FINANCIAL PLANNING
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Personal financial planning is growing in importance for the average Malaysian. Uncertain economic times, changing legislation, the proliferation of new financial products and lack of time make it difficult for consumers to use their resources effectively. A well-designed financial plan can help you do just that and, along the way, give you a  greater sense of financial security.

But what's involved in financial planning? Many of us tend to equate financial planning with investment management and neglect the other components that are just as important to financial independence. Reducing taxes, providing adequate insurance coverage and protecting our families through proper estate planning are key concerns as well.

One common misconception is that you have to have a lot of money to benefit from financial planning. Not so. In fact, financial planning can sometimes be the greatest help to someone who is just starting out and wants to build their financial future from the ground up.

If you have the time and the interest to learn about financial planning techniques and put them into practice, you can get a large part of the groundwork done on your own. But you may find it useful to consult with a professional financial planner when it comes to more involved strategies in tax planning and estate planning.

Whether you go it alone or hire a planner, the steps in the process should be the same. Although every planner has their own unique style, there is a recognized process that defines the financial planning process.
 

1. Establish Where You are Today
The first step is to establish where you're at today. You need a starting point for developing goals and measuring future progress. If you're going to work with a professional planner, they will usually want you to complete a questionnaire that will give them all the relevant financial background. If you're going it alone, you may think you have a pretty good idea of your situation without bothering with the specifics. Don't make that mistake. Take the time to collect accurate information - some of the details may surprise you.

The information you need includes:
* assets and liabilities - everything you own (real estate, investments, pensions) and everything you owe (mortgages, lines of credit, outstanding credit card payments etc.)
* current sources of income - salary, investment income etc.
* current expenses
* tax returns
* investment records 
* insurance policies - life, property, disability and general liability
* company benefits - pension, medical, life and disability insurance
* wills and powers of attorney

2. Develop Financial Goals
Once you know where you're at today, you're in a position to develop some goals for the future. Are you looking to set up your own business in a few years? Retire? Put your kids through university? Most of us have a number of long-term goals we'd like to work towards. But we may not be able to achieve them all. A financial planner can help you to clarify your own attitudes and values, which is an important step towards setting priorities for the future. Only you can decide whether it's more important to provide for your children's education, help support elderly parents or fulfill your dream of early retirement. But a financial planner can help you to explore your own values in a way that will make it easier for you to see where your priorities really are.

3. Analyze Your Current Situation and Prioritize Goals
Now you need to take a good hard look at your current situation in relation to your goals to see what problems are standing in your way. Some of these may be quite apparent to you. Perhaps you know that you don't save any money towards your goals, or that you're so deep in debt, there isn't anything extra to save. Poor money management skills are probably the issue here.

You may need the assistance of a professional to identify other problems. Are you paying too much tax? While all of us feel that we are, a financial planner will know if there are specific tax-reduction strategies you're missing. Are you adequately insured? A financial planner can calculate the benefit that you or your survivors would receive from your current coverage and compare this to the amount needed.

4. Develop Financial Plans and Strategies
Develop a strategy to address the problems. With a professional planner, this will usually take the form of written recommendations and alternative solutions. On your own, you'll probably mull over the problem and decide in your head what you're going to do about it. It's still a good idea to commit your decision to paper, however. This formalizes your course of action and gives you something to refer back to after implementation.

It's important that your strategy be specific. Saying that you're going to start saving money is not a strategy -- it's a recipe for failure. You need to identify exactly how much you're going to set aside every week, every pay cheque or monthly. You also need to determine how you're going to do this. Will it be by participating in your company savings plan via payroll deduction? Or will you arrange with your bank to transfer money into a money-market fund each month? What is your timeline for making these arrangements? How will your savings be invested once they start to accumulate? All these factors should be incorporated into your strategy.

5. Implement Your Financial Plans
Putting your plan into action is the next step. The best plan in the world isn't worth anything if it gets filed away in a drawer. Unfortunately, this often happens when people go it alone. We all have a tendency to procrastinate, and financial matters often get left behind in the crush of day-to-day responsibilities. A financial planner can be of help here, too. Realistic timeframes can be developed for the various steps that must be completed. The planner may be able to perform some of the action steps for you, and can follow up with you on other items to make sure that timeframes are adhered to.

6. Monitor Progress and Revise Your Financial Plans
Finally, a financial plan is never written in stone. Circumstances change, and your plan may need to be adapted so that you stay on track with your goals. You should review your plan at least once a year to assess your progress and see if changes need to be made. 

Your net worth statement can be a helpful tool here. Use it as a benchmark to measure your progress. Has your net worth increased by as much as (or more than) you expected? If not, you need to find out why and take some corrective action. A financial planner can also provide input into changes in legislation and new investment products that you may want to incorporate into your planning strategies.