INFO BANK KNOWLEDGE BASE

TO WILL OR NOT TO WILL (KB10 0411)

Many young working people especially those about to set up a family, more often than not, relegate estate planning to a low priority. After all, they are still young, in the prime of their life and too busy building a career. Death, being a morbid subject, is the last thing on their mind. They feel that they have little to leave behind anyway.

From the financial planning perspective, and from a personal viewpoint, this is far from the truth.

Estate planning is not just about distributing your estate. It is also about settling your debts before you leave this world. It is about leaving something behind especially for your loved ones as part of your worldly responsibility and legacy before you walk away from this world. It is about obligations and filial piety.

It is not uncommon nowadays to find people dying young not due to accidents but illnesses. In my 25 year financial services career I have seen all kinds of death at every age. Often times it is part of my role to be involved in their final rites as well. Many young people nowadays die of heart attacks in their twenties, aneurysms in the teens, and cancer as early as 4 years. It is not only the old who dies!

While there may not be much to distribute, a young working adult should not leave any assets undistributed without identifying his or her wishes. Common assets like bank accounts, shares accounts, unit trusts, memberships, cars, etc. should be arranged in such a way as to reduce problems for surviving family members.

There is also the issue of debts – credit cards, education loans, mortgages, car loans as well as unpaid taxes and card fees. Death should bring a final resolution to all these worldly matters. Hassle free closure can only be achieved via proper estate planning through the instruments of will and trust, as well as other hybrid options. It pays to seek information and learn about such matters no matter how morbid it may seem. Such information is readily available in cyberspace, or you may seek a qualified financial planner or adviser to help sort out the complexity and provide various options. In this matter, experience counts.

To kick start this process, ask yourself the following questions:

1)    What will I be leaving behind?
2)    Who would I like to transfer these assets to?
3)    How can I resolve my outstanding liabilities so that my loved ones will not suffer any consequences?
4)    What would I want to give my loved ones if I have a choice? A legacy, perhaps?

Consider these questions carefully and plan for the unexpected so that you may be free of these burdens when the time comes.........

Also, check out our Quick Take: "Is A Will Important?"

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.

HOW TO MAKE A BUYING DECISION? (KB09 0211)

A major concern with most potential policyholders is ‘how much insurance do I need?’ and the criteria for making a buying decision.  Although this would involve a detail discussion involving the financial aspects, some rule of thumb guides would be helpful.

The amount to buy  :  Generally speaking the amount of insurance needed is an amount required to replace or generate your income.  Thus if you & your dependents require RM3,000.00 a month to provide for day to day necessities, the amount of insurance required to generate this income in the event of death, or total and permanent disablement is determined by multiplying RM3,000.00 by 12 and dividing by the percentage of return on investment. Thus if the interest rate is 3% (assuming fixed deposit rate) then,

                                                                                    3,000  x  12 
Amount of insurance required, Capital)       =     ---------------
                                                                                           3%

                                                                              =      RM1.2million

In other words, RM1.2million kept in the fixed deposit earning 3% will provide RM3,000.00 per month of income.


Of course, this is a very simplistic approach because a few factors will have to be taken into consideration.  These include:

i)    Emergency fund required
ii)    Children education fund if there are children
iii)    Existing savings, investments and other insurances
iv)    Outstanding mortgages and liabilities
 v)    Provision for inflation


Another way of determining the sum insured is by capitalising the economic life value of a person especially a professional or person with special skills.  Thus if a person earns RM20,000.00 a month and has another 20 productive years, the amount to be capitalised is RM20,000.00 x 12 x 20 which equals RM4.8 million.


There are other more detail and comprehensive ways to determine the sum required eg. capital distribution.  But since we cannot exactly quantify the value of life (and it would be foolhardy to do so!), a good approximation will do.  In this regard, a regular review and programming will be helpful.


It must be remembered at all times that apart from the sum insured, the premium consideration is an important factor.  The premium should be checked against your personal budget and should be affordable.   Do not let an agent encourage you to take up something which you cannot upkeep in the long run.  As a rule of thumb, most household would spend between 5 and 15 percent of their income in life insurance depending on the income level, other commitments and investments.


Criteria for decision  :  There are 3 key criteria to look for when making a buying decision after a need is established.  These are company, product and agent.  

