You have a financial goal now, and a plan to get there. You need to diligently do budgeting and track your finances on a regularly basis to make sure you are on track to achieve your financial goal. Typically a public company each quarter will publish its past quarter performance and share next quarter guidance; it tracks its finances to make sure its bottom line is healthy. Same thing for personal finance. Here is what I do in a 4-step tracking:
Step1: Build A Spreadsheet
- It should consists At Least ‘Balance Sheet’ & ‘Income Statement’.
Step2: Balance Sheet:
- It captures your assets (stocks, bonds, cash, SRS, CPF); I do not consider primary residential property as asset as it doesn’t generate any income.
- It should also capture your liabilities (mortgage, and other loans).
- Assets minus liability will tell you your net worth.
- You can track it on a regular basis (monthly, quarterly, or annually) to see how it changes. Does it grow as per your expectation, if not do you need to adjust your financial plan?
Step3: Income Statement:
- This should be tracked monthly.
- It captures your monthly income (salary, bonus, rental income, interests and dividends, other income), and your expenses.
- Income minus expense is your net earnings of the month. From there you can find out your saving rate. If you have a high saving rate, you can accumulate wealth faster. Set a saving rate target for yourself.
- As expense is a very important area, I usually put more focus there and break down the expenses into categories like housing, tax & insurance, non-discretionary, education, transport, leisure etc. So, it’s easier to see how much is spent on each category and at the end of the year you can even study if any category spending trends up or down. This helps you make conscious decision if you need to adjust your spending patterns.
Step4: Investment Portfolio:
- Another thing you should track is your overall investment portfolio.
- This consists of all your investment vehicles such as stocks (index funds, or individual stocks), bonds, CPF money (I consider CPF OA and SA as part of the ‘fixed deposit’ allocation), SRS funds invested, any other alternative investments you have (e.g. crypto, although I don’t invest in it as I don’t understand it well).
- You can track this in Google Sheets or Yahoo Finances (both are free) or some other portfolio management tools.
- This should NOT be monitored too frequently, as frequent checking on your investments will affect your emotions (stocks fluctuate with market sentiments) and might let you make wrong decisions to buy and sell. Plug yourself out of the market daily movement. I think one should only look at the investment portfolio once a quarter or a year to see its health and whether there is a need to do portfolio rebalancing.
- 这里包含你的投资比如说股票（指数基金或是个股），债券，公积金（我认为公积金的OA SA是固定收益投资的一部分），投资的SRS，和其他你有的投资（比方说加密货币，尽管我不投资加密货币因为我不是很理解它）。
- 你可以用Google Sheets，Yahoo Finance（都是免费的）或是其他投资组合管理工具。
For other topics on financial intelligence, you can find it here https://nickandmoney.com/category/fi/
Follow me on Twitter: https://twitter.com/nickandmoney
nick and money – improve your finances and wellbeing