(Word Count: 648 – reading time 2.5 min)
We can go back in history and look great civilizations. Whether it was Genghis Khan, Atilla the Hun, Hannibal, Constantine, The Greek Empire, Roman Empire, British Empire, Russia or any other global power and we know from facts that their fall was caused from within and not by being conquered. Military History tells us that the great generals of history conquered foreign lands but brought into their control the resources of those lands and the inhabitants. Our history books are full of illustrations of battles won, lands conquered, lootings, riches, gold and just about any contrivance that the human mind is capable of creating was a precursor of what we might be facing today.

What Was the Common Thread? Greed, pure and simple greed. Classic movies, with Charlton Heston and Victor Mature have depicted the “glorious days” of past civilizations. The screens were full of the “spoils of war”. Peasants were always the losers, just as in today’s society, the losers or the one’s that are paying the heavy price of “fiscal mismanagement” are the average people. Could education about the monetary system have changed the course of history? I don’t know that answer, but we do know that “lack of knowledge” of the monetary system kept the “masses” always in “serfdom” to royalty. Taking a look back at history and relating it to our present day situation, we can see “history repeating” itself. Do you remember when Jimmy Carter left office? Do you remember what the prime rate of interest was? Shades of our forefathers, would you believe that we were paying in excess of twenty-percent (20%) interest in our time.

The Rule of “72”

Whenever I conduct a seminar or workshop, I always give the students a lesson on the “rule of 72”. I am always amazed at how many have never heard this expression let alone what it means. I can begin by simply saying this. If, Mother has $100,000 and she puts it into a very safe “bank account”, she is content for the bank to pay her a modest four (4%) return on her investment. Well, divide that four percent (4%) into seventy two (72) . The answer is simple. It is eighteen (18). So this means that it takes, dear old “Mom” eighteen (18) years for her $100,000 to double.

Wow, what a deal ! But, now let’s look at the credit card companies that have the nerve to charge twenty percent (20%) interest on a credit card. Hmmmm, that amounts to three and one half years. So, because Jimmy Carter was so in-experienced in “fiscal policy” and his tenure as President allowed for such usurious rates to become reality, this opened the door for usury to become a part of our daily lives.

Of course, promoters, bankers, credit card companies and lobbyists all claimed that consumers of all walks of life (even if some don’t qualified) needed credit and this was a result of what was needed. Well, if that is the case, then why the big, disparity in credit profiles and why do banks and credit card companies continually keep average folks in this credit life-time “imprisonment”. Usury was banned by Constantinople but our country’s leaders were not even aware of what had been the demise in other civilizations. It was high interest rates then and it is high interest rates today. Present day credit card rates for the average person and how under the “rule of 72” it is IMPOSSIBLE for anyone to get out of debt.

Perhaps, you are now beginning to see where this article is going. Maybe, just maybe our “dilution in purchasing power – ability to spend” just might be the result of high interest rates, foreclosures, repossessions, divorce, sickness and the high unemployment rates today. The moral: Start saving into any investment vehicle that gives you (at least) 10% return per annum, that way, your money is double every seven years – perhaps your salary might not be able to pull this stunt within next seven years. Question, if your money is doubled every seven years, should you be concerning over inflation, deflation and global economic slowdown?

By Regis Sauger (Licensed Mortgage Broker, Columnist, Speaker)

(Word Count: 839 – reading time 3.5 min)
Do you hear co-workers or friends talking about their investments and wonder how they got started? How’d they come up with the money to invest? How’d they know what to invest in? Many people don’t know where to start, so they never start at all.

The vast amount of information about investing, the wide array of investment choices, and the risk are intimidating and can prevent you from taking those first steps. It doesn’t have to be that way. You only need to know a few basics in order to begin investing in your future.

Basic Assumptions

First, some assumptions. This article assumes you have your credit card debt under control. It makes no sense to invest in stocks, bonds, or mutual funds if you have thousands of ringgit in credit card debt at interest rates in excess of 10%. You don’t have to be completely debt-free, but you should be making serious inroads into your debt each month, and you should be paying very low interest rates on that debt. This article also assumes you have an emergency fund of at least three months worth of basic living expenses (preferably six months worth) in case of a job loss, disability, etc.

Where Do I Find the Money to Invest?

