Thriving in Life With a Financial Plan

By Helwa Sofni Md Isa

When my client took a career break, she underwent a big transformation that prompted her to work on her financial planning.

Follow the story of my client, Puan Sara and her husband, Encik Que as they undergo a financial planning journey after Puan Sara decided to take her career break in order to to take care of her young family.

Client Stats

• Age: Early 30s

• Location: Selangor

• Marital Status: Married, with 2 children

• Asset Allocation: 50% in property, 40% in Fixed Income, 10% in equity

• Income Source: none, totally dependent on husband

An Unplanned Event

Puan Sara was in her mid 30’s when she decided to take a career break to care of her young family while her husband Encik Que took a job thousands of miles away.

Being career-minded and holding a promising position, taking a career break had never cross her mind before. It was a very difficult decision but being a mother, for her it was the best option for her family at that point of time.

Just a year earlier, she made 1 major financial decision in her life. She bought a property that cost approximately half a million ringgit with a 20-year mortgage. The loan had rather a short tenure despite the large amount as she wanted it to fit into her plan to retire at age 55, hence the loan was targeted to be paid up by then.

Therefore, having to decide for a career break needed serious consideration in terms of financial readiness. The initial plan was all expenses and ongoing commitment to be taken care of by her husband, except for that property loan that she had committed to a year earlier. In order to cover for the progressive repayments of the loan, the plan was to use her EPF account 2 savings.

What Money Can’t Buy – TIME!

You see, both Puan Sara and Encik Que were committed to change their lifestyle in order to match their new single income status, in other words they were prepared to downgrade and live humbly.

What came as a surprise to Puan Sara was that living humbly was actually a little adjustment to what she was already used to. Her lifestyle was not really downgraded at all. There was no significant impact to her emotionally.

She still enjoyed her time very much. In fact, now that she was no longer working, she found that spending time with her family was a true blessing. She also still had meet ups with friends and relatives.

With all this happening, Puan Sara was confused. What happened to all her spending during her working life? Where did all her spending back then go to?

If things were going so well in terms of spending, perhaps being a stay-at-home mother could be a viable long-term option for her? Or perhaps taking on a less demanding job albeit with lower income would be okay too? These thoughts crossed her mind.

The Wakeup Call

Despite enjoying her new lifestyle and considering the possibility of continuing it, Puan Sara felt concerned over one thing – her family’s complete and total dependency on her husband as the sole breadwinner of the family.

This fact was rather scary and made her feel insecure as to what the future held for all of them.

Despite spending being manageable so far, she was worried and had many questions. Was their current lifestyle truly sustainable on a single income? Could they afford to retire comfortably? Would the possibility of sending her children to private school be a wise move?

To address this, she did her own study. She did plenty of reading and asked many financial representatives to find the answers. She was confused with the options available, and how to prioritize needs accordingly. While having many life priorities, their family resources were limited.

A First Step to A Good Start

What Puan Sara needed was an advice on her overall financial situation. She needs a holistic review that consider all financial goals together as much as her concerns. Some goal targets will need to be adjusted to accommodate other financial needs. Thus, prioritizing these needs were equally important.

I attended to Puan Sara’ needs using the 6-step Financial Planning Process. We began the process by getting to know each other better. We included Encik Que in the discussion as many plans were family-related that needed commitment, agreement, and support from both of them. Open-ended questions were asked to understand their concern, goals, and objectives. We identified and fine-tuned their financial and life goals so that they were clear.

The engagement was smooth as both Puan Sara and Encik Que understood that providing accurate and complete input are extremely crucial in order for me to holistically analyse their unique needs and develop the specific plan that would suit their family best.

Holistic Financial Review

The following were areas of Financial Review that were discussed thoroughly with Puan Sara and Encik Que:

1. Cash flow review: Understanding of the income stream and tracking the spending pattern properly. Spending includes discretionary and non-discretionary expenses. This enables them to set aside minimum cash reserves first. This process also allowed them to know their actual investable asset value and the ability to optimize their cash flow.

2. Risk Management review: This to ensures that Puan Sara and her young kids are covered in the case of any financial shocks or should anything have happened to Encik Que. We reviewed and summarized the existing policies and performed the gap analysis. To address the gaps, we prepared multi-vendor product comparison and recommendations.

3. Asset allocation review: This review was intended to ensure their existing resources or investment working harder to beat inflation and support their financial target specifically for retirement, kids’ education planning, and the hajj planning. Investing in the best-of-class products helped them to maximize their potential returns while managing the risk level according to their risk profile.

