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Saving $1 million for our retirement nest egg could be a milestone that many of us want to work towards.
Just like how we can’t expect to run a sub-10 minutes 2.4km without committing to a training regime, neither can we expect to realistically achieve $1 million in our retirement nest egg without first having a financial plan, and being disciplined in working towards this plan.
Whether it’s our fitness or financial goals, the approach we take towards achieving our goals has always been similar.
- Set a goal and write it down.
- Have a plan and get help if required.
- Execute the plan and review it regularly.
Sounds easy? Well, that depends.
#1 Set A Goal & Write It Down
The first thing we need to do is to set our goal(s) correctly, and this needs to be a goal that makes sense for us and meets our aspirations.
For example, accumulating $1 million by the time we retire could be a goal that some people may aspire towards. Alternatively, it could be getting passive income of $3,000 a month for ourselves by the time we retire (that’s my goal!). Some may need more if they aspire to travel often and enjoy the desired lifestyle during their retirement. Others may prefer to continue working part-time and thus, may not need as much money.
Regardless of what our goals may be, they need to be aligned to what we want to achieve and while setting the right goals can give us a focal point, they have to be realistic as well. For example, aiming to run 2.4 km below 10 minutes could be an achievable goal for many people who are willing to train hard, eat right and adopt healthier daily living habits. Wanting to beat Soh Rui Yong’s 6 minute 53.18 seconds timing isn’t going to be as realistic.
Writing down our goals (or documenting it in some other way) is equally important. The process of writing down our goals helps us to clearly process our thoughts. It also keeps us accountable for what we say we want to achieve.
For financial goals, we can use an app such as the Pulse by Prudential which has the Wealth@Pulse component to help us start and set financial goals for ourselves.
I tried it out, and chose the option to set my goal to save for retirement. The first thing I had to do was input my target retirement age.
For me, this is 60.
Based on the income information which I input earlier when I first downloaded Pulse, Wealth@Pulse provides some useful information on the type of lifestyle that I may prefer, and how much it would approximately cost each month.
I chose the simple lifestyle because the amount required (about $3,000 a month) is what I envision I need to get by when I retire at 60, and when my kids and home mortgage are no longer expenses I need to worry.
#2 Have A Plan & Get Help If Required
After setting our financial goals, the next thing is to formulate a plan that helps us achieve it.
Any plans should take into consideration what we are already doing. For example, if we are in relatively good shape, then we may just need to tune up our training to achieve our fitness goals quickly. However, if we are out of shape, then it will take a lot more time and effort to hit our goals.
This applies to financial goals as well. One clever thing about Wealth@Pulse is that it rightly considers our CPF monies to help us determine how much more we need to achieve our retirement goals.
With our CPF inputs, Wealth@Pulse can suggest to us whether we are on the right track to achieve our ideal retirement goals. If we are not, it also tells us how far off the target we could be.
From the screenshot above, the bad news is that solely based on CPF contributions alone, Wealth@Pulse suggests that it won’t be enough to fund the income I need for my desired retirement lifestyle.
The good news though is that I am not completely off-track for my retirement as CPF alone can already give me more than 50% of what’s needed. However, I need to fund my retirement with other sources of income, and that may include my investment portfolio, rental properties and annuity plan.
How long it takes for me to attain $1 million in savings, $3,000 a month in passive income or any other desired level of income that is needed for my retirement will depend on my saving and investment decisions today. But no matter what, I need to start planning for tomorrow today.
While these are personal financial goals, the last thing we want to do is shy away from getting help when we need it. Similar to how a personal trainer can help develop a training plan to help us achieve our fitness goals, we can also engage a Financial Consultant to help us formulate a financial plan that will enable us to attain our retirement goals.
The Wealth@Pulse on the Pulse app makes this easier by providing a“Call Me Back” option on the app to engage an experienced Prudential Financial Consultant to contact me for a more in-depth financial planning discussion.
I can choose to be contacted either via a call or email.
#3 Execute the Plan & Review It Regularly
Once we have our financial plans in place, the final step is to execute. This is always easier said than done.
To ensure our financial plans work, we may need to cut down on certain non-essential expenses to increase our savings each month, or to channel our savings to insurance plans across investments or savings. And we need to do this consistently over a long timeframe for it to work. As is usually the case, it’s only when we adopt more prudent financial habits and adapt our lifestyle that we can achieve our goals over the long-term.
Reviewing our financial plan regularly is also important. Our financial goals may change during certain stages of our lives (e.g. when we have kids or start to earn more with a new job) and these always-evolving goals should be reflected in our plans.
Just like how a personal trainer will help track our progress and motivate us, we can also engage a good and trusted financial consultant to help keep track of the progress of our financial planning, and to adjust the plan accordingly when required. He or she can advise us on other plans we can put in place to achieve our financial goals more efficiently, and also to advise on the right insurance policies we can purchase to protect our financial plans should unforeseen events were to happen.
Financial planning can be daunting – it involves time, money, making plans that are years in the making and adjusting our lifestyles. Yet, it’s an important and necessary step, no matter which stage of life we are in, to proactively improve our finances and safeguard our loved ones.
The Wealth@Pulse on the Pulse app is one simple tool that we can use to kickstart our financial planning journey today by helping us set our goals, formulate our plans with the help of a Financial Consultant, and keep us accountable for our plans.
This article is for your information only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. Information is accurate as at 18 January 2022, unless otherwise indicated.