The first question for many people is “where do I get the money to invest?” There are plenty of stock mutual funds (unit trusts) that allow you to invest with $1,000 or more. Use your next bonus at work, or your income tax refund, or put in some overtime for extra cash. If you just can’t come up with $500 to start your portfolio, many funds will allow you to skip the initial lump sum investment if you sign up for automatic monthly withdrawals of $50 to $100 from your checking account.

How Do I Choose an Investment?

You’re ready for some long-term investments. How do you choose? The first step is to know what your goals are. Are you saving for a house? A college education? Retirement? The type of investment you choose will depend on the amount of time available before you need the money. Stocks are considered long-term investments, and it’s best to plan on holding stocks or stock mutual funds for five years or longer. If you need the money sooner than this, you may reduce your return by cashing in when the stock’s value is down.

How Do I Determine My Risk Tolerance?

Next, you need to know your risk tolerance. If you hide your money under your mattress because you don’t trust the bank, then you’re probably not going to feel comfortable investing in volatile technology stocks. Public Mutual’s Investment Risk Test can help you determine what level of risk you can tolerate.

How Do I Choose an Investment?

How do you decide where to put your money? Most experts recommend spreading your money over several different types of investments to reduce risk, because typically one type of investment does well when another doesn’t. For example, usually when returns on stocks and stock mutual funds are high, returns on bonds are low, and vice versa. By having money in both types of funds, you’re more likely to get a decent combined return if one category takes a downturn. Your asset allocation should be tailored to your risk tolerance and the number of years before you’ll need to withdraw the money from your investments.

For beginning investors, I recommend stock mutual funds instead of stocks in individual companies. Why? It’s all about risk. A well-chosen stock mutual fund is less risky than an individual stock because mutual funds invest in many companies, thus spreading out the risk. If one company does poorly, the fund as a whole may still have a good return. If you buy stock in one company and the company does poorly, you lose money.
Where Do I Find Information About Stocks and Mutual Funds?

Once you’re ready to start choosing a fund to invest in, there are many excellent Web sites to help you. My personal favorite is MorningStar (Malaysia Edition), the respected mutual fund rating company. Their powerful Fund Selector allows you to search for mutual funds based on what’s important to you. For instance, if you want a list of funds that allow initial investments of $1,000 or more, you can click on the appropriate box, leave all the other boxes as is, and you’ll get a list of funds that accept initial investments of $1,000 or more, with their YTD return, expense ratio – the amount of administrative and other expenses that the fund manager deducts from your return each year, their MorningStar rating, and more. Click on an individual fund name and get detailed information about that fund.

Once you’ve chosen a fund you feel comfortable with, call their hotline number and request a prospectus (a description of the fund, its investments, and the returns it’s earned in the past) and an investor’s kit. Fill out the form, send in your money, and voila! You’re an investor.

By Joshua Kennon (Author, Investor, Entrepreneur)

(Word Count: 749 – reading time 3.0 min)

Although making resolutions to improve your financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are my top nine keys to getting ahead into financial prosperity.

1. Get Paid What You’re Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand ringgit a year can have a significant cumulative effect over the course of your working life.
No matter how much or how little you’re paid, you’ll never get ahead if you spend more than you earn. Often it’s easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn’t always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It’s not a four-letter word. How can you know where your money is going if you don’t budget? How can you set spending and saving goals if you don’t know where your money is going? You need a budget whether you make thousands or hundreds of thousands a year.

3. Pay Off Credit Card Debt

Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it’s so easy to forget that it’s real money we’re dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don’t, and end up paying far more for things than we would have paid if we had used cash.

4. Have a Saving Plan

You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.

5. Invest!

If you’re contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better. If you are totally unfamiliar with any investment tool, you can start off with mutual funds as they are easy, liquid, flexible, safe, yet allow investors to earn up to 10%-25% in return annually.

6. Maximize Your Employment Benefits

Employment benefits like a EPF plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you’re maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.

7. Review Your Insurance Coverage

Too many people are talked into paying too much for life and disability insurance, whether it’s by adding these coverage to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it’s important that you have enough insurance to protect your dependents and your income in the case of death or disability.

8. Update Your Will

92% of Malaysians don’t have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn’t too complicated you can even do your own with software like WillMaker from Nolo Press. Protect your loved ones. Write a will.

9. Keep Good Records

If you don’t keep good records, you’re probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It’s much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.

Reality Check

How are you doing on the top nine list? If you’re not doing at least six of the nine, resolve to make improvements. Choose one area at a time and set a goal for incorporating all ten into your lifestyle.

