyone’s risk profile will vary and it ultimately informs your investment advisor about the maximum risk that you can take on in your investment journey.
For example, if your risk calculations show that your maximum risk tolerance is 5%, your financial plan will be crafted in a way that you will not lose more than this value.
This can also give you greater peace of mind as you’re assured that your money is steadily growing. Gone are the days when you need to monitor your wealth in a stressed, panicked manner!
All you need to achieve this peace of mind would be to spend some time on your financial planning in Singapore!
6. You Enjoy Maximum Returns With Minimum Risk
Singaporeans are mostly cautious people who prefer to be on the safer side of things. For such individuals, the main aim of an investment plan would be to maximize returns with minimum risk.
For a given risk tolerance, your funds will be invested and optimally allocated in a variety of instruments to ensure you get maximum returns.
Investors who invest on their own may find achieving this balance of risk and reward difficult to achieve since this requires extensive knowledge.
Thus, it may be wise to consult an investment advisor in this instance.
They form your investment plans with your risk profile in mind, ensuring you get a balance between risk and reward.
7. Lets You Accumulate Funds For Rainy Days
Rainy days are when you might be most thankful for your foresight to have an investment plan. It can really pay to have good financial planning when you run into emergencies in Singapore.
Emergencies can range from personal health crises to retrenchments, all of which are very real possibilities in today’s volatile world.
Hence, having a good financial plan can ensure that such occasions are accounted for. It leaves you with enough funds to deal with such unexpected incidents without causing too much of a hit to your savings.
By investing consistently (and safely!), you get to steadily grow your investments to a point where they can be withdrawn in case of such emergencies.
Hence, if you’re someone who would like to utilize their investments for this purpose, you should actively look for investment plans that align with this goal of yours.
Another part of financial planning would be looking for insurance compatible with your lifestyle.
This can be really helpful if you run into sudden health issues or emergencies such as floods or fires. It can help to tide you through unfortunate time periods without causing any additional financial strain.
If you’re someone who likes to live in the moment, we hope that this article sheds light on why future investment planning is important in Singapore.
So, why don’t you take some time today to sit down and think about your investment plan?
If you're having trouble coming up with an investment plan, it would be smart to work with an investment advisor.
Contrary to their reputation for pushy sales tactics, investment advisors help new investors cut through the noise. They can arrange your investments and build a financial plan that helps ensure you will meet your financial goals in a sustainable manner.
With regards to investment planning, they do the following:
Identify your current life stage
Identify your goals, needs and wants
Find out how much you will need for each need, wants, and goals
Plan how you can achieve these goals
Build and optimise your financial investments
And all it takes is a phone call to change your life!