| Contrary to popular belief, financial planning is not only for the rich. In fact, financial planning can be more crucial for an average wage earner who has limited income and financial commitments, but wants to achieve his goals in life. Such goals include buying a house in five years’ time, sending his children to university in 10 years’ time and retire comfortably in 20 years’ time. In order to achieve your goals within a certain timeframe, saving money alone may not be enough. You need to invest. Good financial planning helps you balance your income against your needs and commitments. It allows you to obtain a clear idea of how much and to what extent you should invest. Financial planning is the launching pad for successful investing. As an investor, you should ensure that your money is working hard to bring you the maximum possible returns. To achieve this, you will first need to set clearly defined targets for your investments. Such targets are often more easily identified if they are related to your goals in life. A financial plan keeps you focused and on track in achieving your financial goals. According to Mr U Chen Hock, President of Financial Planning Association of Malaysia (FPAM), the process of developing a financial plan typically involves the following steps:
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Identifying Your Goals: Define your personal goals and estimate how much money you will need to achieve them |
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Evaluating Your Financial Status: Analyse your financial needs, commitments and debts against your present income to determine whether you have sufficient money for investment |
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Setting Targets: Set a sensible and realistic target, as well as timeframe for attaining the desired results. |
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Choose Suitable Investment Strategies and Products: Investments with high returns come with high risks. Therefore, before making any investment, you must determine a comfortable level of risk that you are prepared to take in case your investment fails |
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Monitoring Your Financial Plan: Review your financial situation (which includes changes in needs, commitments and investments) regularly. This enables you to make necessary adjustments to your spending, savings and investments. |
You may plan your finances on your own or seek professional advice from qualified financial planners.
“Your financial planner can help to articulate and prioritise your goals in life given your current stage of finance and draw up a financial plan,” explained Mr U. President of Malaysian Financial Planning Council (MFPC), Encik Ezamshah Ismail, explained that once a financial plan has been drawn up, the financial planner will suggest investment strategies to help you achieve your financial goals – for example, reduce spending, and increase savings and investment. “A financial planner is not in position to advise you what stocks or investment products to buy,” cautioned Mr U. “His or her role is to lay all the available investment strategies on the table and advise you on the risk and returns pertaining to each strategy. No responsible financial planner will try to force you to part with your money or make decisions on your behalf. Product selection or choice of investment is up to you”, he added. According to Encik Ezamshah, providing the right information allows your financial planner to do a better job for you. He stressed that investors need to be open when sharing their financial details with a financial planner. “It’s very natural for investors not to divulge too much information to a stranger. But the more information you give your financial planner, the better he is able to tailor-make a good financial plan for you. Trust and openness must run both ways.” The financial planning process can benefit anyone – regardless of age, education or income. Even if you are not ready to invest, consulting a financial planner can help you realise how much money you need to achieve your goals in life. “Having a financial planner is like having a good adviser to help you make good decisions,” concluded Encik Ezamshah. Essentially, financial planning is about wisely allocating your hard-earned money to achieve your goals in life, no matter how much or little you have. It is something not only for the rich. It is for everyone and it is crucial for any investors who want to invest intelligently.
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