By Joshua Kennon (Author, Investor, Entrepreneur)

(Word Count: 361 – reading time 1.5 min)
So many people around the world have financial problems. Here are some great steps to sort out your own finances, regardless your current financial status quo.
Start planning a list or spreadsheet. Start a list of all your financial expenses. Gather all your home finances, car insurance, big-ticket installments, school and so on. You need to take account of everything and come to your final number. If you live by a budget then becoming your own financial planner/advisor will be easier than your think. Make sure that you also account for everyday expenses also.

Then, compare income to expenses. Take note of all your total income. This is your yearly pay or income. Budget all expenses and make sure that you are not spending more than your brining in every month. It helps if you pay all your bills on time cause that should build your credit report. This will make it easier to get loans or good deals in such a new car. But before all of that you must calculate all expenses after you pay a yearly tax (if you unsure your tax payable, take 15% as a safe assumption). It’s not hard so save money if you have a higher income every year.

Once you had compared your income to expenses, analyze all total information. Take an estimate of what your future might consist of. I mean, are you going to college? If so, that is going to cost money. Do you want to own a house? That’s also more expenses. When you are your own financial planner keep in mind that it’s going to take some time to calculate everything.

You just start building a small habit of managing your own money. Start easy and small, allocate just 15 minutes per day learning more about your own finances or any lessons on financial planning.

Here are some good advice;

• If you have having a problem being your own financial planner you can always outsource the idea.
• Financial planners can work for credit unions, banks and companies that specialize in offering financial advice. But many financial planners work for themselves.
• Take note all everything closely

By Jeremy Vohwinkle (Registered Financial Planner)

(Word Count: 762 – reading time 3.0 min)
I recently attended a really great seminar about financial planning, money management, and retirement planning. It was interesting how the speaker started out the seminar, because instead of jumping into the key points of the discussion, he started discussing the most common mistakes people make with their money. The basic point is that you cannot really effectively save, plan, or use your money if you continue to make the same mistakes with your money.

Here are the eight most common mistakes made and how to avoid them.

Mistake #1

The first most common mistake people make with their money is to pile up their debt. When you pile up debt, you create an enormous financial setback for yourself that is both extremely difficult to get out of and which also costs you more money in the long run through accrued interest. It is extremely important to use your credit cards responsibly. Building good credit can help you qualify for lower interest rates on loans, but charging your cards to the max and not paying them off destroys your credit and puts you deeper into debt. Pay in cash instead to keep spending within your means.

Mistake #2

The second most common mistake people make with their money is not making sure that they are fully covered by their insurance. The financial fallouts caused by emergency insurance situations can be devastating. Be sure you stay fully covered with auto, homeowners (or renters), health care and disability insurance at all times. If you have a family, you should also have life insurance coverage.

Mistake #3

The third most common mistake that people make with their money is to put-off saving and investing. When it comes to saving and investing your money, time can be your best friend. The purpose of saving and investing your money is to take advantage of compound earnings. The longer that you save and the earlier that you start investing the faster you can reach your financial goals. Waiting just makes it much harder to meet the same goal. So find a way to start saving and investing today.

Mistake #4

The fourth most common mistake that people make with their money is also not setting aside a small amount of money for an emergency fund. In addition to your saving account, you need to set up a small slush found that is only used for emergencies. This will help you to avoid taking money out of your savings and regular checking account when an emergency situation arises. Try to contribute the same amount to his account each month, just as you do with your normal savings account.

Mistake #5

The fifth most common mistake that people make with their money is missing their employer match into their long term saving account. An employer contribution to your EPF is “free money”! If your employer offers EPF, make sure you take full advantage of it. Contribute enough money into your EPF by your employer is crucial or else you are giving away free money.

Mistake #6

The sixth most common mistake that people make with their money is not setting up automatic payments for savings or investment plans. When you base your investments or savings contributions on the amount of money you have at the end of the month, you will get nowhere fast. Instead, set up an automatic plan that takes money out of every paycheck - and you will be surprised how quickly your accounts will grow on their own.

Mistake #7

The seventh most common mistake that people make with their money is co-signing for loans. The next time a friend or family member asks you to vouch for them on a loan, politely run the other way. When a bank requires a co-signer, it’s because the person applying has no credible history of paying debts on time. If the person who received the loan is late on payments or simply doesn’t pay up, you’ll be responsible - and this will damage your credit.