Company  -  A company with a good track record is an important consideration as all values shown in printouts are projections and not guaranteed.  The company need not be the largest but it must be reputable and will likely pay what it projects.  The claim experience and backup services should also be an important consideration as most policies will remain inforce for quite some time.

Product  -  Generally there are only 3 types of life products namely whole life, endowment and term.  The names given to these basic products are marketing strategies.  If you prefer long term coverage with some return on your investment while providing relatively high coverage, then a Whole Life plan will be suitable.  If apart from this you are considering a tidy sum for major medical then a whole life with critical illness coverage will be the right choice. If you are emphasising on savings, then perhaps an endowment product may be more relevant to your needs.  

Investment-linked policies which are actually renewable yearly term policies with investment returns are now commonly bought. The insurance charges especially for young people are rather low initially but will increase over time. The investment returns are also not guaranteed as they are subject to the prevailing investment environment. Your agent should be able to advise you regarding the suitability of products.

Agent  -  And that brings us to the most important criteria  -  the agent or advisor.  Whether a life insurance policy will work for you will depend greatly upon the agent.   The degree of commitment and care, the technical knowledge and the skills of the agent will determine the true value of your life policies.  We always believe that the best policy in the market is that which you now own and is still in force, and serviced by the agent.  At least the agent is within a phone call away!  In this regard, the track record of the service level of the agent is an important consideration.


The above are intended as a guide but ultimately your good sense of judgement of the level of professionalism and trust of the agent prevails.

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.

 

THE IMPORTANCE OF CRITICAL ILLNESS POLICIES (KB08 1010)

Critical Illness insurance is a key component of a risk insurance plan. It provides a lump sum payment should you suffer a serious medical condition such as cancer, heart attack, stroke or any of the 36 critical illnesses.

The lump sum benefit can eliminate your financial concerns. The list of specified conditions include not only cancer, heart attack and stroke, but also other specified conditions including paraplegia, loss of limbs or sight, major organ transplant, multiple sclerosis, kidney failure, full blown AIDS, encephalitis, and Alzheimer’s Disease.

Funds from a Critical Illness policy can be used in many ways to assist you in recovery, as well as provide financial stability whilst you come to terms with your condition. For instance, the critical illness funds can be used for

i) mortgage repayments and other debts,
ii) medical expenses not covered by health insurance,
iii) taking time away from work to recuperate, or 
iv) alternative medical treatments.

The amount of Critical Illness insurance cover required will depend upon your individual needs and your existing levels of other covers. It is advisable to review these covers regularly.

Payment of critical illness proceeds will depend upon satisfying the conditions defined by the life company in the policy documents.

What is the cost of having Critical Illness insurance?
With rising cost of medical treatment, bills for treatment of some diseases can cost as much as a house! However, unlike buying a house, you can’t plan ahead as to when you would fall ill. With the current rate of inflation, experts expect the cost of treatment to continue to rise significantly in the  country.

For example, a five course treatment for leukaemia can set you back RM250,000 with no guarantee of a cure thereafter. A pacemaker implant plus hospitalisation recently cost up to RM110,000. And that’s only because the patient was a civil servant!

The inclusion of a Critical Illness insurance policy or benefit should be seriously considered for any individual when planning a personal wealth protection strategy in order to ensure your goals can be met in the event you suffer a critical illness.

Your financial adviser or agent can help you determine the right sum insured, benefits and critical illness product to suit your needs.

It is important to get critical illness cover while you are fit and healthy, before you actually need it.

Critical Illness insurance puts the control back in your hands by providing an instant lump sum of cash upon diagnosis of a wide range of illnesses, including breast cancer, other forms of cancer, heart disease or stroke.

Having that sort of financial freedom can enable you to make better recovery and allows you to make lifestyle improvements for you and your family. Speak to your insurance adviser or agent today to find out how you can better protect your financial future.

 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.  

 

BUSINESS SHARE REDEMPTION (KB07 0910)

Business Share Redemption or sometimes known as Business Partnership Buy-Sell Arrangement is designed to help shareholders overcome the difficulties in the event of death or disability of a shareholder. It can also be designed to include the share buy-over of partners who may suffer debilitating illnesses such as cancer, heart attack or stroke, or a living buy-out. The variations are many but the main concept is to preserve the business and keep it going with minimal disruptions especially where finances are concerned.

