The Essential Financial 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. 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. Use these checklists as a roadmap towards building financial security in your 30s and 40s.
Financial Planning for Your 30s
Your 30s are about getting ahead financially and building a solid foundation that will last the rest of your life. It’s also a period of major transitions. Marriage, children, buying a home, or starting new ventures happen more frequently at this age. Manage these exciting changes by laying the groundwork for a stable financial future.
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.
We have a guide that will help you spot any insurance protection gaps.
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.
Start an education fund for your children
The cost of education in Singapore is rising, increasing 21% faster than core inflation over the last decade. 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 using a savings plan like Gro Junior Saver, which gives you cash benefits at different stages of your child’s education. Besides helping you save for your child’s university fees, you can also choose riders that will protect your child’s future in case you pass on unexpectedly, get permanently disabled, or fall ill.
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, such as Gro Retire Ease. This flexible savings plan lets you choose your premium term, 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.
Financial Goals 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 in 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.
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 stabilized 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, hospitalization 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?
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 undermines 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.
Upgrade your ElderShield 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 ElderShield coverage with a plan like PrimeShield. In case you get severely disabled, this plan increases your monthly disability benefit for life and gives a one-time lump sum payout.
Enhance your long term care protection from CareShield Life with Care Secure
Something to look forward to on 1 October 2020 is a new nation-wide long term care scheme – CareShield Life – which aims to provide better protection against the uncertainty of long term care costs if you become severely disabled. 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 coverage from two Activities of Daily Living onwards with a payout of up to $5,000 for life if you are moderately or severely disabled, depending on your disability status and the monthly disability benefit level chosen by you. It also provides comprehensive benefits such as support benefit, dependant benefit, and death benefit. To ease your financial commitments, you can opt to pay your premiums using up to $600 from your MediSave account.
CareShield Life and Care Secure will be 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 MerdekaCare are designed specifically for the needs of elderly parents. In case they get disabled due to an accident, MerdekaCare paves a smooth road to recovery by covering medical fees, rehabilitation expenses, and even home-care service fees.
Put your estate plan together
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.
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. You can also ask Sage, our friendly digital advisor who has ready answers to basic questions about your financial priorities.
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.
This advertisement has not been reviewed by the Monetary Authority of Singapore.