Mistake #8

The eighth most common mistake that people make with their money is getting “upside-down” on their car loans. This happens when people purchase and finance new vehicles they cannot truly afford. Since new cars depreciate quickly, and your finance term may extend longer than 5 years, you may owe more on the loan than the car is worth — which is called being “upside-down” on the loan. To get the most for your money, put at least 30% down or, better yet, buy used cars and drive it till it dies.

By Jeremy Vohwinkle (Registered Financial Planner)

(Word Count: 412 – reading time 1.5 min)
Planning your finances has many benefits. Whether you do it yourself or you hire a professional, the important thing is to know that a good plan can help you turn around your financial outlook and can take care of many problems created by bad debts or past mistakes. To make the most of financial planning, it’s important to do it properly and take full control of your situation.

Step 1

Make a list of your short- and long-term goals. Include anything that requires a significant investment, such as travel, buying a new house, going back to school or getting a new car. List as many reasons as you can think of as to why and how planning and saving will benefit you. The clearer you are of your direction and goals, the easier it will be to pursue them.

Step 2

Protect yourself and your loved ones in case of accidents, loss of a job or a major catastrophe. Having a financial plan in place will allow you to take the pressure off and enjoy everyday life without worrying so much about what will happen if a crisis hits. Protective financial planning can include anything from buying life insurance to having an emergency savings account.

Step 3

Take charge of your debt. One–if not the main–benefit of financial planning is the ability to take control of what you owe. If you want to pay off your debt as soon as possible, you will need a good plan to help you decide how to allocate your money directly to where it is most needed.

Step 4

Use financial planning to get a new business off the ground. Not only will you need a good business plan in order to get a business loan in the first place, but you will also need a budget in order to spend your money wisely once it’s available. Knowing what to invest in and what to avoid when starting a new business can benefit you, especially during the first year.

Step 5

Review your plans regularly. As you move toward your goals, it is likely your plans will change or need revising. Don’t be afraid to start anew. As long as you are still working toward your goal, taking a different route is entirely acceptable.

By Editor, Financial Planning Association of Singapore

(Word Count: 958 – reading time 5.0 min)
You may be considering help from a financial planner/advisor for a number of reasons, whether it’s deciding to buy a new home, planning for retirement or your children’s education, or simply not having the time or expertise to get your finances in order. Whatever your needs, working with a financial planner can be a helpful step in securing your financial future.

The questions in this section will help you interview and evaluate several financial planners to find the one that’s right for you. You will want to select a competent, qualified professional with whom you feel comfortable, one whose business style suits your financial planning needs. An interview checklist has been included for your convenience.

1. What experience do you have?

Find out how long the planner has been in practice and the number and types of companies with which she has been associated. Ask the planner to briefly describe her work experience and how it relates to her current practice. Choose a financial planner who has a minimum of three years experience counseling individuals on their financial needs.

2. What are your qualifications?

The term “financial planner” is used by many financial professionals. Ask the planner/advisor what qualifies him to offer financial planning advice and whether he holds a financial planning designation such as the CFP, RFP, ChFC. Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Determine what steps the planner takes to stay current with changes and developments in the financial planning field. If the planner holds a financial planning designation.

3. What services do you offer?

The services a financial planner/advisor offers depend on a number of factors including credentials, licenses and areas of expertise. Financial planners cannot sell insurance or securities products without the proper licenses. Some consultants offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or on tax matters.

4. What is your approach to financial planning?

Ask the financial planner about the type of clients and financial situations she typically likes to work with. Some planners prefer to develop one plan by bringing together all of your financial goals. Others provide advice on specific areas, as needed. Make sure the planner’s viewpoint on investing is not too cautious or overly aggressive for you. Some planners require you to have a certain net worth before offering services. Find out if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.

5. Will you be the only person working with me?

The financial planner/advisor may work with you himself or have others in the office assist him. You may want to meet everyone who will be working with you. If the planner works with professionals outside his own practice (such as attorneys, insurance agents or tax specialists) to develop or carry out financial planning recommendations, get a list of their names to check on their backgrounds.

