Planning the Essential Financial Freedom Checklist for Your 30s and 40s
So much life happens in our 30s and 40s. At this stage, you find more professional success and financial stability, but with these personal milestones also come evolving responsibilities. These successes also coincide with big milestones, like marriage, having children, buying a flat, or celebrating your parents’ retirement. You’ll find that people depend on you and your success more than ever before.
Juggling these responsibilities can get overwhelming, which is why you should start paying careful attention to your financial situation. By understanding the potential hurdles specific to your 30s and 40s, you can build a solid foundation for a secure future. Let these checklists serve as your roadmap to financial freedom, empowering you to make informed decisions and achieve your goals, no matter what life throws your way.
Use these checklists as a roadmap towards building financial security in your 30s and 40s.
| Financial Freedom Checklist for Your 30s | |
| Building a Strong Financial Foundation |
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| Insurance Needs |
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| Retirement & Education Planning |
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| Additional Considerations |
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| Financial Freedom Checklist for Your 40s | |
| Review and Adjust Financial Goals |
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| Debt Management and Wealth Protection |
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| Estate and Legacy Planning |
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Financial Planning for Your 30s
While your 30s are a time of great opportunity, they also come with unique financial challenges. Balancing family and career growth can be particularly demanding. The costs associated with starting a family, such as childcare and education, can strain your budget.
Another challenge is the temptation to overspend or accumulate debt, especially with the availability of easy credit. One crucial advice we can give is to develop healthy financial habits and avoid lifestyle inflation, ensuring your expenses don't outpace your income.
To get ahead financially and build a solid foundation that will tide through these major transitions, you will need to futureproof your financial planning while you’re ahead.
Building a Strong Financial Foundation
Budgeting and Managing Debt
In your 30s, laying a strong financial foundation is key. Start by creating a detailed budget that tracks your income and expenses, helping you identify areas where you can save more and spend less.
Prioritise paying off high-interest debts like credit card balances or personal loans. These debts can quickly snowball and hinder progress towards your financial goals. Consider consolidating debts or negotiating with creditors for lower interest rates to streamline your repayments.
By effectively managing your debt and establishing healthy spending habits, you'll pave the way for greater financial freedom in the years to come.
Establishing an Emergency Fund
Life is unpredictable, and unexpected expenses can arise at any time. That's why building an emergency fund is a crucial aspect of financial planning in your 30s.
An emergency fund can cover unexpected costs like medical bills, car repairs, or temporary loss of income, giving you peace of mind and the ability to handle life's challenges with confidence.
Aim to save three to six months' worth of living expenses in a readily accessible account so that you will have enough funds to cover any unexpected crises that may appear,
Insurance Needs
No life insurance? Get covered now.
Do your loved ones depend on your income? If they do, you’ll want to take care of them no matter what happens to you. That’s why getting life insurance is one of the most impactful and affordable financial decisions you can make.
Life insurance lets your loved ones maintain their lifestyles and carry on with their plans in case you pass before your time or meet with an unfortunate accident. The payout from your policy can help pay the bills and meet present-day needs, or even fund your loved ones’ future endeavors.
In general, there are two kinds of life insurance you can buy: term and whole life. Term life insurance provides financial protection for a fixed amount of time. This would help your family cover present-day expenses like the mortgage. On the other hand, whole life insurance covers you for life, for as long as you pay the premiums. At the end of your life, or should you choose to end coverage from a whole life plan, you or your family will receive a cash payout.
If you have a flat, you can also consider getting mortgage insurance. This is a term life plan that frees your family from mortgage payments in case you get disabled or die unexpectedly. Plans like Income’s Mortgage Term give your family a lump sum that can be used for the mortgage in case of death, total disability, or terminal illness.
Which type of life insurance to get depends on your needs and budget? To help you decide, we’ve outlined the key differences between term and whole life insurance.
Already have life insurance? Check for protection gaps.
Getting life insurance ensures financial security for your loved ones, but only if you have the right level of coverage. Many working Singaporeans are under-insured for events like death, total permanent disability, and critical illness.
How do you know if you’re under-insured? You need to know how much your loved ones need for financial obligations like the mortgage, living expenses, or university fees. Then, check your insurance policy to see if these needs are covered if you fall critically ill, get permanently injured, or pass on unexpectedly.
You should also check if you have secured health insurance for your dependents and children. Although children are covered by MediShield Life, it would be wise to get health insurance coverage early on, while they are still healthy. Not only can one serious illness negatively impact your family’s finances; insurers will not cover conditions that have already developed.
