How to Build a Secure Financial Future: A Beginner's Guide

Why Can’t You Just Let Your Money Go?

Many people think that financial planning is only for the wealthy. But in reality, it is an essential tool for everyone, especially during times of economic volatility. As we live longer (Thai men average 71.3 years, Thai women 78.2 years), but the working life may end as early as 60. We need a clear financial plan to support life after retirement.

Imagine this: if you retire at 60 and spend 30,000 Baht per month until age 80, you need to save 7,200,000 Baht—that’s 30,000 Baht × 12 months × 20 years. The question is, are you prepared?

The Five Principles of Financial Planning You Must Follow

First: Understand the purpose of financial planning

Financial planning (Financial Planning) is not just about recording income and expenses. It is a process that encompasses managing assets, income, expenses, and setting goals to achieve financial stability in the future.

Think of it like traveling: Where are you now? Where do you want to go? And how will you get there? If you need to go home, you decide whether to take the bus, taxi, or BTS, and prepare a map. Life is the same—you need a clear plan.

Second: Separate assets and liabilities

Statistics show that 75% of working people have very few assets but are burdened with debt. To move forward, list out:

• Assets: savings, investments, property value, cars, collectibles
• Liabilities: home loans, car loans, credit cards, other debts

Simple formula: Total Assets – Total Liabilities = Your true wealth

Third: Prepare an emergency fund sufficient for unexpected events

Unforeseen events like job loss, serious illness, or other emergencies can happen anytime. During COVID-19, many lost jobs and faced financial crises. Therefore, you should prepare an emergency fund of at least 3-6 times your monthly essential expenses.

For example, if your essential monthly expenses are 15,000 Baht, prepare 45,000 - 90,000 Baht in a safe, highly liquid account such as a regular savings account or money market fund.

Fourth: Protect against risks through insurance

Many focus on property insurance but forget to insure themselves. If the family breadwinner suffers a serious accident, illness, or death, not only does income disappear, but high medical costs can also destroy the family’s financial stability.

You should have:

• Life insurance: to protect your family in case of unforeseen events
• Health insurance: for medical treatment that costs a lot

Fifth: Understand that financial planning is an ongoing process

Financial planning is not a one-time task. It must be regularly updated as life circumstances change.

Nine Steps to Create a Winning Financial Plan Against Inflation

Step 1: Set clear life goals

90% of people who fail to save money do so because they lack goals. Not knowing what you are saving for makes saving aimless.

Think about:

• Short-term goals (1-3 years): buying desired items, traveling
• Medium-term goals (3-10 years): buying a house, a car, getting married
• Long-term goals: retirement, children’s education

With goals, you will know how much to save, in what timeframe, and where to invest.

Step 2 and 3: Record income and expenses, and create a budget

Before seeing the big picture, understand your basics:

• Track daily expenses for at least 7 days to understand your spending habits
• Identify essential expenses and what constitutes luxury spending
• Create an annual budget to know how much you can save each year

Nowadays, financial apps make this much easier.

Step 4: Build an emergency fund

The standard is 3-6 times your essential expenses, but it may need to be higher depending on:

• Number of dependents
• Job security
• Health condition

Keep this fund:

• Safe: not at risk of loss
• Highly liquid: withdrawable immediately
• Low risk: no worries about losing money

Step 5: Assess your risk profile

Not everyone needs the same level of insurance. Consider:

• If you are the breadwinner, you need higher life coverage
• As you age, health insurance becomes more important
• If you have few assets, you might reduce property insurance

Step 6: Use the “Save First, Spend Later” principle

This is the most important discipline:

Change from: Income – Expenses = Savings

To: Income – Savings = Expenses

As soon as your salary arrives, transfer your intended savings immediately, leaving only the spending money. Waiting until the end of the month to save usually results in no savings at all.

Start with at least 10% of your income or more if possible.

Step 7: Control debt so it doesn’t overwhelm you

Many have “must-have” items in their early working years—buying condos, houses, cars, or brand-name goods on credit—leading to a stressful lifestyle.

Rule of thumb: Total debt payments should not exceed 45% of your income.

Example: If your income is 20,000 Baht/month, total installment payments should not exceed 9,000 Baht. Exceeding this makes life difficult and planning ineffective.

Step 8: Generate additional income

Crises like COVID-19 teach us that relying on a single income source is risky. Many lost jobs, but expenses remained.

The right solution is having more than one income stream:

• Use skills and hobbies to generate extra income
• Make good use of free time
• The more stable your additional income sources, the better

Step 9: Invest to make your money work

After managing basics well, invest the remaining money:

Investment options based on risk level:

• Low risk: bonds, real estate (with steady income)
• Moderate risk: money market funds, balanced funds
• High risk: stocks, equity funds (with higher returns but more volatility)

Important: Understand the products before investing. Currently, there are over 726 stocks and more than 1,537 mutual funds. Choosing the right ones aligned with your goals and risk tolerance is crucial.

Invest in Yourself: Continuous Learning

Not just about investing money—educating yourself about finance and investments is equally important:

• Listen to finance podcasts
• Read analysis articles from leading investment firms
• Follow updates from agencies like SET
• Dedicate at least 1-3 hours weekly to building knowledge

Why is Financial Planning Urgent?

First reason: Longer life expectancy

Statistics show that the elderly population is increasing, but retirement funds are insufficient. 75 out of 100 people have inadequate savings. If you live to 100 but retire at 60, you need funds to support 40 years.

Second reason: Society is changing, fewer children

The population is aging, but the trend is for fewer children (1-2 children). Relying solely on children is no longer wise. Data shows that 55.8% of the elderly depend on others. This is why you must be self-reliant.

Third reason: Inflation erodes money’s value

The real enemy of our money is inflation. Look back 20 years—how much did home rice cost then versus now? Noodles cost 5-10 Baht back then, now 40-50 Baht. What about 30 years from now?

In 20-30 years, essential goods may double in price. Without investing to beat inflation, your money’s value will continuously decline.

Fourth reason: State welfare is insufficient

In 15 years, the proportion of elderly will rise from 10% to 20%. The working-age population per elderly will drop from 6:1 to 3:1, reducing tax revenue and making welfare less sustainable.

Pension for the elderly is only 600 Baht/month, and the Social Security Fund averages 3,000 Baht—will that be enough?

Fifth reason: Financial products are becoming more complex

In the past, bank deposits offered satisfactory returns. Now, with interest rates at 1.00-2.00%, reaching your goals is harder.

However, there are many investment channels. Understanding risks and choosing suitable options is key.

Examples of Money Working: The Saver vs. The Non-Saver

The difference is 1,345,975 Baht! This is the power of financial planning and making money work for you.

Finally: Start Today

“Knowing something is not as good as taking action after knowing.”

If you already know, follow these steps:

1. ✓ Create a rough personal financial statement
2. ✓ Prepare an emergency fund
3. ✓ Set clear financial goals
4. ✓ Avoid over-indebtedness
5. ✓ Start saving and investing with knowledge

Good financial planning begins with today’s decisions. It will be your shield against future financial crises. Stay safe!