6. How will I pay for your services?

As part of your financial planning agreement, the financial planner/advisor should clearly tell you in writing how she will be paid for the services to be provided. Planners can be paid in several ways:

• a salary paid by the company for which the planner works. The planner’s employer receives payment from you or others, either in fees or commissions, in order to pay the planner’s salary.
• fees based on an hourly rate, a flat rate, or on a percentage of your assets and/or income.
• commissions paid by a third party from the products sold to you to carry out the financial planning recommendations. Commissions are usually a percentage of the amount you invest in a product.
• a combination of fees and commissions whereby fees are charged for the amount of work done to develop financial planning recommendations and commissions are received from any products sold. In addition, some planners may offset some portion of the fees you pay if they receive commissions for carrying out their recommendations.

7. How much do you typically charge?

While the amount you pay the planner/advisor will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs would include the planner’s hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.

8. Could anyone besides me benefit from your recommendations?

Some business relationships or partnerships that a planner has could affect her professional judgment while working with you, inhibiting the planner from acting in your best interest. Ask the planner to provide you with a description of her conflicts of interest in writing. For example, financial planners who sell insurance policies, securities or mutual funds have a business relationship with the companies that provide these financial products. The planner may also have relationships or partnerships that should be disclosed to you, such as business she receives for referring you to an insurance agent, accountant or attorney for implementation of planning suggestions.

9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?

Several government and professional regulatory keep records on the disciplinary history of financial planners. Ask what organizations the planner is regulated by, and contact these groups to conduct a background check.

10. Can I have it in writing?

Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.

By Editor, Financial Planning Association of Singapore

(Word Count: 702 – reading time 3.0 min)
Working with a financial planner/advisor can be an extremely rewarding and valuable experience for you and your family. If you’ve decided to work with a financial planner, it’s important to understand your rights in this professional relationship.

This section describes the kind of treatment you deserve from your financial planner, and helps you recognize when he or she is putting your interests and needs first. You can take an active role in shaping your financial future when you know your rights and what to expect from your financial planner.

You Have the Right to an Advisor Who Has Integrity

Trust between you and your financial planner/advisor is central to a successful financial planning relationship. You rely on your planner’s honesty, professionalism and abilities to achieve your financial and life goals. When you know that your planner takes his or her professional obligations seriously, and places principles over personal gain, you can develop the type of partnership that is crucial to the success of any professional relationship.

You Have The Right to Objective Advice

Your needs should be at the heart of all recommendations made by your financial planner/advisor. Your planner should use his or her experience and judgment to carefully consider your situation, and provide you with advice that best meets your goals. Sometimes, this objectivity may require the planner to explain that your goals are unrealistic given your current resources and financial commitments. Your planner may then suggest alternative goals or priorities.

You Have The Right to an Advisor Who is Competent

You have the right to expect your planner to demonstrate an appropriate level of knowledge to offer financial planning advice, such as attainment of proper certification. Your planner should complete continuing education courses as part of his or her ongoing commitment to competency.

You Have The Right to Be Treated Fairly

Your planner should treat you the same way he or she would like to be treated in a professional relationship. This involves clearly stating what services will be provided and at what price. The planner should also explain the risks associated with his or her financial recommendations and any potential conflicts of interest. For example, does the planner gain personally or financially from your purchase of a particular product or from the outcome of a suggested strategy?

You Have The Right to Privacy

To get the best results from your financial planning relationship, you need to divulge relevant personal and financial information to your financial planner on a regular basis. Your planner should keep this information in confidence, only sharing it with others to conduct business on your behalf, at your consent, or when ordered to do so by the courts.

You Have The Right to an Advisor Who is Professional

Your planner/advisor should not provide investment advice or stock brokerage service unless he or she is properly qualified and licensed to do so, as required by law. If your situation requires expertise that your planner does not possess, he or she should suggest other professionals who may assist you.

You Have The Right to an Advisor Who is Diligent

Your financial planner should discuss your goals and objectives with you and explain what you can expect from the relationship before engaging you as a client. Once the planner has determined that he or she (or his or her staff and/or network of related professionals) can assist you and has gathered sufficient information, the planner should make - and, if appropriate implement - recommendations that are suitable for you. A diligent planner investigates the products or services he or she recommends. A diligent planner also closely supervises any staff working with you.

If you would like to better manage your financial situation, a professional financial planner may be able to help you. Knowing how a planner should work with you, and how you will be treated as a financial planning client, will put you in the driver’s seat when it comes to taking control of your financial future.

If you are currently working with a financial planner/advisor and are unsatisfied with the relationship, talk to the planner about your concerns. If you cannot mutually agree on how to improve the situation, you may want to find another planner.

