Annual check-up

We are constantly told that we need to have a health and dental check-up at least once a year. The same rule should apply to our finances as well. Things change over the course of 12 months so it’s always good to do a review, either by yourself or with the help of a financial planner. Plus, our finances are becoming more complex and now include bank accounts, savings accounts, credit cards, insurance policies, investment funds and property. It can be hard to keep on top of where all your money is going and if you are on course to hit your saving targets. So here are some pointers to get you started.

While we encouraging saving as much as you can afford to each month, this doesn’t make a lot of sense if you have huge debts that need paying off. Credit card debt normally charges a higher rate of interest than your savings will earn. So you should focus on paying the debt off first. Also check what rates you are paying on other debts such as a car loan. Pay this off as quickly as possible. While a mortgage is still classified as a debt, the interest rate tends to be low and not a priority.

Reviewing your investments and retirement funds annually should really be common practice for all of us. If you are smart enough to be saving regularly into investment funds and a retirement fund then you should be smart enough to monitor their performance. It’s your hard-earned money after all. Stock markets can be volatile so you need to monitor their performance regularly. If you are in a consistently under-performing fund then it could be time to switch out. And if returns are lower than expected, you may need to start contributing more to meet your goals. While planning for retirement is definitely a long-term game, you still need to check things on a short-term basis, never leaving it too long. And as you near retirement, you should be moving away from riskier, more aggressive investments toward safer vehicles such as bonds. A good financial planner will tell you when the time is right.

As you get older, your life insurance needs change. For example, you might have bought a property or had children since you originally took out life cover. This means you need wider coverage to protect your growing assets and loved ones. Health insurance and accident cover could be crucial. And later in life you might need less coverage as you no longer have mortgage payments to make and your children have grown up and started work. At every stage, you need to make sure your insurance limits are high enough to protect your assets. And with children, make sure they will be provided for should anything happen to you or your spouse.

While some elements of a financial review can be done by yourself, there are trained professionals who can help you with the rest. A financial planner is trained to work together with you to identify a true picture of your current assets, your liabilities, your income and your expenditure. They will monitor any savings plans you have taken out and advise you about what insurance coverage is most suitable for your needs.

A recent survey by Manulife Singapore involving Singaporeans and Permanent Residents revealed that only half of the respondents had previously received advice from a financial planner or consultant. But piecing together the best plan that works with your personal lifestyle and risk appetite can be difficult on your own.

“There can be apprehension of exactly what or how much to reveal. This is quite understandable especially during the first few dealings with the financial advisor,” said Dennis Tan, a Senior Director of Financial Services at Manulife Singapore. “But one should look at a discussion with a financial planner like seeing a doctor for a health checkup — while one is about physical health, the other is about financial health.”