5 Reasons Financial Planning Is Beyond Numbers

By Helwa Sofni

Financial planning is beyond numbers and money. What’s stopping you to take charge of your own finances now?

Personal Financial Planning in a simple explanation is about how to better manage financial resources to achieve personal financial goals.

The word Financial leads us to think it is very much about numbers or anything involving money. It is often relating to savings and investments or more specific subjects like debt management, retirement plan, risk management etc.

It’s true that the financial planning process technically involves mathematical and financial calculations. After all, it is necessary to identify your present financial position and the amount of money you need to live out specific dreams in your future. And the result of the process defines the deficit or gaps, surplus, ratios, rate of return or cost of financing and many other benchmarking. Numbers, numbers, and more numbers.

However, to look just at the numbers themselves can be quite meaningless. It is more important to understand what these numbers mean. Having a good financial plan leads you to find your true sense of purpose. It is about shaping your values and your belief. You need to consider what life will look like and what you wish to explore and do with your life.

Here we highlight 5 reasons why having a financial plan is not just about numbers, but rather a way to enrich your life.

Reason #1. An expression of love

A financial plan starts with setting your financial goals which means your life goals. When you have a clear goal in mind, it gives you something to focus on.

Common financial goals are:

• Stay ahead of inflation and maximize the return on your assets

• Have a comfortable standard of living for yourself and family

• Retire comfortably and maintain your desired lifestyle during retirement

• Sufficient funding for the your children’s education

• Fulfil religious obligation

• Avoid unnecessary debts incurred

• Security to sail through unexpected financial upheaval

Regardless your gender, age, marital status or background, when you are goal-setting, you are actually acting out of love for yourself and the people around you. You want to make sure you fulfil wishes and dreams, and you want a better and happier life, for yourself and for them.

A study by Harvard Business has shown that people with goals are 10 times more successful than those without goals. On top of that, those with written goals are 3 times more successful than those with unwritten goals.

Hence your actions in having a Financial Plan leads you to success that positively impacts those whom you love. It is an expression of love.

“Our purpose is to steer an undeviating course in that direction. A man without a purpose is like a ship without a rudder—never likely to reach home port. To us comes the signal: Chart your course, set your sail, position your rudder, and proceed.” – Thomas S. Monson

Reason #2. Agility in crisis management

Sometimes life presents unforeseen events like sickness or accidents. Sometimes, despite trying hard, you do not achieve what you strived for. Loss of job, divorce, etc. are among biggest life transitions with negative financial consequences.

A regularly reviewed financial plan will help you to put negative events in perspective. You can assess and re-prioritize which things are important to you. Once priority is determined, you can refocus your financial plan and then this allows you to move ahead and enjoy life. In other words, it strengthens your mental preparedness during the storm.

In financial planning, one of the important assessments is about your exposure to risks that are often beyond your control. Since we cannot predict exactly which risks will come your way, not every risk can be for certain covered by a plan. However, the skills that you derive from understanding and living by your financial plan, such as being financially independent, being financially savvy, having acquire more life skills and competency, these will help you adapt to challenges thrown your way.

No matter how you are left financially after a crisis, what matters is how prepared you are to keep moving forward. With a regularly reviewed financial plan, your preparation is already in hand to make you emerge a winner despite whatever circumstances you are recovering from.

“Failure to prepare is preparing to fail”- Benjamin Franklin

Reason #3. Enjoying life to the fullest

A financial plan not only addresses the commitments that you need to fulfil. It also covers or uncovers your other life goals such as an expensive hobby or a wish to travel the world.

While there are so many life goals we want to achieve, we may also at the same time have limited resources. How do we know how much to sacrifice versus how much can we enjoy?

A well-made and regularly reviewed financial planning will help you to:

• Identify steps to help you raise enough funds to pursue your dreams such as pointing out where you can save more or getting your investment portfolio back on track.

• Understand better useful concepts like ‘delayed gratification’, the importance of applying to those concepts to your daily life, and how to do so without getting stressed over them.

• Discover life goals that align with your true values and reality. For example, instead of wanting to be a billionaire traveling the world on your own private jet, you shift focus to taking care of your health, taking care your relationships, or even upskilling yourself in your areas of interest.

Thus, financial planning will lead you to truly figure out what you really want in this life and help you achieve these meaningful goals.

“The best advice I could give anyone is to spend your time working on whatever you are passionate about in life”- Richard Branson

Reason #4. Leaving a Legacy

Being human, we know that one day we will say a goodbye to this world. The issue is we don’t know when the time is.

