As the economy recovers gradually, we tend to leave the past lessons learnt behind us. Hence, it’s important to prepare yourself and keep your family’s financial state healthy in order to protect your family.
Set aside at least 10-20% of your income and put it in an account to build your “Golden Nest” towards financial freedom. Use this money for savings (6 months worth of expenses) and put the rest into any suitable investment plan that suits your risk appetite. Set a realistic budget and track your monthly spending to see if you can cut down on that so that you can contribute more towards your “Golden Nest”.
Here’s a checklist that you may use:
- Pay Yourself First
Set aside a percentage that is at least 10-20% of your income and put it in a separate account. Do not use this money other than for investment purposes to grow your fund. The 1st portion of this savings will first contribute to your savings for rainy days (i.e. 6 months worth of expenses or 3 month worth of income). The rest will then be used for investment purposes as mentioned earlier.
- Set a Family Budget
Come up a cap that you would like to limit your total family expenses to. Make sure that this cap is realistic and it can cover your groceries, bills, transportation, entertainment, etc. Make sure that your family agrees and keep to the limit.
- Debt Management
Make an effort to pay off your credit card bills and other loans such as home loan, car loan etc. This will ensure that you do not have any roll over interest unnecessarily. Other bills are usually less worrying as they normally have a 2 month grace period, such as phone bills etc.
- Insure your family
Ensure that your family have enough insurance protection so that you will not be tied down by any unnecessary burdens should any unfortunate event occur. You may want to consider preparing for your child’s education plan as well. (My suggestion for such plan is more of term plan to ensure that you are covered enough to pay off your child’s education should anything happen to you, and the rest of the money set aside for this will directly go into investment, such as stocks and shares, properties etc. But please bear in mind that for whichever investment mode you choose, you need to ensure that you have enough education / knowledge for that investment mode in order to make money from it. In other words, you must know what you are doing and not follow the crowd blindly, not even follow what your financial planner has to say without first understanding fully what exactly is going on.)
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