Do
I Need Personal Financial Planning?
Planning for a secure financial future
is not easy.
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Maybe you're saving to buy your first
home.
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Perhaps starting your own business is
a dream.
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The costs of a college education have
spiraled and you may wonder how you will pay for your child's education.
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You will probably live longer. Additional
years after retirement can cost more than originally planned.
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Your EPF may not be enough to maintain
your standard of living after retirement.
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Complex financial marketplace and changing
tax laws make it difficult to understand your financial picture.
Everyone  needs
to plan for tomorrow. At every income level, there are steps you can take
to make more efficient use of your assets and to ensure a secure financial
future. It helps to develop well-defined goals and to map out appropriate
strategies to turn your dreams into reality. The answer can be personal
financial planning.
What is personal financial planning?
Personal financial
planning is a process, not a product. It is an organized, well-planned
system of developing strategies for using your financial resources to achieve
both short- and long-term goals. You may think of the process as helping
you to answer three straightforward questions:
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Where am I?
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Where do I want to go?
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How do I get there?
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When should I start planning?
It is important to start planning for
the future as soon as you can. Time passes quickly - it is never too soon
to start planning for tomorrow.
Who should prepare my personal financial
plan?
A well-qualified financial planner should
work with you to prepare your plan. A financial planner combines the objectivity
and trust long associated with the financial planning profession and the
financial savvy developed through years of experience and expertise in
personal financial planning.
What should it include?
A comprehensive financial
plan - one that addresses your entire financial picture - should include
a review of your net worth, goals and objectives,
property and other assets, liabilities,
cash flow,
investments, retirement
planning, estate planning, tax planning and insurance
needs, as well as a plan for implementing your goals.
I don't have a lot of money. Do I
need a full-scale financial plan?
You may not. You can seek out different
levels of financial planning advice, from counseling on a particular issue
to comprehensive planning. Speak to the financial planners you are considering
and discuss with them your budget. You should be able to find one who meets
your needs.
What role does goal-setting play
in financial planning?
It is important to list both short-
and long-term financial goals on paper. You can then rank the importance
of the goals. If you are saving toward something tangible, instead of just
saving, it may be easier. These goals could include: available cash for
emergencies, education for children, care for family members, retirement,
a nest egg to permit a career change, acquiring or selling a business,
estate planning, financial independence or personal objectives such as
a special vacation or second home.
How do I know how much I am worth?
One of the first things that you should
do in reviewing your financial situation is to determine your net
worth. Many people are surprised to find out how much they are really
worth.
First, estimate the value of your
assets. If you have owned your home for a number of years you may be sitting
on a nice nest egg. Several different real estate appraisals will help
you determine its worth. Organize bank and brokerage statements and record
their value. Don't forget assets in EPF. List your liabilities such as
mortgage, car loans or credit card debt. Subtract your liabilities from
your assets and you will have a good estimate of net worth.
How can I plan for tomorrow when
I can barely pay for today?
Create a budget. Determine what you
actually spend each month. It is easy to keep track of large expenses such
as mortgage and car payments.
The variable items such as food, clothing and entertainment are often what
get away from us.
How much should I be saving?
It is hard to apply a rule of thumb
toward savings, because it varies with age and income level. Ten percent
is a good start. If that amount is too high for you, don't let that deter
you. You can start by putting a little money aside each month and slowly
increasing it.
How does insurance fit in to the
process?
Evaluating your insurance
needs is part of personal financial planning. The insurance industry
has changed a great deal over the past few years and there is a wide array
of new products. Some of them may be better options than your current coverage.
Your financial planner can work with your insurance agent to see if you
have adequate coverage.
What type of advice can I expect
from a Financial Planner?
You can expect objective financial advice
that is tailored to meet your financial goals and objectives, as well as
the level of risk with which you are comfortable. Depending on your unique
situation and goals, your financial planner may confer with your attorney,
stockbroker, insurance agent and other investment advisors to achieve the
best plan for you.
After a plan is developed, what happens
next?
The best plan is useless unless it is
put into action. A financial planner can advise you how to implement the
plan and can put you in touch with other financial experts as needed.
How often should I update the plan?
It is good to review the plan when there
is a significant life event such as marriage, birth, death or divorce.
Any change in financial position should be evaluated as well. Many people
have an annual update that reviews how the plan is being implemented. The
review also considers changing goals and circumstances. |