4. Estate Management review: Highlighted the estate administration processed involved and the Islamic inheritance law applicable to their existing financial position. This review included discussion on the estate planning tools available and what best to support their wishes while keeping cost for now and future at the most optimum possible.

“A dream life is all in details”

Level Up

During the first discussion of this financial planning, it was rather an emotional session for Puan Sara. The finding and details were more troubling than what she initially expected. Particularly on estate management, realizing the misunderstanding that she had prior to this discussion was too much for her should anything had happened to Encik Que.

There were few other financial mistakes spotted such as unsuitable insurance policies and selection on investment type that did not match their risk and expectations.

In summary, this Financial Planning Review we worked on together has added value to them both by addressing:

• Reduced Financial Risk

• Reduced Financial Cost

• Optimum Cash Flow management

• Proper Investment Strategy

This Financial Planning Review also made Puan Sara realize that there are things that can happen beyond her control. She realized that not every risk can be for certain covered by a plan.

While her decision has been to prioritize her family, she realized she cannot drop everything else but rather would still need to lend her attention to these other things although they should comparatively take up less of her time. For example, she still needs to be financially independent, financially savvy, acquire more life skills and competency, in order to adapt to challenges that came to her way.

“The diagnosis and analysis done helped me and my husband to make informed decisions. Life scenario planning made it clear what to expect, what to work on and what to sacrifice to some extent. Having comparisons and options for me and my husband to choose from are such a stress reliver, that made me feel so thankful. I enjoy life better; I appreciate things surrounding me. In short, I am a better person today!” – Puan Sara

Puan Sara believes that having a financial plan as a couple is important in order to manage expectations, emotions, and ultimately gain peace of mind knowing that you are on the right track for what is best for your family. And that is possible and much simpler with the help of professional advice from the Licensed Financial Planner.

Do you want to have a holistic financial planning review? Contact Helwa Sofni and get connected to a licensed financial planner. WVA Story is a series focusing on personal stories by licensed financial planners from Wealth Vantage Advisory.

5 Reasons Why Women Should Invest

By Helwa Sofni

For those who aren’t confident to start investing, learn why you should start investing now.

Did you know, studies have found that women are better investors than men?

A 2017 study by Fidelity Investment found that women earn higher returns on their investments than their male counterparts by about 0.4 %. In 2018, Warwick Business School Study found that women tend to outperform men at investing by 1.8%.

And there are still many other studies that draw similar conclusions. However, the number of women investors is far less than their male counterparts. In Malaysia specifically, women investors make up only about 30% of retail investors in our stock market.

Here are five reasons why more women should get started with investing.

#1. Retire in Style

Many women are aware of their longevity – women tend to live longer than men. This can be either good or bad news depending on how financially ready you are to maintain the extra years.

Women can agree that the most important thing is to enjoy life and be happy – it’s all that matters. And women want this to last till the end of their lives. That may mean having a beautiful home with family around. It may mean having access and choice to either simple or extravagant luxuries. Whatever your retirement dreams look like, one thing is for sure: it definitely requires money!

However, it’s understood that later in life, the biggest issue is health and its associated costs. Thus, it’s crucial to ensure your retirement funds are sufficient to support all these factors. There’s a serious consideration every woman needs to make – to either work hard throughout the years or being smart by making your accumulated money work for you, even when you’re sleeping at night.

The choice is up to you!

#2. Reaching Life Priorities

As women, we may have a lot of things going on in our mind. We think about the many people around us, especially those that we love the most.

As an example of life priorities, mothers have a strong maternal instinct to guide their offspring – worrying whether our children are doing fine and whether they can survive if we’re no longer around. We wish for them to get the best education possible as a foundation for better lives. The best education usually comes with higher costs.

As such, many women are taking charge of their finances with the goal of giving the best to their children. To do so requires adopting a longer-term perspective in order for small monies now to compound and grow into big monies later.

Regardless of your life priorities, the recipe for success includes having an action plan with clear milestones. As women, we have the tendency to allow our emotions to guide our decisions. When it comes to action plans, we need to concentrate on dropping the emotion and focusing on the data instead.

Are you willing to take charge of your finances and your emotions or would you rather leave the future to chance?

#3. Stop Making Losses Everyday – Start Investing!