Finances, or rather cash, is the lifeblood of the business. In the event a shareholder is struck with a life calamity, the disruption to business can be disastrous. Businesses may be disrupted, heirs and shareholders may quarrel, clients may leave, financial institutions may withdraw financial supports, goodwill  may be damage, and worst, business may cease to operate. Cash can keep it going and help resolve issues involving shareholders and heirs.

The Agreement or Deed designed to provide for the eventual resolution should cover 3 main areas namely the Valuation, the Distribution or Dissolution and the Financing. The clauses should cover all these areas and other minor areas clearly to avoid disputes. While shareholders who come together to build a business through much hardwork  over the years may have great working relationship, heirs may not share the same enthusiasm. Often times even original shareholders may develop ill feelings and bad relationships especially where money and pride are concerned. The Agreement can serve to overcome some of these problems when life calamities strike.

The Share Redemption of a business may be financed through various options including:

1)    Setting up of a Sinking Fund over a period of time - For this to work, the Company must be reasonably profitable and there must be sufficient time. Calamities can strike without warning and thus result in an urgent for cash. Accountants or Corporate Engineers should be consulted to advise the viability of the setting up of a Sinking Fund.

2)    Providing for an instalment payment over a period of time by remaining shareholders – The clause providing for this option should include the period of instalment eg 5 years, and should include a interest on top of the instalments. It is important but not critical to ensure sufficient funds to drive this option. As such a positive Company cashflow will be an advantage.

3)    Arranging a loan usually through a financial institutions which can be paid off by remaining shareholders – The advantage of this is the Company can pay off the loans over time with small instalment especially if the interest charged is small. In addition, the heirs or living buy-out can be paid in a lump sum thus reducing future interruption to business.

4)    Using Life Insurances to provide immediate cash – This is usually a straight forward option but will require the shareholders to be healthy and preferably of similar age group. The choice of products should be made only after proper discussion and advice given. Usually low premium products like term policies or renewable terms are used but not exclusively.

Each option has its merits but may be used in combination depending on the prevailing conditions. While Life Insurance may be the most economical option, it is dependent on the health of the shareholders and the choice of products available.

A standby loan option may be used where there will be minimal charges upon execution of the redemption. The preapproval removes the uncertainty of using the loan in case the financial institutions may not be interested to provide the ‘umbrella on a rainy day’!

The Sinking Fund and Installment options will require time and profitability on the side of the Company. In addition, the Installment option will usually require an additional interest to be built in to cover the opportunity cost to the claimant or his heirs.

 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.  

 

SOME FINANCIAL PLANNING BASICS (KB06 0110)

While financial planning seems to be the current preoccupation of many financial service or product providers, it pays to get back to some basics – the fundamentals which are important to ensure success of our personal financial plans.  These basics tend to be forgotten or sacrificed in pressing circumstances resulting in loss of focus of the financial plan.

The 3D’s – No financial plan can achieve success without Discipline.  It is the regular setting aside of our income or profit to fund our financial plans that will see to its success in the long run.  In addition, the discipline to leave the investment to perform its role without succumbing to temptation is required.  Without the discipline, the plan will be an exercise in futility.  No matter how small the amount or the yield, a healthy discipline will at least ensure partial success.  Discipline also means sacrifice, the need to delay gratification eg. investing the monies instead of splurging it on an all-paid expense trip to US for the whole family when a less expensive holiday might achieve similar result.

Diversification is a necessary part of all sound financial plans.  While many product providers may choose to emphasize, or even solely focus on one particular investment product, the old maxim of ‘not putting all eggs in one basket’ still holds true.  No right minded investor will imagine that only one investment alone will see him through – unless he is extremely lucky!  And in a sound financial plan, luck has little to do with success.  Would you leave your life at the operating table to luck?

Many investors tend to forget this and focus on one favourite investment eg. properties, leaving them exposed to undue financial stress.  In this respect , one should remember the 3 basic principles of financial planning which will be discussed in future articles.

