Financial planning is a process in long term through proper management of your finances to achieve certain goal or dream. Life goals can include buying a property, saving for your child’s education or planning for retirement. Remember financial planning is a process not a product.

6 Steps to Financial Planning process guided with tips:

Step 1

Establish goals.

Tips:

1. Identify and setting short, intermediate and long-term goals. Ideally, each goal will have a date and dollar amount attached to it.

Step 2

Gather data.

Tips:

1. Review your protection coverage, including life, disability, home, auto, medical, umbrella liability and long-term care.
2. Review your current tax situation to identify tax-saving opportunities and potential deductions.
3. Review your estate plan to ensure that your will, living will, healthcare power of attorney and other estate planning documents (revocable living trusts and durable power of attorney) are up-to-date and valid. (if you have)

 Step 3

Analyze & Evaluate Your Financial Status.

Tips:

1. Evaluating your current situation – cashflow analysis and calculating your net worth. You need to honestly assess your current financial status, including positives and negatives.

 Step 4

Develop a plan

Tips:

1. Develop a retirement funding plan that covers when you plan to retire and how much you will need to support your retirement lifestyle.
2. If you have children, develop a college funding plan to help cover higher education expenses.
3. Develop an overall investment plan with proper investment portfolio that supports your goals, while staying within your investment time horizon and risk tolerance.

Step 5

Implement the Plan.

Tips:

Only actions will give you result.

Step 6

Monitor the Plan & Make Necessary Adjustments

Tips:

Review your plan and progress periodically by giving yourself an annual check up to make sure you are staying on track. Life will throw you a curveball from time to time; divorce, a serious illness and an unexpected job loss can all affect your financial plan. So be prepared and be flexible. Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your financial plan as time goes by to reflect these changes so that you stay on track with your long-term goals.

Last but not least, YOUR ATTIDUTE determines the process. Don’t delay your financial planning. People who save or invest small amounts of money early, tend to do better than those who wait until later in life. Similarly, by developing good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.

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Benefits:

1. Save ONLY for 6 Years, Get until 30 years of Guarantee Yearly income.

2.Average of yearly dividend 5.5%.

3.Get Protected with Hong Leong Assurance once you get the plan.

4.Flexibility to build your income, plan your protection and decide your payment term.

5.Compounding rate is better then FD/ bank interest. RISK FREE!

As you know, FD interest rate will be lower while inflation going to higher. Our money become smaller and smaller.

Scenario 1 Mr.Jammie Saving in FD:
He save RM100,000 in FD at interest rate 3.5% 2008 = 3,500 earn in 2008 ; Inflation >4%

He save RM 100,000 in FD at interest rate 2.5% 2009 = 2,500 earn in 2009 ; Inflation >5%

**Your Cash in Hand & Cash in Bank become smaller and smaller….

Now Hong Leong Assurance Cash Builder can help you to INCREASE your money.

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• Hong Leong is a trusted local bank
• Receive cash payment start from year 1
• Yearly Income is GUARANTEED upon first saving
• Additional around 5.5% interest on accumulated cash payment
• Shortest payment term : One time or 6 times payment
• Guranteed protection coverage (Total Permanent Disability & Death
• Ideally Saving for : FD, Retirement fund, education fund, financial freedom

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From the illustration above, Michael start to save but stop at the age 30 and Terrence only start to save age 31. If you were to choose who would you choose to be? Michael or Terrence? How much do you want to have in your account 6 years from now?

The Fact:

• 95% of young people who got out from work doesn’t have proper planning and budgeting on their income, after 6 years of working their account are still empty.
• 95% of people Spend their money first then do saving
• 95% of Malaysian are not prepare to retire, after 30 years of working.  90% of EPF contributor have less then RM100,000 in their account not enough for retirement.

WHY?

• Young people are not willing to save , they rather spend first.
• Lack of financial education or financial planning.
• Taken up too many unnecessary commitment.

How to save?

• Force saving into an account.
• Find financial consultant for products which are offered by the bank.
• Set aside 10% of income every month to save.
• Commit into a saving plan which have higher compounding rate.

