Your needs change over time, so should your financial plan. Learn how to define your financial goals and priorities, and what to look out for as you invest at different life stage.

Assessing your goals

Generally, we invest to meet certain needs at various points in our lives. Are you looking to accumulate savings, buy a home, send your children to university, or prepare for your retirement?

Before you invest, you should have a clear idea of your goals and risk tolerance. These can change over the course of your life, so you should review them regularly.

Investing for different life stages

There are, broadly speaking, four major life stages for all of us. Every phase brings different goals and priorities that require a different investment approach.

Starting out in your career

At the start of your working life, you have a long investment horizon, and will be just starting to grow your capital for investments.

This is a good time to lay a strong foundation financially and plan ahead. With a relatively longer investment horizon, you are better able to ride out short-term fluctuations in the market. However, know your limits and only invest in products that suit your risk appetite.

You should aim to:

• Build up your savings and set aside an emergency fund - Aim to build up cash reserves that can sustain three to six months' expenses. You can start by saving at least 10% to 20% of your income every month. This will help protect you from financial shocks like a sudden job loss.
• Get basic life and health insurance - Get yourself adequately insured while your premiums are low. If you have dependants, consider getting term insurance to protect them in the event that you pass away or become totally and permanently disabled.
• Invest in suitable products - After setting aside part of your salary to accumulate an emergency fund and to pay your insurance premiums, think about starting to invest some of your savings on a regular basis to benefit from the power of compounding.

Mid-career

For most of us, this life stage spans the most years, starting from when you have been working for a few years to the last few years of your career.

At the beginning of this phase of your life, you may be thinking of starting a family, or already have a growing household. Expenses may be high. You may also be supporting your parents and/or in-laws.

Given your greater financial obligations at this time, it is a good idea to exercise prudence when it comes to investing — you don't want to expose yourself to the risk of suddenly not being able to see to your dependants' needs.

You should aim to:

• Buy a home you can afford - Do not over-extend yourself on housing. Leave more for planning your future retirement needs.
• Make informed financial decisions - Assess your family's needs and goals. There are trade-offs between short- and long-term goals — buying a car or paying for travels may impact your savings for retirement.
• Build enough financial reserves - Review if your emergency fund is sufficient to cover your expanded family's expenses. You may need to top up your emergency cash savings to cater to new commitments, such as a new house or additional child.
• Have adequate insurance coverage - As you now have more commitments, ensure that you and your dependants have adequate insurance coverage.

Once you have laid strong financial foundations and settled on a stable budget, it's time to capitalise on your peaking earning power. You may have the capacity to set aside more for investments. With your financial bases covered, you'll have greater latitude to seek to maximise your investment returns based on your risk appetite.

Preparing for retirement

Later in your career, you may have to manage many competing priorities. Your children may need money for university, and you may need to take care of your aged parents' financial needs. It's also time for you to assess your retirement plans.

At this point, where your investment horizon gets shorter, you may want to preserve what you have saved by shifting more of your investments into those that are less risky. You may also invest in different products that can generate a regular stream of income for you.

You should aim to:

• Prepare ahead for your retirement needs - Work out how much you'll need for your desired lifestyle and healthcare when you retire. You could finance these by topping up your CPF and investing in suitable products.
• Set aside budget for your dependants' needs - Make sure you have enough saved or invested for your children's tertiary education, and your parent's long-term care.
• Think carefully about upgrading - Don't overspend on upgrading your home. You need to prioritise and manage your money wisely.

Retiring well

Once you stop work, you would want to be self-sufficient. Ideally, your home should be paid up and you have an adequate retirement income stream. You should consider lower risk investments that can generate a regular income for you and are easy to liquidate — such as Singapore Savings Bonds.

You can aim to:

• Retire debt-free - Aim to fully pay up your housing loan before you retire. Start repaying earlier from your late 40s to 50s.
• Monetise your home - If you need additional funds for retirement, you could sell your home and buy a smaller, less expensive place. Find out about right-sizing and lease buyback.
• Spend your retirement funds sensibly - Beware of scams and spend within your means.