Retirement Planning
Increase your retirement contributions
You are entering your peak earning years and, though retirement is still some 30 years away, now is the time to build that retirement fund.
We hear you - it’s tempting to prioritise other goals instead. But unlike upgrading to a condo, which you can finance through other means, you can’t afford a deficit in your retirement savings. A deficit means being financially dependent on your children or working in your old age to meet your living expenses.
Consider supplementing your retirement accounts with plans that give you regular cash payouts during your retirement.
Starting an Investment Portfolio
As you progress through your 30s, consider taking the next step in securing your financial future by starting an investment portfolio. Investing offers the potential for long-term growth, helping you accumulate wealth and achieve your financial goals faster.
It's never too early to start planning your investments, and your 30s provide an ideal opportunity to grow your wealth. By investing consistently over time, even small contributions can grow significantly, thanks to the magic of compound interest.
Consider exploring various investment options like stocks, bonds, mutual funds, or exchange-traded funds (ETFs). Diversifying your investments across different asset classes can help to spread risk more evenly and potentially enhance returns. If you're unsure where to start, seek guidance from a financial advisor who can help you create a personalised investment strategy tailored to your risk tolerance and financial objectives.
Remember, investing is a journey, not a sprint. Stay disciplined, focus on the long term, and make informed decisions to build a robust investment portfolio that supports your dreams and aspirations.
Start an education fund for your children
The cost of education in Singapore is rising, but the good news is that you have plenty of time to prepare. Starting your children’s education fund now means you’ll have enough to cover most of their university fees in 15-20 years.
Zarina Yusof, a 43-year-old administrative manager, grew up in a family that had almost no knowledge of financial planning. This meant she had to take a loan for her own tertiary education.
“At that time, my parents knew nothing about investing,” she said. “They didn’t know that they had to start saving for my university fees after I was born.”
She admits wishing that her parents were more financially literate. “Maybe then I wouldn’t have needed a study loan and a part-time job to finance my university degree,” Zarina said.
It’s important for Zarina that her two sons, aged 4 year and 4 months respectively, do not experience the same difficulties she did. “I started funding their education from the time they were born so that their school fees will be fully taken care of when they come of age,” she said.
Consider supplementing your retirement accounts with plans that give you regular cash payouts during your retirement, such as Gro Retire Flex Pro. This flexible insurance savings plan lets you choose your desired amount and duration of payouts, so your present-day needs aren’t impacted by your retirement goals.
Add additional income streams
You might already know about the importance of diversifying your investment portfolio. The same is true for your income. Having more than one income source increases financial security and gives you a safety net in case anything happens to your business or full-time job.
Jason Tan*, a 30-year-old entrepreneur, hosts corporate events and weddings during his free time. When asked about his motivations behind hosting, he said he needed to create financial stability during the early months of launching his personal development business.
“One day, I found myself running out of savings, zero leads, and zero direction,” he said. “So when a friend asked me to host his wedding, I gladly accepted the offer as it meant earning some money.”
That experience taught Jason the importance of income diversification. “Now, business is good and stable, but I still host some events on a monthly basis. It allows me additional income, bringing me one step towards financial freedom.”
Take full advantage of your peak earning years by adding one or more sources of income. You can do this by offering consulting services, monetizing your hobbies, or doing part-time gigs like Jason. The money you earn can be used to fast-track your long-term financial goals, or to help you meet your short-term needs.
Upgrade your CareShield plan
While it’s true that Singaporeans are living longer, the average Singaporean will also have about 6 unhealthy years spent incapacitated by disabilities. That doesn’t factor in conditions like Alzheimer’s disease, which cause periods of disability that last longer than a decade.
If you have a family history of debilitating conditions, consider enhancing your CareShield Life coverage with a plan like Care Secure. In case you get severely disabled, this plan increases your monthly disability benefit for life and gives a one-time lump sum payout.
Financial Planning for Your 40s
Financial planning in your 40s is less about establishing your foundation and more about optimising your resources. With children starting university soon and retirement on the horizon, you need to make sure you’re on track with your goals.
Now is a critical time to brush the dust off the plans you laid in your 30s and see how they’re doing.
As part of the "sandwich generation", you will face the unique challenge of balancing the needs of both ageing parents and growing children, which can put a strain on finances, emotions, and time.