Let’s talk about saving versus investing. You’re probably aware that in investing, there’s a chance to make profit, but there’s a possibility of losses too. Does saving sound better than investing then? Less risks, right?

The truth is that inflation will erode the purchasing power of your money. For example, your RM3,000 monthly spending today will be equivalent to RM6,200 monthly in 15 years of time with an inflation rate of 5%. This means that by saving alone, you are losing money due to inflation.

Can we women address this just by working hard and saving alone? Can you ensure your salary will double every 15 years just to maintain your lifestyle? What would happen if your monthly needs also increase due to additional discretionary and non-discretionary expenses at that future time? A survey conducted by UOB Malaysia in 2017 found that credit card spending amongst Malaysian women grew 129% in 5 years from 2011 to 2016, which is much higher compared to men at 71%.

In other words, both savings and investing are necessary and they can complement one another by supporting your overall financial standing, which is key!

How do you differentiate investing from gambling? The answer is in education. Educate yourself in understanding what your options are, how they function, and understand the fundamentals. Gambling means going in blindly and leaving things to chance. Investing means using your mind and making educated choices based on knowledge you have gained.

#4. Power of Compounding

If you can understand what the effect of inflation does to the true value of money, it’s much easier to understand the effect of compounding when you invest.

Here’s an example – say you can consistently start investing RM3,000 yearly (RM250 monthly) for 15 years. At an annualised return of 5% per year, this would add up to a total of approximately RM65,000 as compared to pure savings of only RM45,000. The additional RM20,000 you made here is the investment return as a result of compounding.

Here’s another important fact – if you keep investing this amount for a longer period of 30 years for your retirement, what would you expect this to accumulate to? The answer is close to RM200,000 instead of just RM90,000!

#5. Invest Confidently, Live Confidently

Life is always full of surprises, good and bad. While there are things that are out of our control, we should focus on what we can do to take charge before it happens. Thus, the amount of time that you’re willing to spend upskilling yourself on the subject of investment could turn out to be life-saving.

To start investing may not be as complicated as you think once you begin to understand how to do it. When you have a better grasp of it, you will have greater confidence, especially when you start to see your money grow.

Conclusion

There needs to be a paradigm shift on the mentality or mindset among Malaysian women about financial literacy in general, as well as investing. With the improved socio-economic status among women, we should expand our sights to beyond family, fashion, and profession, and get more involved in taking charge of our financial wellbeing.

Growing our money through investments can be extremely rewarding. If you’re worried about the risk and exposure, allocate small amounts of money first but be consistent. There are plenty of low-risk investments that offer good returns. This could lead to a better lifestyle and prepare you better to face any uncertainty that may come!

As a woman, what encouraged you to start investing?

You want to start investing? Contact Helwa Sofni and get connected to a licensed financial planner.

Finally, My Debt Has Come to an End!

By Kian Ng

The story of Madam M’s financial planning journey focusing on debt restructuring for a brighter future.

How would you feel after managing stress for a long time and having it finally slide off your shoulders? Such long-awaited relief that boosts the oxytocin inside you. Yes, this story is about finding that feeling – finally, stress has come to an end!

This is the story of my client, Madam M, and her journey with debt restructuring.

Who is Madam M?

Let us greet her as Madam M and this is her success story, with me as her trusted, licensed financial planner.

Client Stats

• Age: Late 40s

• Location: Kuala Lumpur

• Marital Status: Married, with 3 children

• Debt Rate: 80% of net income

• Income Sources: Active income from work

• Available Financial Resources: Property (under her own name)

Madam M’s ‘Her’story

Madam M has been a banking and financial industry veteran for the last 20 years. With her experience and exposure to banking products and how banks operate on credits facilities, she was once a strong believer that she could easily manage her personal finances by using those facilities and with careful management of her personal and family expenses.

However, an unexpected setback occurred that threw her plans off.

Her rainy day filled with thunderstorms happened and she was unprepared for the financial shock.

In 2010, Madam M faced a medical emergency and the accompanying huge medical bills. The sum was so large that she was not only unable to fully settle the outstanding amount with her savings alone but she also had to max out her credit cards and take out personal loans. This one-time event was the beginning of her financial nightmare.

With her savings depleted, she was basically relying on her monthly income to pay the monthly minimum payable amount on her outstanding credit card loans and personal loans. Meanwhile, her regular monthly expenses had to be rolled onto more credit usage, building up more debt.