While we cannot control our fate, being a responsible person we should take charge of what we can control. This means making it easier for those who survive us.

When we are no longer on this Earth, a financial plan brings these benefits to those who have survived us.

• A 1-stop shop for them to find our financial data, including important documents. It is important that while we are still alive, we do regular housekeeping to curate our data in order to consolidate and organize them well for our beneficiaries.

• A clear line of succession to what you have left behind (also known as your estate). Less arguments, less stress, less confusion, and less frustrations. This will also help for a quicker distribution.

Reason #5. A higher purpose

A well-maintained financial plan is one that is regularly reviewed. This is to adapt to changes in your life, allowing for improvements to be made.

There will come a time whereupon reviewing your financial plan, it is no longer about a monetary number you are chasing. Instead, you will achieve a sense of success having come thus far. At this point, what becomes important is giving back to society.

When you decide to make this a better world a better place for others, you are on a different plane altogether. You have uncovered a higher purpose to live for.

Where to start planning your finances

Regardless at what stage you are now, it is highly encouraged that you start your financial planning journey.

Financial planning is indeed a life planning. It is about managing our own expectations and emotions. It is about being grateful for what we have in our life. It motivates us to become better and stronger. It is also about our dreams and thinking about our loved ones and ultimately peace of mind. Working with a competent and ethical Certified Financial Planner who puts your interest first will enable you to reach this success.

“The best way of learning about anything is by doing”- Richard Brandson

Get connected to Helwa for financial planning advice

5 Common Retirement Planning Mistakes & Ways To Avoid Them

By Kian Ng

Planning for retirement isn’t flawless. Learn about some common mistakes and how to avoid them.

Retirement planning is among one of life’s priorities as we would want to have enough to fund a retirement in the lifestyle and up to the life expectancy that we want to live out.

As you prepare for retirement, chances are you may have tripped over one of these mistakes that may cost you in the long-run, for example you may have to work for extra years before you can afford to retire. Luckily, there are ways to recover from them if you are willing to make changes.

Here are some retirement planning mistakes people commonly encounter and some tips to ensure your planning gets back on track.

Mistake #1. Not having retirement plans

Of all the financial mistakes, the most common mistake is when people don’t even have a plan.

In this day and age, you must have some plans to ensure that your retirement planning is on track.

Based on the Employees Provident Fund (EPF)’s annual report, majority of Malaysians have not saved enough to last them more than five years post-retirement. At the same time, according to the Department of Statistics Malaysia (DOSM), an ordinary Malaysian is expected to live for 74.5 years. If you retire at age 55, and your funds dry up by age 60, what will you do to provide for yourself for the following 15 years?

Even if you do have some money tucked away in a retirement fund BUT it is lower than what you have calculated you need, you are still in a vulnerable position. In your desperation, you are likely to become an easy target for scammers. You could end up losing it all.

Solution #1. Start making retirement plans

Retirement planning is important to ensure targeted funds are available upon retirement.

Even though a plan may only cover projected values for your retirement, at least these figures have taken into consideration inflation rates, interest rates etc. Knowing the numbers can give you an idea of what minimum amount you need to sufficiently supporting your chosen lifestyle.

A good retirement plan will also clearly tag different assets towards specific purpose i.e. children education, retirement, or discretionary expenses. The asset tagging for different purposes will allow retirees to cross-check whether their allocation is unbalanced and thus justify whether an adjustment is needed. For example, if investments in unit trust fund are tagged to your child’s education planning, it should not be calculated for retirement planning to avoid double calculation that could give an impression that all plans are still on track when they are not.

Mistake #2. Not investing; only saving

Many still believe the old rationale that their retirement can be funded by their savings. And so they save and save. To them, investing is risky and practically counted as gambling!

The truth is that money needs to grow to catch up with inflation rates. Low interest rates of bank savings accounts are not able to sufficiently grow your money on par with inflation rates.

This is made worse when individuals close their eyes and lump together all emergency savings, business funding, personal expenses funding into one pool fueled by savings while hoping that this is enough to cover all their monetary needs now and always.

Solution #2. Opt to invest your savings

Investing your money helps your money keep up with inflation rates. Avoid keeping all your eggs in one basket by choosing to invest diversely.

How do we invest with better certainty even though there is so much uncertainty in the market?

