You will build a month-by-month plan that shows when you reach each buffer milestone alongside your debt plan.
You have four pieces of planning from earlier lessons: the starter buffer amount and the order for splitting money from lesson 6.1, the milestones from lesson 6.2, the windfall rule from lesson 6.3 and the debt repayment plan from lesson 5.4. Kept in separate places, they can't show you the month you reach each buffer milestone. When you put all four on one sheet, you get a two-year view of where your future you money goes each month.
The sheet takes about 30 minutes. Keep your repayment plan open alongside while you work.
Open a new tab next to your repayment plan and make five columns: month, amount to buffer, amount to extra debt repayment, running buffer balance, and notes. Use the notes column for milestones and windfalls. Number the month column from 1 to 24, one row per month.
Enter your current savings in row 1 as the opening balance. Then work down the rows, splitting each month's future you money between the buffer and extra debt repayment in the order you set in lesson 6.1. Copy the extra debt payments from your repayment plan, and put whatever future you money is left in the buffer column.
Wei Ling is an example learner, and her figures are invented. She has S$200 in savings and S$480 a month of future you money. Her budget also has a S$90 line for the card minimum payment. Her starter buffer is S$1,000, and her month 1 is March.
In month 1 she puts S$480 into the buffer. In month 2, April, she puts S$320 into the buffer and S$160 toward the card, and her balance reaches S$1,000, her starter buffer. For months 3 to 7 her buffer column is zero, and the card gets S$570 a month: her S$480 plus the S$90 minimum.
When your expensive debt is cleared, the money you were paying on it goes to the buffer from that month on. This is the switch month. Mark the row in the notes column. It is often the row people find most satisfying to fill in.
Wei Ling clears her card in month 8, October, with a final payment of S$128.07. The remaining S$441.93 of that month's S$570 goes to the buffer, and her balance becomes S$1,441.93. From month 9 the buffer gets the full S$570, and her balance in November is S$2,011.93. She is also paying S$300 a month on a loan that ends in month 18. From month 19 that S$300 is added to the S$570, so S$870 a month goes to the buffer.
Next, put any windfalls you expect into the months they usually arrive and apply your windfall rule to each one. Only the buffer share goes on this sheet, because the rest goes to goals and spending. A bonus is never guaranteed, so write down what happens if it doesn't come.
Wei Ling usually gets her bonus in December, month 10, and it is about S$3,000 after CPF. Her windfall rule puts 60% into the buffer, so she enters an extra S$1,800 in month 10. She enters another S$1,800 in month 22, the following December, and notes it as an assumption.
Fill in the balance column from the top. Each month's running buffer balance is last month's balance plus this month's amount to buffer. Mark the first month the balance reaches each milestone.
In month 10, Wei Ling's buffer gets S$570 plus the S$1,800 from her bonus, and her balance is S$4,381.93. That passes one month of essential costs. In month 14, April, her balance is S$6,661.93 and passes three months. In month 17, July, it reaches S$8,371.93, past her full target of S$8,220.
Record each milestone date twice, once with the windfall and once without it. If a bonus is smaller than you expected, you can see straight away how far the dates move, and a later date won't look like a failure. Without the December bonus, Wei Ling still passes one month in month 10, but three months moves to month 17 and the full target moves to month 20. She can expect to reach her full target in July of her second year, and October at the latest.
Once the buffer reaches its full target, give the monthly transfer a new destination. If you don't, it tends to drift back into spending. In month 17's notes, Wei Ling writes that from month 18 the S$570, and later the S$870, goes to her Japan fund and then to her next larger goal. Planning for big goals such as a wedding or a home is covered in the course "Big goals: wedding, home, car and kids".
Finally, check the sheet against your budget. Every amount in the buffer and debt columns has to come from your future you line or from a windfall. If any month needs more than that, adjust the plan and leave the budget alone.
When you finish, you have 24 rows, each with an amount to buffer and an amount to extra debt. You also have a running balance, the switch month marked, and each milestone month noted with and without the windfall.
Copy your opening balance into row 1 and work down.
Build the buffer plan for the next 24 months and write the month you expect to reach your full target.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).