Financial planning is the management and maximization of your resources to meet your personal financial goals. Buying your own dream house, to get a sufficient children education funds, to plan for your own retirement, investment, risk management, estate planning, etc are your personal goals to be achieved through proper financial planning.
Once financial goals have been set, there are few aspects that have to be considered to ensure effective financial planning.
a) Management of income and expenses
Expenses are categorised to those we really need and to those we desire. Figure out ways to increase our income and to reduce our unnecessary expenses.
b) Tax planning
Do not be ignorant to new tax system that has been imposed. There are various personal relief such as life insurance, contribution to epf, medical expenses for parents, disabled wife and child, etc. All these informations can be acquired through official website of LHDN Malaysia.
c) Savings
Practice the habit of save first and spend later, rather than spend first and save the remainder. How much savings do you need in order to retire early? How much do you need to put aside for your child’s education in future? Have you set up your emergencies funds? How do you manage your liquid cash? There are few recomendations to suit individual needs and risk profile, for instance fixed deposits, life insurance, investment-linked funds, unit trusts, bonds, shares, business and properties.
d) Dealing with debts
Reducing your debts mean increasing your savings. Be alert on the competitive interest offered by banks in order to do some refinancing. You will be surprised on the amount you can save or the shorter period for the full settlement of your housing loan. Use your credit card wisely. It is convinient but beware ! Clear all your outstanding balances..
e) Assets accumulation
Assets accumulation is not about buying big houses, big cars and unit trusts, it is about creating sustainable income such as endowment plans, properties rentals, high dividend pay out stocks, bonds, websites, employees provident funds, etc for your golden years.
f) Protection
AS the saying goes health is wealth. Insurance is undeniably important as an income replacement plan, family protection, a comprehensive coverage of critical illness and medical bills. Get a peace of mind by transferring your risks to insurance institutions. Set up a trust to shield your family from the creditors and prevent foolish waste of huge inheritance by the beneficiaries.