Madam M was unable to channel any money for savings as most of her income was redirected to monthly debt repayments, and her debt serving ratio was up to 80% of her net income. She had NO emergency funds for rainy days, no savings, and no investment for children’s education planning, only relying on employee provident funds for retirement, and no will writing. Absolutely nothing!

It was a long stressful time for her, not able to stay productive at work and her mind goes blank at home too. Her stress was rocket high when her husband was trapped in similar credit issues and needed to get the repayment done on the next 10 years!

Searching for a Solution

While she struggled, no financial advisor approached Madam M and she did not seek for any professional advice regarding her debt issues. She imagined a day where she could settle her full debts when she gets her EPF retirement funding at the age of 55. Meanwhile, without any clear solutions to pull her out from her current scenarios, she accepted that her situation was her new normal.

Until one day, enough is enough! Madam M is a determined woman. She shook off her stress enough to decide to take some actions to end her miserable financial journey with professional advice. It is at this point that we met each other

.

I am glad that Madam M started to seek for solutions when she did. In fact, the journey to fully uncover her debt issues was bumpy. It is difficult for people with extremely high stress levels to come face to face with the root of their stress. It took more than 8 attempts and meetings to flesh out the entire data gathering process, before she was able to focus on the big picture strategy – Debt restructuring.

The Start of a Journey

From our multiple meetings, Madam M gradually detailed each debt she has. She is fully aware that she is still the final decision maker on any actions needed. The basic groundwork was to get the credit reports to cross check official data with her understanding of her debts to confirm her current credit position. The report indicated that Madam M has been a good pay master as she has diligently been making her regular payments and she has not defaulted on a single payment. This was really encouraging!

We worked progressively and laid out our big picture strategy with action plans to focus on the following:

• Cash flow management before and after the debt restructuring.

• Property refinancing scenarios with multiples possible outcomes with different amount of refinance margins and interest charges.

• Possible savings and accumulation towards different goals i.e. children education, personal retirement, and Hajj Planning.

• Estate planning including will writing to ensure her assets can be managed and distributed to her beneficiaries.

• Risk management key focus on income replacement coverage.

Madam M is a client who upholds the principal of self-discipline and good follow through with her actions. She was determined to get rid of this haunting issue within the shortest periods of time. She would promptly execute any and every action that needed to be taken.

Her only setback happened during her application for refinancing. Due to the Movement Control Order ( MCO ), the process was delayed, taking 8 months rather than the usual 3 months, and plans had to be put on hold.

Despite the setback, she is still kept her hopes up and maintained her determination. She is a real fighter and continued to keep a clean credit record by paying her monthly commitment promptly.

Finally, our efforts paid off when the bank released the disbursement at the end of Oct 2020. When she called me on the phone to inform me of the disbursement news, I could feel the total relief from her.

Her decade-long nightmare has officially come to an end!

With the disbursed amount, we had made the following progress on her finances:

• Completely settled all her credit cards outstanding with various banks.

• Completely settled all her outstanding amount with other financial institutions.

• Optimized part of her balanced disbursed funds into setting up 6 months emergency funding.

• Optimized part of her balanced disbursed funds into children education planning

• Kicked start retirement planning with lump sum and monthly regular investment to close retirement gaps.

• Implemented estate planning process for will writing.

• Confirmed the Hajj planning is in place with close monitoring process.

The list above represents the debts restructuring process we completed. When we both sat down during her recent review, the satisfaction was beyond words!

What is Ahead?

Madam M’s financial planning journey demonstrates that no matter how bad your debt situation is, you can still overcome it with the help of a professional.

Now, Madam M can stay keep abreast with her personal finances. We both view it as a beginning of a new financial journey as she now has a new set of financial goals to work towards, no longer looking just at keeping up with her debtors. After her experience this last decade, she is a happier and stronger woman.

Madam M wants all readers to know from her experience that:

Seeking early professional advice is critical to cut short your suffering.

Like doctors, licensed financial planners can work with you to address financial concerns at an earlier stage for better results.

She believes that financial planning has given her the advantage over her current financial standings. She is certainly more relaxed and can clearly focus on her goals. By reaching out for professional help, she has turned what many would think as mission impossible into mission possible. So, let us wish Madam M all the best in continuing to make a positive impact on her family’s finances.

Struggling with your debt restructuring plan? Contact Kian Ng and get connected to a licensed financial planner.

WVA Story is a series focusing on personal stories by licensed financial planners from Wealth Vantage Advisory.