 |
Financial
Planning is an ongoing process of helping an individual to achieve his / her
financial goals through a systemic management of his / her finances. It is not
just about buying insurance products or mutual funds as many as you can.
Eventually, if you buy too many insurances and too many mutual funds without
knowing their features and return rates, you seems like blind faith, who expose
yourself to the icy ground. According to EPF, 70% of members who withdraw their
funds at age 55 use up their savings less than a decade after retiring (The
Star, 25th October 2017: Most Malaysians Cannot Afford To Retire).
This indicated that the EPF savings are insufficient for retirement living. “If, you fail to plan, you are planning to
fail.” (Tony Bilby)
Why you need financial planning?
1. Inflation
Inflation
is an increase in cost of goods and services over time, causing a depreciation in the value of money over time.
As a result, cost of living will become much more expensive year by year. For
instance, with RM50 on 1998, you were able to purchase a full trolley of daily
goods. However, with RM50 on 2012, you
were only able to purchase a few daily goods on a trolley. The inflation does
not only affect our daily expenses, but it could dilute the value of our
investment, savings, and pension funds. Financial planning ensures you to grow
the value of your hard-earned money and hedge it against inflation.
2. Long Term Goals
Some
financial goals such as children’s education funds, marriage funds after
children grow-up, house purchasing funds, may take 10 years, 20 years, or 30
years to accomplish. Hence, it is important to plan as earlier as possible. As
a result, you can have ample time to invest and accumulate your funds. In line
with these goals, financial planning can help you to determine the appropriate
investment instrument. So that, you are able
to generate return and accumulate your funds for future needs. As Tony Robbins
said that “The most important thing to do is start investing now so you can
unlock the power of compounding.”
3. Emergency
Sometimes, unforeseen incidents such as hospitalization, loss of job, accident, and passing /demise of family member might happen. It is better to be ready than sorry. Therefore, financial planning can guide you to prepare the umbrella before it rains. Subsequently, the interest of your family is safeguarded.
4. Dreams
You might
have some dreams such as owning a house, owning a business, children schooling
fees, create a family trust, foreign trips and so forth. Financial Planning
leads you to the proper direction on realizing your dreams.
5. Retirement
Other than,
family goals, your own retirement planning is significantly important. “If, you
do not find a way to make money while you sleep, you will work until you die.”
(Warren Buffet) Retirement is a long weekends without working. In life, you
cannot expect your parents to be your emergency fund and your children to be
your retirement fund. Based on the new survey done by HSBC shows that 68% of
Millenniums in Malaysia borrow from their parents to purchase their own home
(CBC News: 37% Of Young Homeowners Borrow From ‘Bank Of Mom And Dad,’ HSBC
Survey Indicates”). A journey of the thousand miles begins with a single step,
in order to grant yourself a comfy financial freedom during retirement age, you
should seek financial planning from now.