That takes us to the 3rd ‘D’ that is Deadlines.  What are our deadlines?  It’s no good going into a financial plan without considering the deadlines.  Some financial goals are not very deadline sensitive but most are.  For example planning for children’s education is deadline sensitive.  Unless you intend to wait until the most favourable investment return or climate before sending your children to tertiary education, the fund is usually required within a narrow span of time.  Of course, if you are planning to own a favourite yacht, the deadline could probably be compromised.   With deadlines, comes time.  While timing is important, time is even more critical for the success of your financial plans.  The time value of money requires that you invest the longest possible to gain maximum returns from the compounding effect of time.  The idea is start as soon as possible.  Why not now?

 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.  

 

3 FUNDAMENTAL PRINCIPLES OF FINANCIAL PLANNING (KB05 0110)

While many ‘overnight’ financial planners, consultants and advisers are propagating the concept of Financial Planning, it would be useful to bear in mind some fundamental principles of sound financial planning before embarking on the venture.  Let no ‘panadol’ financial planners or advisers detract you from your purposeful goal to achieve your financial independence.  Whatever products they may advocate you to purchase, ensure that your macro principles remain intact.


Profitability - The principal goal of investment is profitability.  Profitability is directly related to risks although not necessarily in a linear manner.  Thus it will be prudent to understand your personal risk profile before deciding the choice of investment products and its potential return from the investment.  The goal is not to go for the most profitable but rather to select a level of profitability and its attending risk that will match your risk acceptance and allow you to achieve your goals comfortably.  Often a variety of investment mix will more likely be able to fulfil your needs.


Liquidity  -  Every investor dreams of great profits from their investments.  But it will be financially disastrous to invest every ringgit you have.  A good measure will be to maintain some liquidity in case of emergencies or opportunities.  I know of a remiesier who invested all his cash and earnings on a row of shophouses when the going was good.  Due to economic changes, all his cash is now strapped and he had to appeal to his friends to take over the properties from him by giving away the properties.   Some liquidity would have averted the disaster, or at least buy him some time to resolve his financial woes.

Emergencies such as treatment for medical problems, and opportunities that may arise require cash at a short notice.  Thus having some money in the bank and investing in liquid investments will allow for some liquidity.


Security - When erecting a building, it is important to ensure that the foundations are well laid.  Otherwise no matter how tall or elegant the building, it will eventually topple over one day.  As such, all financial plans must have a foundation to rest on.  The concept of security is the concept of risk management.  It is always good practice to set asides some money to purchase some security products or insurance.  This will help conserve your estate should any disaster or mishap befalls you.


Balancing the 3 principles - Depending on individuals and their financial goals, the level of mix of these principles vary.  A person who is highly geared should ensure that sufficient coverages are taken before embarking on aggressive investment.  A person who may have need for cash over the short term should consider the aspect of liquidity.  No one mix is applicable or good for everyone.  Each has to find his level.

 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.  

 

WHEN YOU ARE CONSIDERING A LIFE POLICY (KB04 1109)

Buying a life insurance policy.

While it is not common for policies to be bought rather than sold, the prospective buyer who is considering a life policy to build up his financial plans should consider diligently.

It is important to firstly take note of the objective or purpose of the life policy.  Although most policies may serve a different purpose from it’s original intention, a well thought out objective will serve the financial goals well.  Why is the life insurance needed?  Is the objective to provide protection for dependents, personal use, or business or commercial reasons?   The clearer the purpose or objective is, the easier to come to a decision.

There are 3 other areas to consider namely the type of products, the life insurance company and the agent or financial adviser to purchase from.

Products

There are 3 main types of life insurance products ie. Whole Life, Term and Endowment.  While term policies provide cover without cash values, endowment policies provide protection as well as savings in the form of maturity values.  The whole life policy provide a life long cover with some cash values.

Other features may include critical illness cover and investment returns in the form of investment-linked policies.

Usually the rest are variations of product features to enhance certain aspects of the policies to meet various requirements and objectives.

Insurance Company

Although there are less than 20 life insurance companies, it is relatively important to purchase from a reputable company you are comfortable with.  Afterall it is a long term commitment, and Insurance Company support should be present throughout the tenure of the policies.  A cursory review of the reports by Bank Negara Malaysia (BNM) may help give an indications of standing and performance.  Performance of Companies vary and each may focus on different segment of the market thus different products.