Managed Portfolio, income portfolio or private mandate accounts can be good options to diversify risk. However ,the composition should be based on your risk tolerance to ensure you have peace of mind while investing. Since we invest to ensure our net worth grows by years, changing asset classes combinations with time is necessary as the market responds differently to current events.

While investing is such a simple term, the options for investors are diverse. To begin, investors should have familiarity with the following questions.

• Are you familiar with the various assets classes available in the market?

• Do you know what suits your personal risk profiling?

• Have you assessed your own risk tolerance?

Now, answering these questions aren’t always as easy as you would need some financial knowledge, time, and also capability to do an analysis on your own. If you need help understanding the questions, seek the aid of either knowledgeable friends (and second opinions!), or consider directly talking to a professional by engaging a licensed financial planner.

Mistake #3. Greed

Many people believe that they can earn easy money by investing in get-rich-quick schemes, with the hope that their wealth can be doubled in the shortest periods of time. Greed blinds their minds from even questioning the validity of such schemes.

A study carried out by the Telenor Group covering scam victims in Malaysia, India, Singapore, and Thailand concluded that Malaysians are the most vulnerable to Internet scams. Which means, the chances for a Malaysian to lose their money is high and this could be costly for those who have invested their entire retirement funding.

Solution #3. Seek a second (professional) opinion

Scammers have many ploys to trick investors into believing them. Even when it seems like the whole world is rushing to jump onto a super amazing opportunity with lucrative returns, it is best if one can stay rational. Face your fear of missing out and calm down.

When returns are lucrative, rather than jump into the pan while the fire is hot, take it more as alarm bells ringing instead. Seek a second opinion from others who are not involved in the scheme but have some good knowledge about matters related to the topic, preferably someone with professional certifications such as a licensed financial planner.

Do your homework too. Make sure that you have sufficient time to evaluate the cost-benefits analysis and learn the pros/cons of the scheme. Learn to resist peer financial pressure while you do your homework. This is to avoid rushing headlong into making the wrong investment decision which could have severe repercussions on your retirement fund.

Mistake #4. Investing in only 1 asset class

There are some investors who may also lean towards just 1 asset class to plan for their retirement planning. This would be a mistake.

For example, many people follow some unlicensed investment guru’s advise blindly thinking that investing in property is THE WAY to a secure retirement as property value may appreciate with time. These investors believe that they can live on the rent collected every month and live comfortably with that money.

The problem with this is that they fail to access their own risk tolerance. They may also overlook the risk of non-tenanted periods which may even last for years, especially during a financial crisis.

This can be applied to investors who rely heavily on other single asset classes such as stocks or foreign exchange schemes. In these situations, an even bigger risk needs to be factored in if they are not familiar the homework required to understand how they all work.

Solution #4. Building diversified and flexible portfolios

Retirement planning should not lean towards certain assets classes alone, which means one should not hold too much of one asset class and forget about the rest.

An example is holding onto too many properties for rental income. This may cause too little cash or liquid assets in hand as properties are fixed assets. If you were to need cash in hand, it takes time for the liquidation process to take place. Selling a property could take up to years for the right buyers and right pricing to be met.

A diversified portfolio has a good ratio to make up the composition of liquid assets, investment assets, and fixed assets. A good ratio should take up 1/3 of each assets class.

A flexible portfolio allows easy cash flow and liquidation to be made in the event of emergency. A good holding of income portfolio, fixed deposit, Tabung Haji, or ASB can be a good combination of liquid assets, which potentially could give better returns than savings accounts.

Mistake #5. Life changes occur, but retirement plans don’t change

As we live our lives, we encounter experiences and life events which change our plans. Because of this, very little of what we planned decades ago would hold true today.

For example, an unexpected occurrence forced a career change on you. Suddenly, although you are no longer young, you need to dip into your retirement fund to start your own business. This would leave you with a depleted income when you reach retirement age. What is more worrying is if the business encounters financial trouble leading to more money to be pumped from your retirement fund into the business.

Would your retirement plan made some time back still hold? Unlikely.

Solution #5. Regular reviewing of retirement plans

As life faces ups and down and is constantly changing, our retirement planning needs to be reviewed as well to adapt to the changes in our situations and our expectations.

Regular reviews are necessary to verify that our retirement plans are on track. This review serves as a checkpoint to safeguard the minimum required in our retirement fund that must be left intact. This review also assesses if changes to our plans need to be made to match our ability to accumulate retirement funds with the retirement lifestyle we want to lead.

