Personal Finances needs are unique for each individual & having a good plan is invaluable. Below are simple steps to get started & improve with your Personal Finances planning.
What’s Your Age & Focus?
- Late Millennials (below 25): Paying off any debts (e.g. student loans), living frugally (hopefully) & growing income.
- Millennials/Gen Y (25-34): Building savings, starting investing & buying your 1st property.
- Gen X (35-44): Middle of marriage & mortgage years balancing expenses, baby care/education planning & investing as much as possible.
- Late Boomers (45-54): Starting to plan for retirement, have more luxury/comfort items & made some gains with investment/savings.
- Baby Boomers (55-64): Spending slows as readying for retirement years, holding more to familiar investments & increased amount in FD/savings.
- Seniors (65+): Living on savings, investment income & to hopefully leave a small gift for loved ones & causes.
Personal Finances Quick Checklist
- Emergency savings fund: 6-12 months expenses
- Insurance: medical, income replacement, less than 10% net income
- Investment: min 10% of net income & max comfortably 50% for most
- Plan out your annual cashflow, budgeting & goals. Put money aside for what’s important first.
- Plan your investments portfolio & get educated on investing and/or work with trusted advisors who put you first
- Plan your retirement fund based on your planned retirement age
- Execute your Personal Finances plan, track your numbers & review regularly (recommended every 6 months)
Key Risk Management Checklist
- Medical coverage: cover for medical bills, hospitalisation, surgery & treatment especially with Malaysia’s high medical inflation costs
- Income replacement: for yourself & dependents upon occurence of death, disability or critical illnesses
- Debt cancellation: to cover all or part of debts for loans (e.g. home/business loans)
- Legacy planning: to plan for your own golden years & leaving a gift for loved ones, organizations or charitable causes
Investment Quick Rules
- Invest in what you know & are familiar with (else get educated / work with a good advisor). Do NOT follow hot tips from the kopi tiam.
- An age-based investment portfolio strategy (even though slightly dated) is a good starting point (use 110 less current age for ratio of high risk:low risk investment allocation)
More important than the individual investment is your overall portfolio allocation between high risk:low risk. Do not put in more than 1/3rd into any single investment.
- Diversify but do not over-diversify (3 to 10 investments is a good rule of thumb)
- Track your investment performance. If something is not performing & there is no concrete factual evidence that things will change, cut your losses ASAP.
- Use an investment advisor who works for you (and not to enrich himself/herself at your expense)
- 10 Golden Rules of Personal Finances
- Financial Knowledge You Need at Different Life Stages
- How can MyPF help you
- Get members articles on Personal Finances
Share & discuss on your Personal Finances journey below.