Future Proofing Your Finances

Singapore is slowly restarting her economy after more than 2 months of circuit breaker. During this period, our economy slowed to a halt. On the whole, 2020 has brought about a harsh reality. VUCA is now.S&P 500 tripped the circuit breaker several times in march.Oil prices went negative. Interest rates could potentially reach the point where borrowers get paid to borrow money. Our usually crowded skies are now empty of planes.

Rare sighting. Airplane flying.

But this is an opportunity. As our economy reopens, take the chance to restart our financial journey. This time round, build a future proof financial engine. An engine that is robust, capable of adapting to challenges.

How can we do so? Learn from Singapore. Singapore can’t print money, but we sure can spend it, $92.9 billion of it, allowing us to survive and thrive even in such difficult times. Where did we get the money from? Well designed budgets of old.

Budgets are the start of your financial planning journey that ends with you achieving your goals. Budgets are for now and tomorrow. Budgets empower you to future proof your finances. Budgets are your first active steps towards your goals.

Budgets are liberating; they allow you to spend freely. Once you know how much you can spend, there is no need to hold back. You are able to spend all because it has been allocated to be spent. Isn’t it more fun to spend all the money in your bank than worry about your future?

How do you budget? Here is a short summary, though a more detailed one can be found here. There are three major areas you need to plan for.

The first is your Past. Debts will grow with the accumulating interest. Debt can cause many problems. If you don’t have debt, continue to set aside money for ‘debt repayment.’ This will help you determine how much debt you can take on.

A New Wedding Vow?

That said, debts are not always bad. A good financial plan can and does involve a measure of debt. Debt, well managed, is a powerful tool. But with great power comes great responsibilities.

The second is your future. Build up a reserve fund. Like Singapore, this will help you create a buffer in event of crisis. The reserve fund will also take stress out of meeting daily needs when shocks occur. Once a reserve fund is created, continue to set aside the same amount for future goals. Retirement, owning a business, education are some goals that we can strive towards. The savings towards these goals will define the future you have. When you set aside money, it allows you to take opportunities when they arise, letting you chart your life.

The third is today. Allocate money towards necessities. Daily food and household needs. Insurances. Entertainment is also a necessity, for all work and no play makes Jack a dull boy. But having a budget governs how much of a want you can afford. And with a well designed budget, you don’t waste time and energy to track your expenses because you’ve already allocated your money.

A properly designed budget is future-proofing. It prevents excessive debt, it allows you to lead a balanced life between now and tomorrow; and it gives you the best chance to deal with uncertainty. It allows you to spend without worry.

Every dollar you have is an opportunity. What will you do with it? As Singapore reopens, Restart your Financial Engine!

Source:

1. Refer to hyperlinks.

2. Pictures from unsplash: Nafis Al Sadnan, Alice Pasqual

#financialgoals #budgeting