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 The Truth About Financial Planning
The
Truth about Financial Planning
Two, three years back, financial planning was rarely
heard of. Today, the term is so loosely used that many
have different interpretations of what financial planning
is. The confusion is made worse by some financial planners.
These are the black sheep in the industry who do not
have the necessary qualifications and skills. Nevertheless,
they call themselves financial planners, advisers or
consultants and push products in the name of financial
planning.
Financial Planning is certainly not just about recommending
which unit trust or to buy. It is about taking care
of all aspects of your finances so that you can lead
a better, happier and worry-free life.
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Hype or
Help?
There was no need for financial planning before. So
is there a need for it now? It is true that life still
goes on without financial planning. But if financial
planning can make your life better, then why not? Let's
take a look at how you can gain by having a financial
plan :
| Without
Financial Planning |
With Financial
Planning |
| You always wonder where all your money went.
Your finances seem to be in one big web. Your
money controls you, not the other way round. |
You have a sense
of control. All areas of your finances are
compartmentalised neatly. You know where you
stand now and what your future is like. You
know how each financial decision will affect
other areas of your financial well-being.
You are in the drivers' seat. |
| You need money to satisfy
yourself materially. You also need money to
lead and sustain your preferred lifestyle.
But you really don't know when you can achieve
all that you want, or if you will ever achieve
at all. |
You prioritise your
wants and desires. You may need to make some
tradeoffs. Most importantly, you have a plan
that will take you from where you are now
to where you want to be. You know exactly
when and how you can attain your desires. |
| You are either worried sick over the 'what
ifs' in life or you have not given it any
thought at all. Either way, you will suffer
a big financial blow when the 'what ifs' strike
you unprepared. |
You manage and cater
for the various risks in life. You have a
sense of calm as you know that even if the
'what ifs' strike, your plans and hopes for
the future for yourself and your family will
not be dashed. |
| Borrowing is convenient.
It is an easy tool for instant gratification.
It can also be an excellent wealth creation
strategy. You borrow to invest in property,
buy a car and so on. But you are not quite
sure when to draw a line. You are unsure how
to leverage on debt without adversely affecting
your financial health. |
You use debt to your
advantage while keeping your total debt to
a manageable level. Thus allowing you to deal
with situations such as a significant rise
in interest rates or loss of your job. |
| You invest your money.
Your investments are made haphazardly. You
buy and sell your investments as triggered
by your emotions. You often end up losing
rather than gaining money. |
You have a clear
investment strategy that will help you maximise
profits at a risk level that you are willing
to take. You make better informed investment
decisions and avoid the pitfalls of investing. |
| You are paying so much
taxes, not knowing that you are actually paying
unnecessary taxes |
You save significant
amounts of money on taxes, especially if you
have overseas investments or business transactions |
| Your retirement lifestyle
is one big question mark. You don't know how
much you need, how much you can accumulate
and how long the money can last you. |
You can look forward
to pampering and enjoying yourself as you
have put in place clear steps to achieve how
you want to live during retirement. |
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To sum up, financial planning gives you greater certainty
and control. You will know exactly how and when you
can achieve your various personal financial and lifestyle
goals. Financial planning also plugs the leak holes.
There are many possibilities to how you can lose a big
chunk of money. It may be due to a divorce, a bad financial
decision, or simply to unnecessary taxes. A good financial
plan puts in place checks and measures to preserve and
grow your wealth.
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Your Personal
Financial Plan
Some financial planners scribble a few numbers on a
piece of paper or make some computations on the computer,
then recommend some insurance plans and unit trusts.
And that's their version of a financial plan!
A financial plan that can really make a difference
to your life is a lot more than that. You should receive
from your financial planner a written plan that comprehensively
covers each of the following areas:
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Your Current Financial
Situation |
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If you do not know where
you are now, you can't go anywhere! Your financial
plan must give you a clear picture of your current
financial standing. |
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Your Goals and Action Plan |
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If you do not know where
you want to go, you will get nowhere! Your lifestyle
and financial goals are uncovered and documented.
A detailed roadmap that is suitable for your particular
situation is recommended for execution for you to
achieve your goals. |
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Your Investment Strategy |
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In order to achieve your
financial goals with greater certainty, you should
adopt asset allocation as the focal point of your
investment strategy. Asset allocation not only
reduces all forms of investment risks, it also
accounts for over 90%* of the variation in your
investment returns. Your financial plan should
map out an investment strategy based on the amount
of risk that you can take financially and emotionally.
Your plan must also take into account the effects
of inflation. |
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Your Retirement Lifestyle |
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The issue of retirement
planning has never been so pressing. With a big
cut in CPF contribution and with most Singaporeans
having 75% of their retirement assets tied up in
housing, many Singaporeans will not be able to afford
a comfortable retirement. Your financial plan should
map out how much you need for retirement and steps
on how to achieve your desired retirement lifestyle. |
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Your Tax Liability |
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Your financial plan should
include tax strategies that can help minimise tax
so that you can keep more of what you earn. |
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Your Estate |
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Too many people are caught
up with growing their wealth but few take time to
ensure that their wealth is protected. If you were
to die and you do not have in place estate strategies,
the government may take much of your wealth, leaving
less for your loved ones. Besides, an estate plan
will eliminate the need of a long drawn probate
process that is costly and agonising for your loved
ones. Your financial plan should have an estate
plan in which you can dictate how you want your
wealth managed and distributed after your death.
Most importantly, you can appoint in your estate
plan a trusted person to be a Guardian to your young
children should both you and your spouse die. Otherwise
the Court will appoint a total stranger to look
after them. |
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Your Contingency Plan |
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There are many hurdles which
may disrupt your pursuit of your financial goals
and lifestyle dreams. It is therefore important
to have in place a personal financial plan that
can absorb shocks. Your personal financial plan
should meet the dual objectives of helping you achieve
your financial goals with greater certainty and
helping you overcome obstacles such as loss of job,
illnesses, disability etc. |
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Your Financial
Plan Does Not Last A Lifetime
Nothing stays the same. Your personal circumstances,
the economic environment, rules and regulations, they
all change with time. A good financial planner will
help you stay on top of it all and make changes to your
financial plan so that your plan stays relevant at all
times.
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Accept Nothing
Less
A thorough and comprehensive financial plan that is
suitable for your situation plays an instrumental role
in improving your financial well-being and your quality
of life. You have every right to demand from your financial
planner a tip-top plan and accept nothing less.
At ipac financial planning, our licensed advisers take
extra steps to draw up plans that work for you. They
include:
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Taking a proactive
approach in alerting and helping you adapt to changes
in legislation, investment markets, economic conditions
and your personal circumstances. |
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Giving you regular streamlined
reports, clearly showing your progress towards achieving
your financial goals. |
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Acting as a sounding board
for your major financial decisions so that you can
make the right choices with confidence. |
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Connecting you with other
professionals for advice on estate planning, tax
planning, insurance, asset ownership structures,
legal matters and other areas where you need help. |
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Acting as a personal coach
who provides financial advice on an ongoing basis. |
Start a partnership with your licensed adviser and
draw up a blueprint for you and your family's future.
*Source: Ibbotson Associates, Inc.
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Disclaimer and Copyright |
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