Conclusion

Most people could have many things to be accomplished during retirement, but only have limited resources. We would like to travel all around the world during retirement but found out we can’t even meet the retirement needs up to our life expectancy. This is common amongst all retirees and potential retirees when the failed to plan for their retirement. Thus, one should be prepare not only to plan for their retirement, they should also aware of what financial mistakes they potentially committed to ensure their retirement is on track.

What other steps can be taken to avoid retirement mistakes?

Analisis Belanjawan 2021

Oleh Rafiq Hidayat Mohd Ramli

Analisis terperinci dan ulasan tentang Pengumuman Belanjawan 2021

Golongan yang paling ramai mendapat manfaat daripada Belanjawan 2021 yang diumumkan pada minggu lalu adalah golongan berpendapatan rendah (B40 dan golongan pendapatan rendah M40). Pelbagai insentif yang diberikan bagi membantu mereka menghadapi masa yang sukar ini.

Berikut merupakan ulasan daripada Pengarah Urusan Wealth Vantage Advisory, Rafiq Hidayat Mohd Ramli berkenaan insentif serta inisiatif yang diumumkan ketika pembentangan belanjawan berkenaan.

#1. Bantuan tunai

Isi rumah (keluarga atau individu) akan menerima bantuan wang tunai melalui sambungan Bantuan Prihatin Rakyat (BPR) bermula daripada RM350 untuk individu berpendapatan kurang daripada RM2,500 kepada RM1,800 untuk isi rumah yang berpendapatan kurang daripada RM2,500 dengan dua orang atau lebih anak.

Bantuan bagi kanak-kanak daripada keluarga miskin juga meningkat daripada RM150 seorang (umur 7-18 tahun) atau RM200 seorang (umur 6 tahun ke bawah) hingga RM1,000 setiap keluarga. Mereka juga akan menerima baucar telko berjumlah RM180 dan data internet percuma di bawah insentif Program Jaringan Prihatin. Ia akan membantu mengurangkan bebanan rakyat Malaysia yang termasuk dalam kategori tersebut.

#2. Moratorium pinjaman dilanjutkan

Salah satu daripada insentif terbesar yang diumumkan semasa pembentangan Belanjawan 2021 adalah peminjam B40 yang menerima Bantuan Sara Hidup (BSH) atau Bantuan Prihatin Rakyat (BPR) akan menerima bantuan untuk pembayaran pinjaman mereka. Mereka akan diberikan 2 pilihan: moratorium selama tiga bulan, atau pengurangan jumlah bayaran bulanan kepada 50% selama 6 bulan.

Proses permohonan untuk bantuan pembayaran bagi golongan M40 akan diringkaskan, dengan peminjam hanya perlu membuktikan pengurangan jumlah pendapatan mereka bagi mendapatkan bantuan tersebut.Bantuan ini akan bermula pada Disember tahun ini.

Lanjutan moratorium pinjaman untuk individu yang terkesan ini akan membantu golongan berkaitan bagi mengubah situasi kewangan sekarang sehingga ekonomi negara bertambah baik dan pulih.

3. Peningkatan pemilikan rumah

Kerajaan turut mengumumkan beberapa inisiatif untuk membantu meningkatkan pemilikan rumah dalam kalangan golongan berpendapatan rendah seperti memperuntukkan RM500 juta untuk membina 14 juta buah Projek Perumahan Rakyat (PPR), lanjutan skim Sewa-Untuk-Beli (RTO) hingga 2022 dan pengecualian duti setem untuk pembeli rumah pertama hingga RM500,000 dari 2021 hingga hujung 2025.

Walaupun ia mampu membantu golongan berpendapatan rendah untuk membeli rumah dengan harga mampu milik, kami berpendapat bahawa insentif ini memberi manfaat terhadap industri pembinaan kerana golongan berpendapatan rendah mempunyai kepentingan lain dan memiliki rumah akan menjadi perkara terakhir dalam senarai keutamaan mereka.

#4. Kumpulan Wang Simpanan Pekerja

Bermula dari Januari 2021, pekerja boleh memilih untuk mengurangkan potongan EPF mereka dari 11% kepada 9%. Pemilik akaun KWSP juga boleh memohon untuk mengeluarkan wangan daripada Akaun 1 (ya, ini bukan kerana penulis tersalah tulis) sebanyak RM500 sebulan untuk 12 bulan bermula Januari depan. Kedua-dua inisiatif ini (ia bukanlah insentif kerana anda menggunakan simpanan sendiri) akan membantu isi rumah yang terkesan semasa waktu yang sukar ini.