Agent or Financial Adviser

The prospective buyer should be confident and comfortable with the agent or adviser – confident that the agent or adviser has sound technical knowledge and skills regarding life insurance, and professionalism, and comfortable to deal with an empathetic agent or adviser who’s purpose is to ensure good advice is given.  He must be accessible and be able to advise you from time to time.  Service is important as there are many areas service is needed like claim services, advisory services, alterations of policy features or details, upgrading the programme etc.  While qualifications are not a must, but an adequately qualified agent or adviser can do much to enhance the benefits derived from the policies through timely and informed advice.

 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.  

 

HEALTH IS WEALTH (KB03 1109)

It’s often said that health is wealth.  In fact health & wealth are the cornerstone of the success of a person’s life.  Without health, what’s the use of wealth?  Afterall money may buy health food, supplements and medicines but not health.

Many may take a narrow view of the concept of health.  It’s not just about popping into gyms, consuming the latest health food or join the latest aerobic or yoga exercise club.  In fact health should be a wholistic approach.  It’s more than just physical.

There are 4 areas of health we need to take care of in order to be happy and financially independent.


Physical Health

Physical health is the most obvious area of our well being.  Keeping fit by regularly exercising is important.  But very often we give excuses like busy work schedules or unable to find partners to avoid having to exercise regularly.  Yet we must be physically fit in order to perform our daily activities with relative ease. 

Keeping fit like eating well, regular exercise, and deep restful uninterrupted sleep are a must in order to maintain our bodily functions at the optimum.  How often do we wake up and wish that we do not have to get out of bed but instead sleep an hour more?  Or when we are having a meeting but unable to focus our attention on the matters at hand?  While it is quite natural for people above 40 years to suffer from sleep disturbances or waking up in the middle of the night to attend to bladder activities, a healthy body will reduce the frequency of these sleep conditions.  After a bout of vigorous exercise, it is easier to achieve restful sleep. 

Avoidance of tobacco and over-indulgence of liquor also help us to maintain a healthy body.  A healthy body naturally leads us to healthy and effective working mind – the prerequisite to a successful work day.  A healthy body also means less manhour loss in work.

It is also advisable to have an annual checkup to ensure you are physically healthy especially for those above 45 years of age.


Mental Health

It is important to keep the mind in good working condition.  Keeping updated by reading and researching the latests news and information give us mental dexterity and keep us mentally in shape for the tasks ahead.  Our mental health will determine how we face each day’s work challenges.  A healthy mental state gives us confidence as we can think clearly and judge with better precision.  Obstacles are easier to overcome and solutions easier to arrive at.

Mental health is often overlooked.  Malaysians generally are under-read with most reading less than 2 books a year.  Reading the newspapers word for word is not considered as part of mental development.  How are we to stay ahead if we keep losing out on information and knowledge?  Mental health can also be developed by attending talks, seminars & workshop.  These help us to keep up with some of the latest trend and information.


Spiritual Health

In our hustle and bustle world where materialism rules the world  and, money and power is worshipped over morality, integrity and human compassion, spirituality is often sacrificed.  Many had scoffed at the idea of spirituality suggesting it has no place in the modern world.  On the contrary, it is a very important ingredient in the fulfillment of our life.

Life is not all about money, power and positions.  I’m often encouraged by the following maxim.

When a baby is born, relatives and friends gather around smiling and laughing while the baby cries.  We must live our lives so that when we leave, our friends and relatives will be crying while we are smiling to our graves.  That should be the way to live life!

Personally, I believe integrity is the hallmark of a professional.  It does not matter if you are a doctor, lawyer, architect, politician, agent or financial planner.  If you can deliver your services with integrity, then it does not matter what you do or what titles or qualifications you possess.  You cannot hold out yourself as a professional if it is not ingrain in you that others’ concerns and interests matters more than yours.


Spirituality is not about religion or faith but rather what human values you hold.  A person is spiritual by the way he respect life, and having compassion and loving kindness for others.  Spirituality is about respect for life itself.  A sound spiritual health gives us a sense of worth and purpose in life.