It's crucial to have open conversations about caregiving responsibilities, explore financial assistance options for elderly care, and ensure you have a support system in place.
And while building a secure future for your family remains a constant priority, it will take on added significance in your 40s. Unexpected events like illness, disability, or job loss can disrupt even the most carefully laid plans.
Review your insurance coverage, create an emergency fund, and explore additional income streams to safeguard your family's financial well-being.
Review and Adjust Financial Goals
Review your insurance protection
Today, your family depends on your income more than ever. You are also more vulnerable to health issues and retrenchment at this age.
After 40, chronic conditions like high blood pressure, cholesterol, and some cancers are more likely to occur. The Ministry of Manpower also revealed that nearly 70% of retrenched workers are professionals over 40 years old. Make sure your family has a financial safety net in case of these unexpected events.
Joshua Koh*, a 54-year-old sales and business development director, shared that his parents did not do any form of financial planning for him or any of his siblings. When he was 14 years old, his father lost his job, and his family had a hard time making ends meet.
“I washed dishes at a zi char after school to help my parents pay the bills,” he said. “My parents were always fighting about money and I almost quit school so I could earn more. But my mother would not hear of it and insisted that I finish my studies.”
A year later, Joshua’s father found work, and things stabilised at home. He managed to finish his studies and get a degree. While at university, he learned what it meant to do financial planning. Due his experiences as a teenager, Joshua has now ensured that he and his wife have accident plans, hospitalisation plans, and life insurance policies.
It might have been years since you last looked at your health and life insurance policies. Make time to sit with your financial advisor and ask if you have enough protection. What changed occurred in the last few years, and are your policies keeping up with these? Are there any areas where you are under-insured?
Assessing Financial Needs for the Next Decade
As you enter your 40s, it's time to take a closer look at your financial needs for the next ten years. Your priorities might have shifted since your 30s. Perhaps you're thinking about your children's university education, planning an early retirement, or looking to upgrade your home.
Whatever your aspirations, now is the time to assess your financial needs and make sure you're on track.
Start by evaluating your current financial situation, considering your income, expenses, and existing investments. Project your anticipated expenses over the next decade, factoring in inflation and potential lifestyle changes. This will provide a clearer picture of your financial requirements and help you identify any potential gaps in your savings or investment plans.
Next, review your financial goals and ensure they are still relevant and achievable. Have your priorities shifted? Do you need to adjust your savings or investment strategies to stay on track? This is also an opportune time to re-evaluate your risk tolerance and explore investment options that align with your financial goals and time horizon.
By taking a proactive approach to assessing your financial needs for the next decade, you can empower yourself to make informed decisions and build a secure financial future for yourself and your loved ones—It's never too late to start planning.
Clear as much debt as possible
Loan repayments should be among your top priorities. Whether it’s your mortgage or business loans, you don’t want to approach retirement with debts to repay on top of your living expenses.
Carrying debt also poses a financial risk. If you pass away unexpectedly, whoever you share a joint loan account with (i.e. your spouse or family member) will end up repaying your debts. Whoever inherits your home will also be responsible for the mortgage attached to it. All these undermine the financial stability you worked so hard to create.
Clear high-interest debts like credit cards first, then whittle down loans with fixed rates and repayments. Fixed repayments are easy to plan around, so factor in these into your financial planning.
Enhance your long term care protection from CareShield Life with Care Secure
CareShield Life, Singapore's national long-term care scheme, has been providing crucial support since its launch in 2020, offering lifetime cash payouts to those with severe disabilities. Lifetime cash payouts will be given for as long as you are severely disabled, starting at $600 a month in 2020 and will increase until age 67 or when you make claims, whichever is earlier. What’s more, CareShield Life premiums are fully payable by MediSave which means zero out-of-pocket expenses.
To achieve greater health security with lifetime coverage, you can also consider signing up for Income’s Care Secure. Care Secure provides the following benefits:
- Lifetime coverage with monthly disability benefit of up to $5,000 if you are disabled1 and cannot perform two or more ADLs. This benefit payout2 depends on your disability status1 and the monthly disability benefit level3 chosen by you.
- Comprehensive benefits such as support benefit, dependant benefit, and death benefit.
- Pay for premiums using up to $600 (per insured person per year) from your MediSave account.
CareShield Life and Care Secure are available to Singapore Citizens and Permanent Residents born between 1980 and 1990, as well as those born after 1990 when they turn 30. Both these schemes will subsequently be available to those born earlier in end-2021.