Bagi mereka yang tidak menghadapi masalah dengan aliran tunai, inisiatif ini mampu meningkatkan simpanan kecemasan sedia ada atau mengurangkan hutang sedia ada (kad kredit, pinjaman peribadi) jika anda tidak mampu berbuat demikian. Nasihat kami untuk golongan lain adalah mengekalkan sumbangan sedia dan tidak mengeluarkan akaun 1 KWSP kerana tiada sebarang keperluan mendesak untuknya.

Keputusan kerajaan untuk pekerja mengeluarkan simpanan di Akaun 2 adalah bagi mendaftar untuk insurans hidup atau polisi takaful bagi penyakit kronik untuk diri sendiri dan ahli keluarga adalah amat digalakkan. Ia merupakan usaha kerajaan untuk meningkatkan jumlah perlindungan dalam kalangan rakyat negara ini.

Inisiatif ini juga memberikan perkembangan positif untuk sektor insurans dan takaful serta individu yang mempunyai jurang dalam keperluan perlindungan mereka tetapi tidak berniat untuk memohonnya. Perlindungan harta mempunyai hierarki yang lebih tinggi dalam kewangan peribadi dan jika dibandingkan dengan pelan persaraan. Kami sangat menyarankan kepada mereka yang mempunyai jurang dalam perlindungan sedia ada untuk mengambil inisiatif ini sebagai peluang menguruskannya dengan lebih baik.

Walau bagaimanapun, anda digalakkan untuk membuat kajian dan berbincang dengan perunding kewangan berlesen untuk lebih memahami keperluan kewangan anda sebelum membuat sebarang keputusan.

#5. Insentif cukai

Walaupun fokus Belanjawan kali in tidak kepada golongan berpendapatan tinggi, ia tidak bermakna mereka dilupakan. Kerajaan turut mengumumkan beberapa insentif yang berkait dengan perlepasan cukai untuk membantu perancangan cukai isi rumah. Berikut merupakn beberapa insentif cukai yang diumumkan pada minggu lalu.

• Pengecualian cukai untuk vaksinasi pneumokokal, influenza dan Covid-19 hingga RM1,000 untuk diri, pasangan dan anak-anak

• Pengecualian cukai untuk belanja perubatan bagi penyakit kronik meningkat dari RM6,000 kepada RM8,000 untuk diri, pasangan dan anak-anak

• Pengecualian cukai bagi pemeriksaan kesihatan yang menyeluruh meningkat dari RM500 kepada RM1,000 bagi diri, pasangan dan anak-anak

• Pengecualian cukai untuk ibu bapa atau anak bekeperluan khas yang memerlukan rawatan perubatan dan penjagaan meningkat dari RM5,000 kepada RM8,000 untuk diri, pasangan dan anak-anak

• Pengecualian cukai untuk diri bagi pendapatan bermula dari RM50,001 – RM70,000 dikurangkan sebanyak 1%

• Pengecualian cukai tahunan SSPN-I berjumlah RM8,000 dilanjutkan hingga 2022

• Pengecualian cukai untuk Skim Persaraan Swasta (PRS) sebanyak RM3,000 dilanjutkan hingga 2025

• Pengecualian cukai gaya hidup meningkat dari RM2,500 kepada RM3,000 dan akan meliputi yuran pendaftaran kejohanan sukan dan akhbar digital.

Walaupun insentif ini tidak sebanyak seperti insentif untuk golongan berpendapatan rendah, ia masih membantu individu dan isi rumah untuk membaiki tahap kewangan peribadi mereka.

Kesimpulan

Secara keseluruhannya, Belanjawan 2021 memberi fokus bagi membantu rakyat Malaysia yang bergelut untuk menghadapi waktu yang sukar ini, dan insentif serta inisiatif ini datang tepat pada masanya untuk mereka. Namun, perkara yang mencetuskan persoalan adalah sumber wang yang digunakan untuk menampung segala kos yang akan muncul nanti. Jangkaan kami adalah belanjawan ini akan memandu negara ke arah pemulihan, tetapi jika ekonomi tidak pulih, kerajaan perlu menjalankan kajian semula bagi mengenal pasti samada ia boleh dikekalkan untuk masa akan datang.

Apakah pendapat anda tentang Belanjawan 2021 yang diumumkan baru-baru ini?