From my personal experience, you carry with you to and beyond your grave the number of lives you touch while alive, not the amount of wealth you possess in your banks and assets.  The pain of regret is even harder to bear at the dying bed than the pain of the illness itself.  Trust me; I know.


Financial Health

This lead us to the seemingly all important financial well being – our financial wealth.

Financial wealth is often measured by the amount of assets over liabilities.  The lower the liabilities and correspondingly, the higher the asset, the better the financial health.  Financial health is achieved by keeping expenses well below the income and investing wisely the portions saved.  This is easier said than done considering the current economic turmoil and uncertainty.  It is always back to basic which include :

i) Save first, spend later.
ii) Spend less than what you can afford.
iii) It is not just about interests or returns but rather discipline. 
iv) Keeping records of all income and expenses as well as assets and liabilities.

Just like the proverbial phase, ‘many want to go to heaven; few are willing to die for it’, many want to make it rich and be financially well-off but few are willing to pay the price of discipline and sacrifice.

In order to be financially healthy (which is different from being wealthy), the game plan is to be financially savvy and have a financial plan.  All actions bear results – good or bad.  Inactions will also bear results, usually undesirable ones.  As such, setting out the financial objectives and charting a course of action via a financial plan is advisable.  It does not matter 
if the objectives are mundane and strategy seems simplistic.  It is usually because of the desire to be financially healthy that will motivate you to put thoughts to paper and actions. Inaction breeds frustrations and consequently lead to loss of opportunities, and simply loss of control.

All financial plans should be preceded by a set of well thought out objectives and priorities.  Discussions with informed and knowledgeable people such as financial planners will broaden the scope of options while strengthening the strategies and implementation.  Strategies can then be modified and improved over time.

Monitoring the strategies and programmes is very important.  Many plans  fail because there is a slack or lack of monitoring.  The financial world is an ever changing landscape actively evolving all the time.  As such we cannot afford not to monitor the progress especially when invested in highly volatile markets or instruments.  The plan should incorporate the 5 pillars of cashflow management, insurance planning, investment planning, tax planning leading to estate planning.


Conclusion

In conclusion, health and wealth should be approached wholistically through managing our physical, mental, spiritual and financial health.  The happiness achieved will be the result of

i) having sufficient wealth or able to enjoy economic security.
ii) able to spend the acquired wealth freely on himself, his family and others.
iii) freedom from debts.
iv) living the life well according to these principles.

Only then can we be able to achieve true and lasting financial wealth and happiness.

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document. 

 

FINANCIAL PLANNING - ESTABLISHING GOALS & OBJECTIVES (KB02 1109)

The maxim ‘if you fail to plan then you plan to fail!’ is especially applicable in the current financial planning scenario.  A well thought out plan to reach your financial goals is imperative to ensure a greater degree of success in the light of the complex and multiple choices of financial products and services available.  While they may not be as complex or varied as in the developed nations, the continuously changing financial environment can cause our financial intentions to go awry.  But before you set out a financial plan for yourself, think through your goals and objectives.

Establishing Objectives – it is not surprising to have multiple goals and objectives which seems to contradict each other.  Nevertheless, the best way of arriving at ‘working’ goals is to have it written down.  Use the following guidelines when considering your goals & objectives.

i) emotions and logic

 Financial Goals should be emotional and logical.  What we mean here is not to encourage you to let your heart rule your head, but to set out logical goals that you can feel for.  Ask yourself why.  Of course, certain goals like children’s education is obviously a logical goal with strong emotional overtones and rightly so.  But it should be rationalized eg. planning to set them up for a less expensive course like twining instead of ‘killing’ yourself to get them to do medicine in UK if your financial committment places a constraint.  A good dose of emotion, though, will help you commit to your goal and thus a higher likelihood of achieving it.

ii) time frame

 Arrange your goals in various time frames viz. short term, mid term and long term.  Short term goals could tie up with long term goals in the future eg. purchasing a property with a view to creating income for retirement in years to come.  You create more excitement that way, and your goals will be more systematic.  Short term goals would be those with a timeframe of less than say 5 years while a mid term is between 5 to 10 years.  Long term goals are usually more than 15 years.  You can choose your investment vehicle to match the term of your goals.

iii) personal and family

 Personal goals may be more exciting and gratifying in contrast to family goals.  Remember, with motivation comes commitment.  Small success will build upon itself to give more power to achieve other goals.

iv) priorities

 While there may be many goals, there may also be financial constraints.  Prioritising the goals will help you focus on more important ones,  not necessarily urgent ones!  By giving priorities to important goals you are more likely to succeed, and perhaps take on the rest of the goals after that.  Do not allow every goal to appear important eg. upgrading your double storey terrace house to a semi-detached while relegating more important goals to later.  Keep prioritized goals to about 3 to 5 so that it would be easier to focus.

