Preparing for 2021 – 5 things to do on personal finances

For most of us, 2020 blew past really quickly. We are just slightly more than a month away to usher in the new year.

Here are some tips on what you can do financially to help you prepare for the year ahead.

Consolidate trading and banking accounts

I like to do a routine housekeeping of my financial accounts to reduce unnecessary load on my head. Over the years, I’ve opened several brokerage and trading accounts which I end up not using anymore.

One good practice is to consolidate your assets into just a handful of trading accounts that you will frequently use.

For example, I use Interactive Brokers (alternative: Tiger Brokers) for my global stocks and ETFs because of their low fees. I’ve since closed or emptied my assets in all my other traditional brokerages like DBS Vickers and iOCBC.

With just one to two brokerages to manage, depending on how you’d like to store your assets and which markets you’d like to trade in, it’s far easier to keep track on your investments.

The same should be done with your banking accounts, since there isn’t any point to spread your money so thinly into so many accounts. It’s ideal to park money in multiple accounts, but it’s useless to over-engineer the process just to extract a 0.1% marginally higher interest rate on one account.

For me, I’ve decided to keep Stanchart Jumpstart (1% p.a), Singlife (2% p.a. up to $10K) and DBS for my everyday banking needs since they have the largest ATM network in Singapore.

Relook and rebalance your investments

The second thing to do is to relook into your investments across your entire portfolio, across all asset classes.

Taking into account your risk appetite, invesment horizon and target asset allocation, you might want to consider rebalancing your assets to your ideal risk profile. Most investors tend to be too heavily weighted towards individual stocks or one asset class.

A holistic portfolio has a good balance between risks and returns to optimize performance for the long-run. That means it should help you mitigate drawdowns and stay invested despite large corrections.

Also consider, if your risk appetite and investment horizon allows, alternative assets such as precious metals, cryptocurrencies or digital assets, which might have an assymmetric payoff due to their relatively new emergence as an asset class.

Ensure comprehensive insurance coverage

The third thing to do is to ensure that you have sufficient insurance coverage especially across important factors like health, accident and maybe critical illness.

Even if you already have company insurance, it’s good to supplement that with an individual one which persists even after you change jobs and companies.

Most health insurance policies underwrite the policy based on your health conditions at the point of underwriting, so you want to consider locking one in when you’re in the pink of health.

I personally also cover myself with personal accident and critical/early critical illness policies at an early age to take advantage of lower premiums and create a disciplined approach to insurance premiums from a young age.

I spend roughly 10% of my total salary on insurance to cover for any unforeseen circumstances – I assess this percentage to be fair and reasonable at least until I reach the next stage of my life, which I can then reassess and layer on more insurance protection if needed.

Start funding for a rainy day

Funding for a rainy day is also something to look into during this period. This emergency fund doesn’t have to be used strictly for emergencies only, it can also be expanded into other important uses.

Once you already have an emergency fund set up for emergencies (e.g. job loss), you can consider building a supplementary emergency fund for other purposes such as an investment war chest, capital for starting your own business, or for a trip around the world once the pandemic ends.

If you give your money a job to do, you’ll find it very fun to save money.

Give yourself a good break

Lastly, I think you can take some funds and give yourself a good treat and break for sustaining through this demanding year.

We are mostly lucky to be still alive despite millions having lost their lives or livelihoods due to the pandemic. For me, this episode has at least reminded me the ephemeral nature of our time on Earth, and it’s more important to be happy than to be rich.

  1. hello! what are your thoughts about having funds in both Robos (Stashaway & Syfe Equity100/REITs) as well as ETFs like VOO and VWO? I’m relatively new to this but considering consolidating/streamlining because it’s getting too much to handle…

    1. Hey Rachel! Yep, I totally get that. There’s no point duplicating your portfolio since VOO and probably equity100 from Syfe has a huge overlap. The best approach is just choose a maximum of 2 – one core holding (DIY) for long term while you can use your robo for dollar cost averaging without fees. I would not use multiple roboadvisors and multiple brokers at one time!

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