Ensure your parents have adequate health coverage
Manage your parents’ costs by making sure they have enough healthcare coverage. If they don’t have an Integrated Shield Plan yet, insist that they get one before their 75th birthday – the latest they can apply for the policy.
If they already have health insurance, review their policy and assess whether they have adequate cover for accidents, disabilities, or critical illness. Look into getting additional riders or plans to meet these gaps.
Plans like SilverCare cater to the needs of elderly parents. In case they get disabled due to an accident, SilverCare paves a smooth road to recovery by covering medical fees, rehabilitation expenses, and even home-care service fees.
Estate and Legacy Planning
One way of protecting your family is to leave legally-recognised instructions for your financial affairs after your death. This is called an estate plan. Doing proper estate planning ensures that your surviving family members receive the assets you’ve set aside for them.
Start your estate planning by taking stock of all your assets and liabilities. Then, write a will that states a plan for how your financial matters will be handled. Your will should contain proper documentation of all your holdings, including investments, life insurance policies, property owned, and debts.
Reviewing and Updating Your Will
Creating a will is a proactive step towards securing your legacy, but it's not a one-time task. As life unfolds, your circumstances and wishes may change.
An outdated will may not accurately reflect your current wishes and could lead to unintended consequences for your loved ones. Regularly reviewing your will ensures that it accurately reflects your current intentions and provides clear instructions for the distribution of your estate, offering your family clarity and peace of mind in the future.
Trusts and Beneficiary Designations
Beyond a will, consider utilising trusts and beneficiary designations as part of your estate planning strategy. Trusts provide a flexible and secure way to manage and distribute assets, especially when you have young children or beneficiaries with special needs and circumstances.
Beneficiary designations, on the other hand, allow you to directly name individuals to receive specific assets, such as life insurance policies or retirement accounts, bypassing the probate process and ensuring a swift transfer of wealth.
By utilising these estate planning tools, you can further enhance your legacy plan and ensure that your hard-earned wealth is preserved and utilised in accordance with your wishes.
The Financial Decisions You Make Today Affect Your Loved Ones Tomorrow
Every decade of life comes with changes and challenges. Your prime earning years are also filled with fresh opportunities. Now that you know what you need to do to ensure financial stability, it’s never too late for you get your finances in order – so long as you start now.
Remember, the financial decisions you make today affect the future and security of your loved ones.
You don’t have to master your finances alone. Get help from a financial advisor if you’re unsure about how to get your goals back on track.
1 Moderate disability or moderately disabled means your inability to perform two ADLs, which means requiring significant assistance from another person throughout the entire activity.
Severe disability or severely disabled means your inability to perform at least three ADLs, which means requiring significant assistance from another person throughout the entire activity.
2 During the waiting period, we do not pay any claim except claims resulting from an accident. If you become disabled during the waiting period (other than due to an accident), your policy will end and you will receive a full refund of your premium.
In order to claim under Care Secure, a certification by an approved assessor under the Relevant Act that you are suffering from disability must be sent to us. Relevant Act means the Central Provident Fund Act (Chapter 36) or CareShield Life and Long-Term Care Act 2019, and subsidiary legislations as amended, extended or re-enacted from time to time.
If you become and continue to be disabled, we will pay a monthly disability benefit for life. If you become moderately disabled, we will pay 100% of the disability benefit. If you become severely disabled, we will pay 100% of the disability benefit, less the CareShield Life benefit that applies to you. If you are receiving CareShield Life benefit, we will automatically consider you to be severely disabled.
We will pay the first benefit payment immediately after the deferment period. Deferment period means the 90-day period from the claim date (inclusive). We treat the claim date as the date on which the claim form for your policy is certified by an approved assessor under the Relevant Act.
If you have recovered from a disability but become disabled again from the same cause within 180 days, we will not enforce the deferment period for the new claim. If you suffer disability arising from the same cause after the 180-day period, or suffer a disability arising from a different cause, the deferment period of 90 days applies for the new claim.
The CareShield Life payout (if any) will be administered by the Singapore Government.
3 You can purchase Care Secure at monthly benefit levels from $1,200 to $5,000 in multiples of $100.
This article is meant purely for informational purposes and does not constitute an offer, recommendation, solicitation or advise to buy or sell any product(s). It should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. Please seek independent financial advice before making any decision.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact Income Insurance or visit the GIA/LIA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org.sg).
This advertisement has not been reviewed by the Monetary Authority of Singapore.
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