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Life is not merely about survival; it’s about living to the fullest. While meeting our basic needs is essential, we all have desires and dreams—our wants—that give meaning to our lives. Needs and wants are different, but both are backed by the ability to pay.

While most of us know we have to save money for our necessities (especially when we have no stable income, like after retirement) and goals, fewer know how to execute them effectively and wisely. The first step, essentially, is to understand more about ourselves and plan carefully. Asking yourself the questions below may help guide you on your journey.

What are your goals?

Our needs and desires change throughout our lives. In our early 20s, we may be focused on paying off student loans. After a few years in the workforce, we may want to buy a car or other luxury items. When we're ready to start a family, our children may become the centre of our lives. And in retirement, we may long for more leisure time and quality experiences.

The effort to achieve different goals varies and it’s essential to think holistically when planning. For example, if you want to send your child to study abroad, you’ll need to consider not only the tuition fees but also the cost of living. The articles provided below delve into key considerations for four common financial planning scenarios:

• Planning for the spending needs after retirement
• Planning for your child’s education
• Planning for home purchasing
• Planning for pursuing goals in life

Additionally, include potential unexpected expenses, such as medical emergencies or unforeseen repairs, in your planning.

What is your priority and timing?

As your list of needs and desires expands, managing them can become challenging. It is crucial to prioritise and arrange the items on your list. Consider the repercussions of placing one goal over another and weigh your options carefully. But try not to set unrealistic goals or save too much too soon, which may lead to discouragement. Start with what you can do and gradually increase the savings to accomplish bigger goals.
You may also want to decide if you would like to focus on fulfilling one objective at a time, which would allow you to accomplish it quickly but may delay lower-priority items. Alternatively, you could save for multiple goals simultaneously, which would take longer but enable you to achieve many items at once. Ultimately, the choice is yours and depends on your preferences and circumstances.

How much do you need?

Many tools on the internet can help you estimate how much you need to save every month. Keep in mind that the results are for reference only, as the inflation and return rates are assumptions only. However, it can help you grasp whether you can allocate this amount for saving or investing. Additionally, don’t forget to set aside emergency funds that can cover your living expenses for six months to one year without any extra income.

How much risk can you afford to take?

Risk tolerance is the amount of risk you are comfortable taking with your money. It is vital to gauge your risk tolerance because it will affect your investment decisions. For example, if you are relatively conservative and do not want to take too much risk, you may select a portfolio composed mainly of cash or bonds. On the other hand, if you are more risk-tolerant, you may choose a portfolio that participates in the stock and fund markets.

In general, if a person has more time to recover in case of a loss, such as when they are still in their 30s and far from retirement or if they do not save for short-term goals such as a home down payment, they will be more willing to take on more risk. However, personal preferences and responsibilities play a significant role in determining risk tolerance. Some individuals may choose to take less risk, even with time on their side, if they have dependents to support.

Once again, don’t forget to reserve cash that is immediately accessible when unplanned expenses emerge. Remember that there is no such thing as a risk-free investment, nor are there high yield, high security and high liquidity products. A product's risk, profitability, safety and liquidity are often complementary.

The Golden Rule of Saving

In conclusion, the golden rule of saving can be summarised in two simple yet powerful words: start now. Procrastination is the biggest obstacle to achieving your saving goals. Many people know they need a savings plan but fail to take the crucial first step of defining what and how they want to save. If you have already begun understanding yourself through the questions discussed above, congratulations on taking that important initial leap.

Then, it’s time to embark on your saving journey. For it to go smoothly and successfully, discipline and persistence are key. Stick to your budget, regularly transfer money to your chosen savings plans and consider automating these transfers for consistency. While challenges may arise along the way, the rewards will undoubtedly make all the effort worthwhile.