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A Financial Plan That Works For You

  • Financial Literacy


If you’ve ever been intimidated about creating a financial plan, don’t fret -- just think of this as planning for your wedding! As with planning any wedding, you can achieve this in 3 simple steps by asking yourself the following questions: Where do you want to be? Where are you now? And how will you get there? Don’t be daunted, the good news is you and your spouse will be together and side by side in this journey, making everything a piece of cake

So, where do you want to be?

You need to establish what your goals are for you and your family. In establishing your goals, make sure that you set the time horizon and the monetary value. A helpful tip would be the acronym, SMARTER (Specific, Measurable, Attainable, Relevant, Time-Bound, Escalating and Rewarding). People fall into the trap of creating vague and ambiguous goals like “we want our children to go to the best school!” What is the best school? Is it UP, or Ateneo? Are you thinking of securing education abroad? How does this entail in terms of cost? When do you expect this to happen? What course are they supposed to take? After you have answered all these, place value to it.  After all, how would you even know you’ve already achieved your goal if there is no numerical value in place? It’s like shooting on a target you cannot even define. 

At this stage, assess your and your spouse’s risk appetite. Remember the golden rule “the higher the returns, the higher your risk”. The challenge you will face at this phase is when you have a different set of risk appetites. Don’t worry as this happens to practically all couples.  So instead of arguing who should be followed, my advice is to match your choices to your goal. 

Where are you now?

Gather and document all information that will be relevant to assessing your financial situation. This would include your health situation and that of your family, your interest and hobbies, expectations about employment, a possible change in lifestyle, such as retiring soon.  Include as well as financial data such as assets and liabilities, current investments and how has it performed in the last few years, insurance policies, income and expense, and so on. 

Understand that each financial decision you will make can affect other areas of your plan. Always be mindful of the “Big Picture”. This will help you stay clear of potential pitfalls and misalignment. You need to look at both your and your spouse’s situation. Does your cash flow, asset and liabilities, insurance and current investments match your goals? Does your risk appetite match your investments? Do your investments match your goal’s time horizon? 

How will you get there?

This requires choosing ways to achieve the goals you have identified.  This will include mapping how much you and your spouse need to set aside regularly, realignment of your investments, or even possibly making adjustments to your lifestyle. 

You need to evaluate possible courses of action, taking into consideration your life situation, personal values, and current economic conditions. Every decision closes off alternatives. For example, by deciding to invest in the stock market now, it may mean you cannot take a vacation. A decision to go back to school full time may mean you cannot work full time. Opportunity cost is what you give up by making these choices. Many of these financial decisions will be challenging and I have to admit, having a good grasp of investment planning will go a long way at this stage! So consider sitting down with a professional Insular Life Financial Planner as your partner! 

Once all of this is done, implement it! Yes! It sounds simpler that you think! It takes a lot of discipline for both of you to put this into action. Saving a few thousands or even hundreds per month may be difficult especially if you have a family! People can easily be tempted to take no action, eventually leading to procrastination. Successful people will tell you that just getting started is the most difficult but the most important aspect of succeeding! 

Best advice? Start gradually and be realistic. Work out a low to medium level savings and less complex investment strategy. You could learn how to invest with just one fund or you could start saving a few pesos per month to build up to your first investment. In time, you can slowly build it up to your comfort level and budget.

Just remember, this is a continuous cycle. Make it a habit to review your goals, always referring back to the goals you set as significant life and financial events occur.  And again, you may also want to sit down with a professional Insular Life financial planner to provide step by step guidance on how to reach your family’s goals!

Happy, Wealthy living!

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AUTHOR BIO Senior Wealth Management Executive

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