Some goals in life may be easier to achieve than others. Saving enough to afford a vacation trip or buy a car is easy with some short-term planning. But other life goals may require longer term plans.
From getting married and starting a family to buying a home, many of life’s most important moments will require proper financial planning. This is where investing can help you grow your money faster to achieve your goals. But before you start, you need to ask yourself a question.
What are you investing for?
Having a clear goal in mind will increase your chances of success. You need to set goals for yourself so that you can measure the success of your investments. Without it, you may not know if you are investing enough or if you are taking too long to achieve this goal.
Setting financial goals for major life events can also inspire you to make decisions and take actions that bring you closer to that goal.
Major life events that can have a bigger impact on your finances in the long run include:
Romance aside, marriage has a big impact on your finances. It starts with the wedding ceremony and celebration, which comes at a steep price that you cannot afford with your monthly salary alone. You will probably need to allow a few years to pay for the wedding expenses.
Marriage is also about making financial decisions together. Your choices of income, expenses and investments no longer depend only on your decisions, but also on your spouse. The combination of your finances can also provide better financial opportunities, as your combined income means that you are eligible for larger investments, like buying a house while sharing the costs.
A new baby means an instant increase in expenses, starting with the cost of delivering and caring for the baby. These expenses will continue to increase throughout your child’s school years or if you have more than one child.
Saving for your child’s education will require long-term financial planning if you don’t want to go into debt. The good thing is that you know in advance how many years you have to plan your investment accordingly.
If you have dependents, saving money for an emergency fund and protecting your finances is even more important. You will need an investment plan with the right investment portfolio that can grow with the growing needs of your family.
Saving and investing in this event of life is one of the most important decisions because you can live decades after retirement and still have to support your own expenses even without a monthly income. For Malaysians who have EPF savings, studies have shown how the majority of them may not have enough to cover the cost of retirement today.
Therefore, they need to supplement their EPF savings with other forms of savings and investing in private pension schemes may be an option. The World Bank has recommended an income replacement rate of 70% of an individual’s last salary withdrawn to live a comfortable retirement life. So, if your last salary withdrawn is 10,000 RM per month, you need 7,000 RM per month to live comfortably through your retirement years.
Retirement also comes with other expenses such as rising health care costs and maybe even paying for nursing care and recurring medical expenses if you have chronic health conditions. It is important to have an investment plan based on how much you will need for retirement.
It is only reasonable to take steps to prepare as much as possible for the financial security of your loved ones while you are still there.
It means having a plan to write off your own debts instead of passing them on. The last thing you want to do is let your loved ones inherit your debt commitments without any financial plans on how to clear them.
Leaving an inheritance for your children in the form of property, car, insurance, or other investments that they can benefit from can also help them become financially independent.
Your inheritance can also include support from a charity or plans for how your money will be used by naming your beneficiaries and how your assets will be allocated.
Knowing what you are investing allows you to start making investment decisions with the end goal in mind.
Create a financial game plan
Once you have your investment goals in mind, you can plan how to achieve them by choosing the right investment strategy.
Knowing how long you have before you need money for each of these life events allows you to develop a game plan for achieving those goals.
For example, if you are new to your professional life and are planning to start investing, you can start by ranking these major life events based on how much time you have before the big moment arrives.
|To marry||High||Short term|
|Raising a family||High||Medium to long term|
|Planning for inheritance||Low||Long term|
If you have a short time frame, you may want to include higher risk investments with the potential for higher returns. Goals that have a medium to long time horizon may have a mix of high to low risk investments to maximize returns over a long term investment horizon.
Having a game plan in mind can also help you focus your efforts on tackling any challenges that get in your way. If you have high interest debt like credit card debt or loans you took for your education and car financing, having a game plan will allow you to pay them off to secure your future goals.
If you are new to investing, a financial advisor can help you get started in building an investment portfolio tailored to your needs. This way, you can get expert advice up front on how to prioritize your budget, save more, or revisit your retirement planning strategy.
Start your investment goals with Principal
You can never start investing too early in your life. The earlier you start, the more time you have in the market to take advantage of the compound interest on your investments to grow your money.
Principal offers a range of investment solutions ideal for those new to investing.
- Unit trust. Suitable for new investors looking to start small.
- Private pension plan. Suitable for long-term investors looking to hedge against inflation and take advantage of compound earnings.
- EPF i-Invest. Suitable for those looking to diversify their EPF savings into other national and international funds without additional sales fees by consultants.
- Sharia-compliant investments. Suitable for those who wish to maximize their investments in accordance with Sharia principles.
If you’re thinking about starting to invest for life’s bigger goals, Principal can help you take the first step. Find out more.
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