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Financial planning


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Published in: Economy & Finance
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Financial planning

  1. 1. Financial Planning ~ Planning To Achieve ~
  2. 2. OBJECTIVE• To help people to achieve their financial targets in a disciplined way;• It’s about creating a lifestyle that’s just right for you• Maintain your standard of living during retirement• Pay less tax• Maintain your family’s standard of living in the event of your death or disability• Become financially independent• Preserve your estate for your heirs• Provide for your children’s education• Pay off your mortgage and other debts• Stay ahead of inflation• Earn a higher rate of return• Buy a home or recreational property• Learn to invest and manage money more wisely• Start your own business
  3. 3. What is Financial Planning???• Financial planning a process where you plan your Investments in such a way which meets your financial goals over time.• It’s about anything you do or plan to do that affects your financial state of affairs - career planning, business planning, transportation planning, food planning, hobby planning, vacation planning, entertainment planning e.t.c.;
  4. 4. Fundamental Principles of Financial Planning• Controlling day to day finances:The $ Adds Up...• Daily Cup of Coffee $547/yr,• 2 Packs of Cigarettes/Day $2555 - $3285/yr,• 1 Hardback & 3 Paperback Books/Mo.$690/yr,• Lunch Take-out 5 days/wk @ $5- 10/day $1300 - $2600/yr,• 3 Drinks at a Bar/Wk.$936 - $1092/yr,• 3 Six-packs of Beer/Wk.$624 - $936/yr• Long term financial goals:• Retire in 20 years with an annual retirement income of $40,000 (todays $),• Save for your child who will be attending university in 15 years and will require $10,000 (todays $) / year for a period of 4 years,• save $20,000 for a down payment on a home to be purchased in 5 years.• Financial safety net:• an emergency fund,• health insurance,• homeowner’s or renter’s insurance,• auto insurance etc. Spend less than you earn: INFLOW < OUTFLOW
  5. 5. STEPS to Financial Planning1. List down your Goals2. List down Your Cash Flows and Cash Inflow3. Understand and figure out your Risk-appetite4. List down your Financial Goals5. Make sure your Goals are realistic6. Make the Plan7. Review and Take advice8. Take Action and keep Reviewing
  6. 6. Asset Allocation/ Income DistributionIncome :(+)Pension, child support, government benefit, rental income, etcExpenses:(-) Housing: Mortgage, rental, maintenance, bills, property tax, home insurance(-) personal & living: eating out, personal care, groceries, clothing & gifts, etc(-) Transportation: license and registration, gas/oil, parking, taxi, toll, repair(-) Debt repayment: credit cards, loads, personal loan, student loanSavings:1. Emergency Fund2. Major purchase savings3. Vacation
  7. 7. Cash Flow Statement
  8. 8. Effective Money ManagementThe FFA (Financial Freedom Account) – 10% = RM 150The LTSA (Long Term Savings Account) – 10 % = RM 150The Income Protection Account – 10 % = RM 150The Education Account (EDUC) – 10% = RM 150The Necessities Account (NEC) – 45 % = RM 675The Leisure Account – 10 % = RM 150The Giving Account – 5 % = RM 75 GRAND TOTAL = RM 1500
  9. 9. FRUGALITY???“Without frugality none can be rich and with it very few would be poor” - Samuel L. Jackson“The way to wealth depends on just two words, industry and frugality” Benjamin Franklin"Beware of little expenses; a small leak will sink a great ship"-- Benjamin Franklin"He who does not economize will have to agonize"--Confusius agonize"--Confusius“Being frugal does not mean being cheap, it means being economical and avoid waste” - Catherine Pulsifer
  10. 10. The Practise• Plan to achieve• Live on your means of basic income and invest the rest• Needs VS. Wants• Asset VS. Liability• Data book of expenses