Building A Strong Financial Defence


What is a financial defence?

Financial defence is the act of defending our personal finances from depleting.

What are our enemies in the battle of personal financial management?

Increasing liabilities, letters from creditors, retrenchment or any unforeseen financial circumstances can attack us and exhaust our finances without us realizing.

How do we build a strong financial defence?

We can design a multi-layered defence to protect ourselves against money-draining enemies. A threefold system can be adopted: the front-line, the secondary-line and the contingency defence.

The front line

The front-line defence is largely made up of our personal income. Apart from the monthly income that we receive, some of us may have other sources of income such as business, rental or dividend income. This line of defence protects us from potential threats to our personal finance such as regular expenses that we incur daily like food, utilities, transport, entertainment and necessities.

In order to strengthen the use of front-line defence, there are two areas that we can work on. Firstly, we need to learn how to make prudent financial choices. The choices that we make today will determine our financial destiny for tomorrow. This is where understanding our needs and wants comes into the picture. For example, do you need to buy a car or is public transport sufficient to meet your transportation needs? By opting for public transportation, you can save an average amount of $800 monthly which can be channelled to your savings account for the benefit of your financial future.

Secondly, we can strengthen our front-line defence through personal growth and by being a diligent earner and a student of financial literacy. By developing our SKA – Skills, Knowledge and Abilities – in competency at work and in financial literacy, our front-line of defence will potentially be stronger.

Secondary line

Secondary-line defence protects us against expected threats that come at a larger cost, for instance large purchases that are expected to be made. All of us are aware that when things wear out, they need to be replaced. This includes replacement of our household appliances, car, home renovations and maintenance. Hence, the backbone of this line of defence can be formed by having a replacement saving fund.


Contingency defence protects us against threats that come along in our lives unexpectedly, such as sudden health conditions, rising medical costs or retrenchment. What happens when our front-line and secondary-line defence are not sufficient to handle this sudden turn of events?

This is when the setting up of emergency funding, an account for the purpose of setting aside some fund in case of emergencies is very crucial. Financial planning textbooks recommend that we keep an emergency fund of at least 3 months of our monthly living expenses to cover for regular expenses. The emergency fund should be kept in accounts that are easily accessible when the need arises. Insurance is another crucial contingency defence that is not to be overlooked as it can protect us from major money-draining enemies such as major illnesses, accidents and mishaps which can easily cause us to fall into a financial despair.

In summary, you need to have a front-line, secondary-line and contingency defence to build a strong financial defence.


This article was contributed by Ferris Wee and Nasuha.