Why is financial planning essential starting from the present?

Many people often think that financial planning is something for the elderly or for those with high income. But the truth is, the current economic situation and lessons from the COVID crisis tell us that everyone, regardless of income, needs a clear “financial plan.”

Why do you need to plan your finances? Let’s look at the real reasons.

1. Longer life expectancy, but money doesn’t keep up with longer life

According to statistics, Thai men have an average life expectancy of 71.3 years, and Thai women 78.2 years. If you plan to retire at 60 and live another 20-30 years, just 30,000 baht per month in expenses would require 7.2 million baht for retirement.

The funny thing is, statistics show that out of 100 people, only 25 have enough money after retirement. The remaining 75 rely on government welfare or children, which is not a large support system.

2. Changing family structures mean you shouldn’t rely on your children

Over time, the younger generation has fewer children—averaging 1-2 per family—due to high costs and aging. Data shows that 55.8% of the elderly depend on others, mostly children. But when they face their own expenses, their ability to help parents diminishes.

Therefore, “self-reliance” is not just a slogan but a fact.

3. Inflation: the enemy that erodes money

Looking back 20-30 years, a bowl of noodles cost 5-10 baht; now it’s 40-50 baht. In 30 years, it could be over 100 baht.

Inflation means money gradually loses its purchasing power. The cost of living keeps rising relentlessly. If you don’t invest to “beat inflation,” your savings will become worthless paper.

4. Government welfare: available but insufficient

In the next 15 years, the proportion of elderly will increase from 10% to 20% of the total population. Meanwhile, the working-age population will decrease from 6 to 3 people per elderly.

This means lower tax revenue for the government but higher welfare costs. The result: welfare becomes insufficient. The old-age pension is only 600 baht per month, and the social security fund averages 3,000 baht. Do you think this is enough?

5. Financial products: complex but with huge opportunities

In the past, depositing money in banks yielded decent returns. Currently, interest rates are at a historic low of 1.00%-2.00%. Saving alone isn’t enough.

Fortunately, there are many options now: over 726 stocks, 1,537 mutual funds, life insurance, health insurance, and more. Knowing how to choose can make your money work better.

6. Saving early = outstanding results

Compare saving 5,000 baht per month for 15 years with an initial principal of 10,000 baht:

Case 1 (Systematic Saving)

• 5% annual return
• Total savings: 1,357,582 baht

Case 2 (No plan)

• 1% return (bank deposit only)
• Total savings: 11,607 baht

Difference: 1,345,975 baht over 15 years.

7. Life risk: COVID shows everything

During COVID, many lost jobs. Households had expenses but no income. Some families lost breadwinners, leaving debts to loved ones. Others faced serious illness requiring millions, and some lost their lives.

Having good “self-insurance” and enough “emergency fund” can lessen the impact.

How to systematically plan your finances?

Step 1: Set clear life goals

Many people are stuck because they don’t know what they’re saving for. Life becomes “aimless.”

Ask yourself:

• Want to buy a house, car, or travel? Or just dream?
• At what age do you want to retire?
• How do you want to design your life after retirement?

With goals, choosing financial products becomes clearer, for example:

• House/car: save for 10-15 years
• Retirement: save for 20-30 years
• Life insurance: lifelong coverage

Step 2: Check your financial health with a financial statement

After years of working, you should check your physical health annually. But many never check their “financial health.”

Record all assets:

• Bank accounts
• Investments (stocks, funds)
• House and car values
• Valuable collectibles

And all liabilities:

• Mortgages, car loans
• Credit cards
• Personal loans

Calculation: Total assets – total liabilities = net worth

The higher this number, the better.

Step 3: Regularly record income and expenses

90% of early-career people face one problem: “month to month, no savings.”

A simple solution is to record daily, see what expenses are necessary and what are wasteful. Now, financial apps or even simple notes work.

Try doing it for 7 days; it will become a habit. At year-end, sum up to see how much you saved and plan accordingly.

Step 4: Prepare an emergency fund of 3-6 times essential expenses

Unexpected events like job loss, illness, or emergencies happen suddenly.

Your emergency fund should:

• Be kept in safe accounts, like savings or money market funds
• Be accessible immediately, without waiting
• Have minimal risk

Having 3-6 months of expenses saved will give you peace of mind.

Step 5: Save before spending; avoid over-indebtedness

Many people cut their budget: “This month, I get paid, so I pay the car and house loans first, then spend freely, and save at the end of the month.” The result: no savings.

Change to: Income – savings = expenses

Save at least 10% of your income; more is better.

Regarding debt, installment payments should not exceed 45% of income. For example:

• Income 20,000 baht
• Installments should not exceed 9,000 baht
• Exceeding this makes life difficult

Step 6: Protect yourself with insurance

Many insure their house and car but forget about insuring themselves—life and health insurance.

The biggest risks are:

• Serious illness
• Losing a breadwinner
• Losing earning capacity

Without insurance, these events can cause families to fall into financial ruin.

Step 7: Build alternative income streams

COVID proved that “stable jobs” are not guaranteed. Over 1 million people lost their jobs during that time.

Supplement your income: use free time to earn extra

• Freelance work
• Online selling
• Tutoring
• Or anything you’re skilled at

Having two income sources is not just an “option” but a “lifeline.”

Step 8: Make money “work” through investments

Savings alone are not enough; you must make it work by investing in suitable assets.

Options include:

• Stocks/mutual funds: 5-7% returns per year, but with risk
• Dividend stocks: steady income
• Bonds: fixed interest, safer
• Real estate: rental income

Invest at the right time; long-term results will be evident.

Step 9: Invest in knowledge

Learn about finance and investing:

• Free: YouTube, podcasts, SEO education websites
• Paid: online courses with certificates

Spend at least 1-3 hours weekly. Increasing knowledge helps you make better decisions.

Summary: Financial planning is like a “map” for your journey

If you say you’re going home from afar without a plan—when, how, and by what route—you’ll likely get lost.

Life is the same. Without a plan, you’ll wander aimlessly. The “home” is a destination, and the path is your plan.

The starting point is yourself. When you understand why you need a financial plan and follow these steps:

1. Set goals
2. Check your financial health
3. Record income and expenses
4. Prepare emergency funds
5. Save before spending
6. Insure yourself
7. Build additional income streams
8. Invest to beat inflation
9. Keep learning

In a few years, you’ll feel more financially stable and confident, ready to face any crisis.

Financial planning is not difficult—just requires “commitment” and “discipline.”