FINANCIAL PLANNING
- 

WHY FINANCIAL PLANNING?

Too many people have the idea that financial planning is a complicated process that only the very well-to-do need to worry about. To be sure, there are some practitioners in the financial planning industry itself who promote that notion. In point of fact, however, financial planning is something EVERYONE needs to do.

It's not for the well-to-do; it's how you become well-to-do. People who say they can't or won't do it really are saying they don't mind spending their golden years under the Golden Arches, because that's what will happen to them.

Strong words? No doubt, but the good news is, it's easy to do; the bad news is, there's no "magic bullet." In a nutshell, financial planning for "regular" folks boils down to two things; First, you have to save some money to invest; second, you have to learn how to invest it.

Neither is as hard as some people fear, but too many are doing a lousy job at both. At the same time, people are bombarded daily with financial and economic news that has little or no relevance to their lives. Stories about derivatives scandals, option puts and calls and the other arcane flotsam and jetsam of the financial world don't serve to educate most people; they just confuse them.

Financial planning takes on a critical role for everyone because most of us are responsible for setting up our own retirement plans. There are many ways to do this, ranging from the simplicity of using your EPF fund to a more complex defined financial plan. It's best to consult a professionally trained financial planning consultant to decide which type of plan will best meet your needs.

Whatever plan is chosen, financial planning is the key to making it work. Every person's goal is to be able to retire comfortably. You want your income in retirement to protect you against inflation and allow you to maintain your lifestyle.

That is what financial planning is all about. Certainly, there are financial interruptions for most people along the way - things such as buying a home, starting a business, paying for your children's education, taking care of elderly family members - and good financial planning makes it possible to meet those challenges. But those are all just practice for the big kahuna, which is retirement.

Boiled down to the nitty gritty, financial planning is about three things - wealth accumulation, wealth protection and wealth distribution.

There are only four legal ways to create wealth: marry it, inherit it, win the lottery or spend less than you earn. Obviously, only one of those options is realistic for most people.

The sooner you start to save, the better. The average person in his 50s would have to save more than half his yearly gross income to retire at age 65, whereas a 30-year-old who starts saving just 10% of his income will be so flush with cash at retirement he'll have trouble spending it all. The most important thing is to start saving, no matter what your age or how little you can afford.

Financial planning may seem like just another "chore" in an already busy life, but failing to do that chore could have unpleasant consequences down the road.