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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. |
| ~ |
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. |
| ~ |
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 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. |
| ~ |
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. |
| ~ |
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. |
| ~ |
Giving you regular
streamlined reports, clearly showing
your progress towards achieving your
financial goals. |
| ~ |
Acting as a
sounding board for your major financial
decisions so that you can make the right
choices with confidence. |
| ~ |
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. |
| ~ |
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. Click HERE to
arrange a complimentary meeting with an
ipac adviser in Hong Kong.
*Source: Ibbotson Associates, Inc.
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This information presented in this website is of
a general nature only and therefore does not take
into account your current circumstances, financial
situation, individual needs or personal investment
objectives. Please do not act on any information
in this website, but seek advice from your financial
adviser. This information is subject to change. |
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