Why is it important to manage finances? Financial planning guidelines for beginners

Introduction: Life Needs a Plan

Many people often ask, “Why manage finances?” The answer is simple: because no one will do it for you. Whether during an economic crisis or the recent COVID-19 situation, we can be confident that financial planning is not an option but a necessity.

For beginners, understanding the basics of financial planning will open the door to future stability. Let’s learn the right way.

What Is Financial Planning Really?

Financial planning is not as complicated as it seems. It’s about “navigating” our financial life by considering:

• Our current status (How much money do I have, what debts do I have)
• Future goals (Retirement, buying a house, traveling)
• The appropriate path (Saving, investing, insurance)

This process considers assets, income, expenses, and financial goals to help us achieve true financial security.

Why Plan? 7 Key Reasons

1. Longer life expectancy, but money is running out

Statistics show: Only 25 out of 100 people will have enough funds after retirement.

Think about it: If retiring at 60 and needing 30,000 THB/month until 80:

• 30,000 × 12 months × 20 years = 7,200,000 THB

What if living until 100? And this doesn’t include inflation.

2. Changing demographics, you can’t rely on your children

• Countries are aging, with over 10% of the population aged 60+
• Younger generations have fewer children (Average 1-2 children per family)
• 55.8% of seniors still depend on others

Conclusion: Our children are still reluctant to save money, so they cannot be part of your future financial plan.

3. Living costs keep rising (Inflation is the enemy)

Noodles costing 5-10 THB 20-30 years ago now cost 40-50 THB.

In 30 years? It could be over 100 THB.

Data: Prices of goods increase 1-2 times over 20-30 years.

Therefore, our investments must beat inflation by generating income through investments.

4. Government welfare? Not enough for sure

In the next 15 years:

• The aging population will grow to 20% (1 in 5 Thais)
• The ratio of workers to elderly will drop from 6:1 to 3:1

Result: The government’s tax revenue will be insufficient to fund elderly welfare.

Is a monthly allowance of 600 THB + social security of 3,000 THB enough?

5. Financial products are increasing but more complex

In the past: Bank deposits were enough, with consistent returns of 3-5%.

Now:

• Bank interest rates: 1.00-2.00% (the lowest ever)
• Total stocks: 726 companies
• Mutual funds: over 1,537 funds
• Other options: life insurance, property insurance, bonds

You need to understand each option and choose tools that match your goals.

6. “Save first” is a sign of wealth

See this example:

Is that the only real difference?

7. Protect yourself: Life risks are certain

Illness, accidents, job loss, layoffs, other life events—these are all possible.

During COVID-19:

• Many lost jobs and income
• Some families lost breadwinners, leaving debts
• Medical expenses soared, wiping out savings

Protection methods: Life insurance, health insurance + emergency fund

Key Principles of Effective Financial Planning

1. Control budget and cash flow

Create a budget -> Track expenses -> Continuously improve

This helps you understand where your money goes and allocate resources wisely.

2. Save and invest

Save = Keep money for the future
Invest = Use money to generate additional income

The more you save, the more you can invest, and the higher your returns.

3. Manage risks + insurance

Identify risks -> Purchase appropriate insurance -> Feel secure

Life insurance, health insurance, property insurance—all are your “shield.”

4. Tax planning

Reduce taxes to maximize benefits and comply with laws.

Good tax planning = more savings in your pocket.

5. Retirement planning

Set goals -> Calculate expenses -> Create savings + investment plan -> Retire gracefully

The earlier, the better. Longer time horizon = higher returns.

9 Steps to Financial Planning You Must Do

1. Set life goals and financial goals

“Save money for what?” If you don’t know, saving is like drifting in the ocean.

Set goals:

• Emergency fund
• Asset purchase (House, car)
• Travel
• Marriage
• Retirement (Don’t forget this!)
• Tax deductions

2. Record income and expenses daily

90% of young working adults face the problem: “No savings left at the end of the month”

Solution: Keep records regularly.

When you see where your money goes, you’ll realize:

• Which expenses are necessary
• Which are unnecessary

Try doing this for 7 days -> It will become a habit for sure.

3. Create your own financial statement

Have you worked for years but never checked your “financial health”?

Create financial statements:

True wealth = Total assets – Total liabilities

Example:

• Assets: Bank balance, investments, house value, car, brand collections
• Liabilities: Mortgage, car loan, credit card debt

Result positive = You are truly wealthy.

4. Prepare an emergency fund of 3-6 times your essential expenses

What if:

• You still have work on Friday but get laid off on Monday?
• A relative gets sick and needs thousands of THB?

Emergency fund is your “safety point” in life.

Should be kept in:

• Highly liquid assets (Can be withdrawn immediately)
• Safe investments (Low risk)
• Examples: Money market funds, savings accounts

5. Know your risk profile

Many people insure their house and car but forget to insure themselves.

COVID-19 showed:

• Family breadwinners lost their lives
• Medical expenses skyrocketed
• Debts left for family

Solution:

• Life insurance (No matter what you do)
• Health insurance (Medical costs are non-negotiable)

6. “Save before spending” rather than at the end of the month

Change from:

• ❌ Income – Expenses = Savings

To:

• ✓ Income – Savings = Expenses

Save at least 10% of your income (The more you save, the better)

Important note: Debt for health care should not exceed 45% of your income.

Example: Income 20,000 THB -> Should not have installments > 9,000 THB.

7. Create additional income streams “other channels”

Main job alone isn’t enough. During COVID-19, many lost jobs.

Way to survive: Generate income > 1 channel.

Use:

• Your skills
• Your passions
• Your free time

Multiple income streams = Happiness and security

8. Make money work: Invest like an owner

Invest your savings in suitable assets.

Options:

• Stocks / mutual funds = High returns but with risks
• Bonds = Fixed returns
• Real estate = Rental income + appreciation

Don’t forget: Follow market info and choose the right timing.

9. Invest in continuous learning

Free resources to learn:

• YouTube: Finance and investment channels
• Podcasts: SET Education and others
• Websites: Financial pages, blogs

Spend 1-3 hours/week learning.

Knowledge = The best capital of life.

Finally: The real work is in starting

What matters is not how well you start, but when you start.

Those who begin financial planning early have more time + the power of compound interest behind them.

Economic situations are unpredictable; crises can come anytime. But if you have a plan, you won’t panic.

Start doing:

1. ✓ Create a financial statement
2. ✓ Prepare an emergency fund
3. ✓ Don’t overspend
4. ✓ Systematic investing

Wealth comes from consistency, not luck. You can do it! 💪