By Editor, Financial Planning Association of Singapore

(Word Count: 167 – reading time 1.0 min)
A long term survey done by the CFP Board (USA) denotes that many people, with or without the help of a financial expert make the following mistakes when it comes to planning their own finances in all areas, regardless the stages of their lives – single, married or retiring soon. Some of them may seem “common sense” but these mistakes do not choose its victim!

1. Do not set measurable financial goals.
2. Make a financial decision without understanding its effect on other financial issues.
3. Neglect to re-evaluate their financial plan periodically.
4. Look for quick financial fix instead of a long-term strategy.
5. Expect unrealistic returns on investment.
6. Think that financial planning is only for the wealthy.
7. Think that financial planning is only necessary when they get older.
8. Confuse financial planning with investing.
9. Think that financial planning is primarily tax planning.
10. Wait until a money crisis occurs to begin financial planning.
11. Think that using a financial planner/advisor means losing control.

By Jeremy Vohwinkle (Registered Financial Planner)

(Word Count: 948 – reading time 4.5 min)
You may have come across the term “financial planning” recently and wondered what it means. You may have decided to start your own financial plan but you’re not sure how. Or you may feel it’s time you went to a financial planner/consultant for some professional advice. Whatever your situation, the following information can help you decide what’s right for you.

What Is Financial Planning?

Financial planning is the process of meeting your life goals through the proper management of your finances. It is a process that consists of specific steps that help you ascertain your financial condition objectively.

The financial planning process consists of six steps that help you take a big picture, look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.

The process involves gathering relevant information, setting life goals, examining your current financial status and coming up with a strategy or plan on how you can meet your current situation and future plans.

The Benefits of Financial Planning

Financial planning should provide direction and meaning to all your financial decisions. By viewing each financial decision as part of a whole, you can consider its short and long term effects on your life goals. You can therefore adapt more easily to life changes and feel more secure that your goals are on track.

Can You Do Your Own Financial Planning?

Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner/advisor if:

• you need expertise you don’t possess in certain areas of your finances. For example, a planner/advisor can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
• you want to get a professional opinion about the financial plan you developed for yourself.
• you don’t feel you have the time to spare to do your own financial planning.
• you have an immediate need or unexpected life event such as a birth, inheritance or major illness.
• you feel that a professional adviser could help you improve on how you are currently managing your finances.
• you know that you need to improve your current financial situation but don’t know where to start.

What Is A Financial Planner?

A financial planner or consultant is someone who uses the financial planning process to help you figure out how to meet your life goals. The planner can take a “big picture” view of your financial situation and make financial planning recommendations that are right for you. The planner can look at all of your needs including budgeting and saving, taxes, investments, insurance and retirement planning. Or, the planner may work with you on a single financial issue but within the context of your overall situation. This big picture approach to your financial goals sets the planner apart from other financial advisers, who may have been trained to focus on a particular area of your financial life.

Be Sure You’re Getting Financial Planning Advice

The government does not regulate financial planners as financial planners; instead, it regulates planners by the services they provide. For example, a planner/advisor that also provides securities transactions or advice is regulated as a stockbroker or investment adviser. As a result, the term “financial planner” may be used inaccurately. To be sure that you are getting financial planning advice, ask if the adviser follows the six steps described below.

The Financial Planning Process

The financial planning process consists of the following six steps:

1. Establishing and defining the client-planner relationship

The financial planner/advisor should clearly explain or document the services to be provided to you and define both his and your responsibilities. The planner should explain fully how he will be paid and by whom. You and the planner should agree on how long the professional relationship should last and on how decisions will be made.

2. Gathering client data, including goals

The financial planner/advisor should ask for information about your financial situation. You and the planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary documents before giving you the advice you need.

3. Analyzing and evaluating your financial status

The financial planner/advisor should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

4. Developing and presenting financial planning recommendations and/or alternatives

The financial planner should offer financial planning recommendations that address your goals, based on the information you provide. The planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.

5. Implementing the financial planning recommendations

You and the planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your “coach,” coordinating the whole process with you and other professionals such as attorneys or stockbrokers.

6. Monitoring the financial planning recommendations

You and the planner should agree on who will monitor your progress towards your goals. If the planner is in charge of the process, she should report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes.

By Editor, Financial Planning Association of Malaysia

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