We don’t need a crystal ball to tell us that the one thing that will continue to head north in 2022 is the cost of living. Contributing factors range from the US Fed hikes to surging inflation and the ongoing pandemic.

In a recent survey by CNBC in the US, more than half of the 400 respondents said inflation – rising prices of goods and services - is their biggest worry for this year.

But it is not all doom and gloom. Instead of fretting over the things we can’t control, let’s do something about the things we can, like reviewing our budget and having a comprehensive financial plan. Higher prices mean exercising more prudence and being more strategic about our spend to stretch our income.

Here are 7 financial tips to help you kickstart your financial planning for a more secure financial future.

1. Reducing discretionary spend
Have you noticed that your electricity, petrol, food and entertainment bills have inched up? Goods and services will cost more in the future.

Still, it is timely to review our saving and spending habits to inculcate a habit of thriftiness and learn to defer gratification for bigger future financial rewards. After all, our experience of living within the constraints of the pandemic in the last two years has taught us that it is possible to reduce discretionary spend when the need arises.

Ensure that you have at least three to six months of emergency cash set aside for the rainy day. In the light of higher prices, review if it is still adequate for you and your dependents.

Several saving strategies adopted during the crisis that can become long-term habits over time. This is partly because the new normal will see more people working from home for longer periods of time compared with previously. They include cooking and eating at home, group tuition, self-care, less consumption of cosmetics and apparel, buying in bulk, doing away with unnecessary subscription services, a car or domestic help, or swapping out brand-name items for generic ones where possible.

2. Review home loans and cost of buying a home
When inflation rates are up, the banks’ interest rates are likely to rise too, which will impact people who take out home loans.

Homeowners should reassess the interest rate of their existing home loans and explore loan options where they can enjoy potential interest savings. In the light of rising interest rates, a fixed-rate home loan might provide one with a greater peace of mind.

Another option is to reduce your housing loan, especially if your housing loan allows for partial repayment with no penalty.

For new borrowers, determine how much money you can borrow.

Factor in additional payments such as property tax, property agent commissions, property maintenance fees, insurance, home repairs or improvements, property loan interest and so on. Include other upfront costs, such as the down payment, stamp duties, cost of furnishings and any renovations.

3. Assess protection needs
The start of the year is a good time to have a thorough audit to assess your insurance plans and cover.

You work hard to achieve your financial goals, clocking in countless hours in the office to provide for your family and grow your retirement savings, but are you actually doing enough to protect these efforts?

It’s often easy to forget about the need to protect your wealth as well when you are preoccupied with taking care of your family’s needs and doing your best to build up your retirement nest egg.

Having the right health insurance for your family, in addition to other important policies, will help to ensure you continue to enjoy the fruits of your labour. After all, it only takes one accident or major illness to wipe out all your family’s resources.

Any additional regular premiums should be affordable and sustainable. Furthermore, do ensure that your travel insurance includes cover for Covid-19 if the need arises.

4. Review your investment portfolio
When constructing a portfolio, asset allocation and diversification are key as it is very unlikely that a single asset class will deliver the highest return all the time. So, combining different asset classes in a portfolio can diversify the risks and improve returns over the longer term.

Furthermore, review and rebalance your plan as personal circumstances change.

It’s a good idea to review your portfolio once a year and consider rebalancing whenever you go through major life events, such as getting married or having a baby.

Rebalancing means selling some stocks and buying some bonds, or vice versa, so that your portfolio’s asset allocation is aligned to your risk profile and matches the level of returns you’re trying to achieve.
All investors want to make more precise and better-informed decisions with their money.

5. Jumpstart your investing journey
If you have never invested or are relatively new to investing, consider starting small and building your investments over time. This will also help you build investing discipline by setting aside money regularly for investments.

By adopting the dollar-cost averaging strategy - where you invest a fixed sum regularly into the same choice of investment over a period - you accumulate more units when prices are low and less units when prices are high. Over time, the average cost of your investment could potentially be lower versus a lump sum investment.

It’s a relatively simpler way to invest and eliminates the need for investors to spend time monitoring the markets by leaving this to the experts.

6. Have a complete view of your finances
The start of a new year is an opportune time to review your financial health and objectives via a financial plan. The best way to do this is to have a comprehensive view of your finances so that you can make informed and better financial decisions.

7. Insurance is important. Here’s why.
Juggling your financial commitments sometimes requires zen-like calmness. With multiple financial commitments, you might find yourself being spread too thin. Getting an insurance plan becomes the last thing on your priority list.

But be warned: this is a major mistake you’ll want to avoid at all costs.

Insurance acts as a financial safety net for your financial portfolio. With the right insurance, you can be rest assured that your loved ones won’t be saddled with a pile of bills, should anything happen to you. That’s because a comprehensive insurance policy covers the immediate bills, and can help to defray the cost of daily living expenses in adverse situations.