Mr Alfred Chia BSc, CFP, FChFP, ChFC, SAMP, Affiliate of STEP, IBF Fellow
CEO, SingCapital Pte Ltd
This article is contributed by SingCapital
Many often make the mistake of seeing their income as a “huge lump sum”, and fail to allocate their money for the different needs in life. The lack of a proper money management system means that any income earned seem to “disappear” right before their eyes.
The 4-3-2-1 Money Management Framework can help us allocate our income in the following proportions:
|Not more than 40% of your salary should be spent on Liabilities. If you find yourself spending more than this percentage on housing, car and credit card loans, it is time to reduce and simplify your living habits so that you would spend less on your debt servicing.|
|3||Not more than 30% of your salary should be spent on household Expenses such as groceries, children maintenance, domestic helper, shopping etc. Should your expenses exceed the 30% limit, it is time to rein in on your expenditure by adhering religiously to a budget.|
|2||Save at least 20% of your salary for various investment instruments like fixed deposit, stocks, unit trusts, gold (not referring to jewellery), etc. This 20% set aside for investment purposes will be the money that will build your wealth in the long run.|
|1||Save at least 10% of your salary for insurance protection such as medical, critical illness, children’s education, etc. This 10% will be the pillar of stability guarding against any contingency that might arise, giving you a peace of mind while you build your wealth.|
In short, the 4-3-2-1 System of Money Management is the LESS way of achieving MORE, LESS being:
It is never too late to take charge of your own financial destiny. The 4-3-2-1 System of Money Management can be adapted to suit your living needs instantly, so long as you are determined to begin.
Remember: proper financial planning and money management taken today will accord you the financial freedom and abundance of tomorrow. As such, take charge of your financial destiny now!
Contact SingCapital to find out how you can take charge of your financial planning journey.