Gift Yourself A Year-End Financial Checkup
As we start to get busy with the festive preparation, it can be tough to find time to organize and review your financial life. But if not now, then when? It may seem easier to postpone it till the first quarter of the New Year, but your financial health deserves your undivided attention as well. And there are a few things that you can do to wrap up the year and start afresh on a solid note.
I’ve put together a checklist of Nine Key Financial Planning Areas to Review (ideally in partnership with your financial planner):
1. Take Stock of the Year
When you started 2017, chances are you had goals that you planned to work towards. What are your achievements and what are you still working on? Take some time to review your spending and savings. Having a good grip of your cash flow allows you to make better financial decisions. Examine areas where you had done well and areas which are challenging for you and use these realisations to set a game plan for 2018.
2. Review and Set SMART Goals
What did you do well this year, and what could you have done better? By going through your finances at the end of the year, this gives you a good starting point on which your goals are built upon. Goals can be short term, mid term or long term.
Your short term goals might be to:
- Ensure that you have set aside an emergency fund that is equivalent to at least 3 months of your income. For young families, I would suggest 6 months or more of income.
- Establish a budget
- Pay off as much credit card debt as possible
Where could you be saving money to fully fund your emergency savings and put aside more for the future?
Your mid term goals could be to:
Your long term goals could include:
- Get sufficient life and disability income insurance for yourself and your spouse
- Ensure health insurance and long term care protection are in place for yourself and your loved ones, especially if you are caring for elderly parents
- Determine the amount to save for your children’s tertiary education
- Buy your first property
- Renovate your home
- Purchase a brand new car
- Determining the size of your nest egg and how much you need to save regularly to achieve your desired retirement lifestyle
- Identifying various sources of retirement income
- Figuring out how to increase retirement savings
Once you have identified your goals, create an action plan for each goal. This will help you to stay focused and motivated.
SMART stands for:
S - Specific
M - Measurable
A - Action-oriented
R - Realistic
T - Timely
3. Optimise Tax Relief
Some of the ways to obtain maximum tax relief for next year’s tax assessment include:
- Giving to charities
- Topping up your own (capped at $7,000) as well as your family members’ CPF Special or Retirement Account (capped at $7,000)
- Contributing to the Supplementary Retirement Scheme (SRS)
- Voluntarily contributing to CPF Medisave account
Be mindful of the deadlines so as to avoid any last minute rush.
Note: Personal income tax relief cap of $80,000 will apply from the Year of Assessment (YA) 2018.
This cap applies to the total amount of all tax reliefs claimed, including any relief on voluntary CPF contributions made on or after 1 Jan 2017. There will be no refund for accepted voluntary CPF contributions. As such, taxpayers who make voluntary CPF contributions on or after 1 Jan 2017 should take note of the overall personal income tax relief cap. You should evaluate whether you would benefit from tax relief on your voluntary CPF contributions and make an informed decision accordingly.
4. Review Your Life and Health Insurance Coverage
Do you know the answers to these questions:
- Are you adequately insured or underinsured?
- Do you know exactly what you are covered for and for how long?
- Are you overpaying?
- Do you have duplicate or redundant policies in your insurance portfolio?
- If a major illness strikes tomorrow, will the insurance payout(s) be sufficient to replace your income for the next 3 to 5 years?
- Are you covered for temporary and permanent disability?
Evaluate your protection needs with your financial planner. Ensure that you have adequate and relevant coverage
in place. For those of you who are still procrastinating about beefing up your coverage, do it now. You and I know that anything can happen tomorrow … therefore, better be safe than sorry.
5. Rebalance Your Investment Portfolio
Review the asset allocation of your portfolio. Check that it has a healthy combination of high and lower risk investments
matching your risk profile and investment objectives. If the asset allocation has skewed from its original allocation, it is time to realign it.
6. Secure Your Retirement
Many of my clients have made retirement readiness
as their primary objective in 2018. Treat retirement planning as a mini project that will reap meaningful rewards when you hit your desired retirement age. If you have not thought about your own retirement plan, I urge you to give it serious consideration and get professional retirement advice. A good financial advisor will be able to work with you to develop a holistic plan to secure your retirement.
7. Get on a Debt Diet Today
Don’t wait for tomorrow or the New Year. Make a resolution today to shed your debts. If you need help, there are several avenues where you can seek help from. These include:
8. Review Your Estate Plan, Check Your Beneficiaries and Nominations
- Banks that offer the Debt Consolidation Plan (DCP)
- Credit Counselling Singapore which has the Debt Management Programme (DMP)
- Experienced financial advisers
- Have you got a Will drawn up?
- What about a Lasting Power of Attorney?
- Is an Advanced Medical Directive (AMD) important to you?
- Are there any life changes that require you to update your estate plan?
Take some time to check the names of the beneficiaries in your life insurance policies and CPF nominations. Are they valid and accurate or are there updates to be made? A divorce and marriage can affect the validity of existing nominations so pay special attention to ensure the correct documentations are done.
9. Proactive Planning - Schedule a Meeting to Get Professional Advice
The end of the year or beginning of the New Year is a good time for a financial checkup.
A holistic (comprehensive) financial plan is best developed with the help of a trusted financial advisor and preferably CFP® certified.
To Sum Up:
Though an annual review may seem time-consuming and facing up to some financial realities (that you have been avoiding) may not be the most pleasant of things, organizing your financial information and planning your financial future will pay huge dividends in the long run.
Wishing you a Great Start to a Brand New Year!
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