Trend

• People are living longer- life expectancy for women is 76 years and men 72
• They are marrying and having children later, at retirement age, the children are still in school or university
• 70% of retirees use up all their EPF money within THREE years after retiring

Living Costs and inflation

• Inflation rate is 6% in urban areas
• 3 meals a day at RM20 now may cost RM64 in 20 years
• RM500,000 in your EPF or bank account at retirement may have the pruchasing power of RM145,053 in 20 years
• Medical inflation is 15% each year

Case Study

• If Family in Kuala Lumpur with 2 kids and two cars needs RM5,000 todat at retirement, expenses should go down to RM3,000 or 70% of one’s current lifestyle.
• One would need RM747,000 if one were to live for 25 years, but the average contributor has only RM106,000 in his EPF account when he retires.

MOST MALAYSIANS DO NOT HAVE FINANCIAL SECURITY(taken from The Star published in 27 May 2007)

ONLY 5% of Malaysian are prepared for retirement. Despite a growing awareness for the need to prepare for one’s retirement, many do not translate their plans into action.

Those in their 20s think they are too young to think about retirement, while those in their 30s and 40s tend to believe they are doing enough because they have EPF savings. By the time they are 55, it is just too late.

The Sad truth is that at 55, most people cannot retire with financial security.

Based on EPF’s 2005 annual report, about 90% of EPF contributor have less than RM100,000 in their accounts – not enough to see them through 20 years past retirement.

Inflation in Malaysia

Debt Consolidation means take up one LOAN to pay off many other loans. This is when your existing loan or debt is taking higher interest rate, by taking another loan with lower interest rate to pay off the existing loan/debt, Banks are eagerly looking for new customer which offer them low interest loan package. This is an idea to restructure your existing loan with a new loan, so you can save yourself from the higher interest rate. After debt consolidation, you are able to pay monthly or yearly debt and settle your loan/debt faster. However, you must consider a few thing before getting another loan from bank which can lead you into more debt. You need to work out monthly affordable loan repayment amount and financial strength before you take up another loan package. You can consult financial consultant or go for debt consolidation counseling for advices before taking up another loan.

Debt consolidation is often advisable to person who is paying up credit card debt. Credit card is carrying much higher interest rates because it is an unsecured loan. Unsecured loan means it is not collateralise by any asset of the borrower in case of bankruptcy or failure to meet the terms of repayment. Debtor with property such as home or car can get a secured loan using their property as collateral  for lower interest rate. Allowing the debt to be paid off sooner and incurring less interest.

DEBT! is something that is due or owed typically MONEY. DEBT happens when one party start BORROWING from another party for their own use, when time  due the person who BORROWED the MONEY was unable to settle the sum that they borrowed. This person will be called DEBTOR, and the person who LEND the sum of MONEY/ASSET is called CREDITOR.  Usually DEBT is usually granted with expected repayment scheme with INTEREST included. The relationship with CREDITOR and DEBTOR are agreed upon “LOAN AGREEMENT” whereby PAYMENT can be made in increments over a period of time.

WHO is the DEBTOR and who is the CREDITOR?

Debtor= Person who borrows money

Creditor=Bank

HOW and WHEN debt start to happen?

Debt happen in LIFE CYCLE for most of us,  from one generation to another. Example,when your grandfather start to borrow money for your father to further study in university or college  this is when the LOAN AGREEMENT is sign and your father is officially a DEBTOR. Your father can only pay when he start to work, and usually it takes years to finish paying STUDY LOAN. Half way along, your father will find a wife. This is when your father’s DEBT becomes bigger, it happens when he sign for CAR LOAN and HOUSING LOAN. Life is getting better with CREDIT CARDS when he try to buy furniture, television, and all accessories for house and car with CREDIT CARD. This is when your father’s life is getting harder when monthly BILLS and LOANS to PAY!  Until you’re born, your father have to spend more. When you are going to college , this is when your cycle happen HE sign you up on STUDY LOAN and you’re officially young DEBTOR. This cycle will continue until one generation have to put an end. YOU DECIDE!