Financial Planning has become an integral part of the lives of most Singaporeans when they realize the importance of taking ownership of their finances and managing them in different stages of their lives.
You probably had been approached by friends or insurance agents along the streets to look into purchasing a policy. However, it might not be in your best interest to do so if you are unsure where you currently stand financially, and in which stage of financial planning you are looking to address.
In this post, we’ll try to understand each stage of financial planning.
1) Wealth Protection
The word “Protection” has been so overused that some people think of it as a bad word.
Just a slight mention of the word and it would trigger images of aggressive salespeople peddling insurance products.
Nonetheless, protection (including insurance) is a cornerstone of your financial plans. It ring-fences your goals and aspirations from harm, making your plans airtight.
You wouldn’t start work on a building if your foundation is weak would you?
Similarly, it is important to create a strong foundation on which your financial home can be built on.
You may strengthen it over time when your ambition grows and your financial home gets bigger.
2) Wealth Accumulation
Wealth accumulation is about creating and accumulating your wealth over a period of time. There are different strategies that a person can implement to help him accumulate wealth for his life’s priorities. Strategies depend on many factors, including his risk appetite and time horizon for his goals.
Many young professionals view this as the most exciting stage in financial planning, and thus spend a huge amount of time, energy and money (often taking on unnecessary risks) here.
This is also where you can make use of a myriad of financial instruments in the market to achieve your wealth accumulation goals.
3) Wealth Preservation
Haven’t we seen enough horror stories of people whose life savings ran out before they did? Many of them are forced to depend on their children for their daily living; some even have to jump back into the workforce doing menial jobs after years of ‘retirement’.
While it is extremely important to accumulate wealth for retirement, and it certainly helps to make alot of money, the date to be printed on our death certificates will always remain a mystery. To make sure that we do not outlive our resources, we need to explore ways and implement strategies to preserve our wealth throughout our golden years.
Even in our working years, there are tools and strategies that we can look into to start this process.
4) Wealth Distribution
This is commonly and mistakenly associated with only older people. Yet, distribution is important even to young working professionals and their families.
How do you ensure that you distribute the right assets to the right people at the right time with the right arrangements, in the event of your demise?
Huge amounts of wealth may be lost if you leave distribution to chance.
I hope this overview of the 4 stages of financial planning is helpful to you in familiarizing yourself with the subject.
I’ll be sharing more about each stage in future posts. Meanwhile, do leave any comments below if you have anything to ask me regarding the 4 stages of financial planning.