Financial Goals and Objectives are essential to one’s financial success and gives meaning to our actions and career.  So get your pen out and write away.
 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.  

 

THE NEED FOR FINANCIAL PLANNING (KB01 1109)

Financial Planning, a popular catchphrase used extensively (and sometimes rather inappropriately!) by many financial institutions, has garnered alot of attention.  Basically, it is the organising of your financial resources to reach some financial goals or objectives.  Typically the objectives are centered around retirement, children education and general wealth accumulation say to purchase a luxurious apartment, a yacht or to tour round the world.  Less typically and often overlooked, is to plan for emergencies which may deplete our financial resources or throw the financial plans off balance.

Whatever the objectives be, it is important to realise that all sound financial plans must begin with clear goals and objectives.  Without these goals and objectives, there will be no clear direction and course of actions. Without financial planning, any investments will seem appropriate.


There are 5 key steps to a sound financial plan.

1. Establishing goals and objectives

This is a critical step and much thoughts should be focussed on this area.  The clearer the objectives, the easier it will be to answer the how, why and what of action plans.  Goals and objectives should include the feelings not just facts.  Questions like why these objectives and how they will improve general wellbeing and motivation will eliminate future apprehension and ensure commitment to planned actions.  These goals and objectives may change in future, but the same principles apply. Sound financial planning cannot be achieved without establishing goals and objectives properly.


2. Data gathering and analysis

Although we may think we are totally aware and in control of our finances, majority of us do not have a true and complete picture.  It is therefore imperative that we put down in writings and reports these data which will help us to determine our true position and, the remedy and course of action.  The data gathering tools will include the personal data profile, cashflow report and risk profile.  We shall discuss more about these tools in future.  Suffice to say that the more details and true the information the better to work the plan.


3. Developing the plan

Armed with the right information, a broad strategy for the financial plan should be established.  The broad strategy will give an outline of detail plans covering all aspects of the financial plan needed to achieve the objectives and goals.  Generally, the plan should cover the financial quadrants of investment planning, risk & insurance planning, estate planning and tax planning.  A good strategy will allow us to focus adequately on these quadrants.


4. Implementing the plan

During this stage it would involve a third party who will provide the service or products to initiate the plan.  The choice of service and product provider is important as it would usually involve long term considerations and commitments.  Above all, the integrity of these providers is utmost complimented by skills and knowledge.  Experience does count.


5. Monitoring the plan

The plan should be monitored regularly to ensure it is bringing you closer to your goals and objectives.  Just like flying a plane or navigating a ship, the compass must be checked from time to time, the environment or ‘winds of change’ should be accounted for and minor (hopefully not major ones!) adjustments should be made.  If the goals and objectives are mid to long term, there should be no cause for alarm if the plan take some beating.  It is the final result that will count.  Be ready to take remedial course if necessary without too much emotional attachment as this could make matters worse.


After all that’s been said, financial planning is a very personal preoccupation.  No 2 plans are ever exactly alike and it should not.  What counts most is what it can do for you!

 

 

 

This document shall not be reproduced either in part or otherwise without prior written consent of the writer. The opinions and information contained herein are based on available information believed to be reliable although the writer do not make any representation as to its accuracy or completeness and the opinions are subject to change without any notice. No reliance upon statements whether expressly or implicitly, directly or indirectly, from the information in the documents by anyone shall give rise to any claim whatsoever against the writer, its associates, directors and employees. The writer and/or its associated persons may from time to time have an interest in the products and services mentioned in the document. If this document is distributed via electronic transmission, then such transmission cannot be guaranteed to be secured or error-free. The sender therefore does not accept any liabilities or whatsoever for any errors or omissions in the contents of this document.