Who and what are the millennials? Born in the early 1980s, they are a group that will likely jump from job to job over the course of a lifetime, may decide to rent a house rather than to own a home, and is used to being able to get answers with the click of a button. They represent an entire generation of adults who have been born into the digital age, with access to technology and social mobility that their forefathers had never even dreamt of.
Despite this seemingly advantageous edge, millennials have continued to struggle to save and plan for their financial future; much boils down to an extremely volatile economic climate and impact of the great recession.
Changing mind-sets also come into play. For many millennials, the financial freedom to do what they want in the near future, such as continuing their education or travelling, may take greater priority than squirreling away money in order to retire comfortably in 30 years.
To incite change, millennials must adjust their outlook and accept that the world’s economic conditions and social circumstances are beyond their control, and instead shoulder responsibility for their financial planning. Financial advice can prove invaluable, but the crucial key is for millennials be more proactive about securing the best possible future for them and their loved ones.
Financial planning may seem an insurmountable task; but really all it takes is three simple steps to get yourself started.
Step 1:Know what you are planning for by making a list of all your needs and goals and calculating how much is needed. Managing day-to-day living expenses comes first.
Other needs and goals:
- Having emergency reserves
- Health/life insurance
- Meeting retirement needs
- Buying a home
- Financial protection against unexpected events such critical illness or permanent disability
Step 2: Take a good look at your current financial situation.
- List out all the resources you possess; such as your salary and wages, savings or investments like shares or unit trusts.
- If you have any insurance products which are bundled with investments or savings, do list out how much protection you are getting and the value of the investment.
- Make use of the various CPF schemes for housing, healthcare and lifelong savings.
- Also make a list of your liabilities – household expenses, debts (e.g. home loans, car loan payments), credit card balances, health and life insurance premiums, taxes and so on.
Step 3: Now you can begin to allocate and manage your resources.
- Use a budget to help you manage your income, spending, debt and other liabilities. You should be able to cover your basic living expenses (needs) as well as put aside an amount for savings and investments (goals). Review your budget from time to time to make sure it still works for you.
- Prioritise your goals. For many, having emergency savings and health/life insurance will come first. Saving for your retirement will probably be next in line.
- Borrow only when absolutely necessary; for example to buy a home.
- Explore the range of financial products and investments available to you. You will need to spend some time understanding them and how to use them to reach your goals. There are also some products which claim to help you reach a specific goal, like an endowment plan for your children’s education. But all investments carry risk (for example, they may not achieve the desired returns or you may lose money), so always remember to buy only the products you fully understand and have a level of risk you are comfortable with.
- To reduce risk, you should endeavour to maintain a diversified portfolio. When choosing a particular product for investing, find out whether it will complement the products you already have or expose you to more risk.
- Keep track of factors that may affect your plans, e.g. changes to government policies and inflation.
Most of all, remember to review your financial plan regularly and adjust it when your resources, needs and circumstances change.
Article sourced from http://www.moneysense.gov.sg/Financial-Planning/Setting-Goals.aspx
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