As the saying goes: "Money is earned, not saved." It
actually means that we need to earn AND manage money in order to grow it. Only
when we have a clear financial management goal, can we better understand what
kind of investment tools we will need, making financial planning more
effective.
But before that, we should have a clear understanding of our
financial values in order to better "prescribe the right medicine."
In a broad picture, people born after 1980 can be divided into the following 6
categories according to their financial values:
① 1. Diligent
Group: Choose to struggle first and then enjoy. Actively save, know how to
increase income and reduce expenditure, live within their means, can quickly
accumulate funds, and use funds for investment and financial management.
② 2. Enjoy
First Group: Enjoy first and then struggle, focus on the immediate enjoyment of
life, have strong purchasing power and consumption power, spend as much as they
earn, and basically have no savings.
③ 3. The
hard-working Group: In the initial stage, the main goal is to purchase real
estate. In addition to the long-term pressure of housing loans, they also need
to prepare for their children's education expenses.
④ 4. Dink
Group: Pay attention to personal development, do not have children after
marriage, and prefer to live in the two-person world. It should be noted that
when one of the parties has an accident or financial risk, it is easy to
trigger a marital crisis.
⑤ 5. Non-married
Group: Although there is no huge financial demand-buying real estate or
preparing children's education funds, one should understand the indisputable
fact that one will eventually grow old.
⑥ 6. NEET (Not in Employment, Education or
Training) Group: One is mostly at home, does not start a business or work, and
the living expenses are all provided by the parents. In addition to consuming
social resources, it is also easy to cause adverse effects on society.
Specifically, the life cycle of a family can be roughly
divided into four stages: the "formation
period" from being single to the establishment of a family; the "growth period" when children
grow up; the "maturity period"
when the family and career develop together; and from retirement to the
end-of-life "ageing period".
The following focuses on the three stages of "formation
period", "growth period" and "maturity period", and
provide corresponding asset allocation suggestions. I hope it will be helpful
to everyone.
Formation period:
quickly accumulate wealth
Our life is not long nor short, the earlier you plan for
financial management, the more wealth you can accumulate. We can start with the
following 4 basic financial management steps:
1. Keeping track of income and expenditure: It allows you to
understand your own consumption behaviors and habits, and can better control
your future economic budget by sorting out whether each item of living expenses
is reasonable.
2. Income: work hard and make money, set up a dedicated
financial account for investment, and choose suitable financial products for
investment.
3. Expenditure: living within your means and controlling
shopping desires, such as coming up a shopping list before shopping and purchasing
strictly in accordance to the list.
4. Value-addition: From the perspective of long-term
interests, we will need to understand and improve professional ability. For example,
to obtain various skills certificates to prepare for future promotion.
From the perspective of asset allocation:
Investment advisors used to recommend a rule of thumb where
the investor will subtract their age from 100 to know the allocation for stocks
in their portfolio. However due to the higher life expectancy, recommended formulae
is to subtract your age from 110 or 120 to be more aggressive in stocks. The
rest can be in less risky financial products such as bonds, ETFs, etc.
Growth period:
emphasis on asset preservation and appreciation
The age of 30 to 50 is a period of heavy responsibility for
life. This age needs to bear multiple financial pressures. Therefore, the
proportion of investment in core assets can be adjusted appropriately.
From the perspective of asset allocation, planning can be
made from the following four aspects:
1. Reserve a family fund: generally 6-12 months of family
living expenses, in case of emergency.
2. Repay various types of loans: such as car loans, housing
loans and general consumer loans.
3. Prepare children's education funds: to support children
from kindergarten to university, the tuition and miscellaneous fees and various
living expenses during this period will require a lot of money.
4. Retirement planning: The sooner you prepare for
retirement planning, the less economic pressure you will bear.
Maturity period: Stay
conservative and avoid risks
During the period from the age of 50 to critical retirement,
our funds should be invested in more conservative or prudent financial
products.
From the perspective of asset allocation, there is basically
no income from work in the elderly after retirement, and they can only rely on CPF
to pay for various expenses that may be faced, including necessary expenses for
maintaining life, medical or nursing expenses, etc.
At this stage, good health is as important as wealth.
Therefore, investment and financial management should prioritize
"stability" and choose low-risk financial products, focusing on fixed
income.
Do a good job in investment and financial management to
achieve financial freedom
Financial management is lifetime homework. The greatest
achievement of investment guru Warren Buffett when conducting financial
management in stages, he always stays sober, adheres to medium and long-term
investments, and follows the principle of asset allocation that is, investing
in familiar ones. Only invest in what you are familiar with.
Read also:
The eight golden periods of financial management in life, have you missed them?
Listen: Podcast
