Financial Planning

Lately, was inspired to do a little bit of financial planning. The impending GST hike, the gradual edging towards retirement age, together with the increased burden of our new baby, means that the purse strings might need to be tightened.

Besides, it is only fair that we provide some money to help Jarren ease into his adulthood 21 years later. Whether this is for his education or otherwise will depend on the situation.

Found a website talking about some steps to follow. Although it is specific to US citizens, some of the tips are generic.
http://financialplan.about.com/od/personalfinancebasics/a/AnnualCheckup.htm

I took the following steps:
1) Take stock of existing fixed deductions per month
2) Keep track of expenses for a month. It is sufficient to just track the bank account fluctuations. There are tools to track your everyday expenses as well but I find it too tedious to follow thru.
3) Total your monthly variable expense, add to the fixed deduction and verify the amount of savings you can expect to get per month
4) For better accuracy, the monthly expense could be averaged over a few months since it is normal to fluctuate (eg Wedding dinner ang-bao...)
5) Based on monthly saving, set a target for saving each year

With this yearly target achieved, I will feel more relieved if there is any extra and we can use this then for our vacation and special purchases (eg PDA phone, TV...)

On top of this, I also evaluated all my existing investments/insurance/fixed Deposit
1) Fixed Deposit - It is best to keep moving the FD around to "new" banks, since banks offer "promotion" rates for "new" funds. This can be about 3.0+% currently. Forget about the miserly 0.xx% you get normally.
2) Investment should be checked for the rate of return. This website is really useful -> http://www.banksite.com/calc/neir. Compare and ensure that the risk you are taking is worth more than the fixed deposit interest rates you can get, risk free.
3) Insurance should be checked if they are matching the projected return rates. Nothing much you can do here if it doesn't but at least you will be aware.
4) Take a look at CPF. For ordinary account, you can choose to repay the mortgage or invest in unit trust for example. Always compare with the CPF rates, currently 2.5% -> http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_16AUG2006.htm. For Special Account, investing is another option but only if you think the returns are more than 4.0%. Remember that the CPF rates can change every quarter.

Just for fun, I checked how much fund I expect to accumulate by the retirement age of 55 (if possible). Let's just say it is not close to making me a millionaire yet. Maybe I should have started younger but you always think there is plenty of time more before you reach middle-age.