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| Wealth Management |
| Written by Nor Azmi Omar | ||||||
| Wednesday, 11 October 2006 07:16 | ||||||
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Why a financial plan? Well, if you want the best results out of any attempt or effort - be it going to travel or having a party, you should have a plan. So it should be with managing and investing your money. It is often said, most people don't plan to fail, they just fail to plan. Financial planning not only tells us where we stand financially right now, it also works out where we want to be in the future through setting our financial goals, and it enables us to reach our financial goalposts in an efficient financial manner. Assess Your Financial Situation Before embarking on any investment plan, you need to assess your financial situation, i.e. take stock of how you are financially, so that you can decide how much you can afford to save and put aside for investments. It could be that right now you just spend on whatever you want and whenever you want, without any idea of how much or how little you end up with at the end of each month. To determine your financial status, you have to; First, compute your net worth Your net worth is your personal equivalent or value to a company's balance sheet and tells you how healthy you are financially. To calculate your net worth, you need to list down your assets and your liabilities. Then subtract your liabilities from your assets to arrive at your net worth. Your assets will include items like your cash, bank accounts, possessions, existing investments if any, like shares or unit trusts, and your fixed assets, such as properties. Your liabilities include any loans that you have taken (car, house or even loans from family and friends), your credit cards and any other debts you might owe. If your arithmetic works out to a negative net worth, then you are insolvent. Forget about investing for the time being and work on how to turn it positive. If your arithmetic gives you a positive net worth, that' s good but unless your net worth is already sufficient for all your future needs, you would want to improve the figure so that you can have more to invest. How can you increase your net worth? One way is to reduce your expenditures. Any excess cash over expenditure can then be allocated among your assets to improve your net worth. But which expense to cut? To determine this; Do your cash flow statements next You have to work out where your income goes to; in other words embark on a cash flow analysis of your earning and spending patterns. First, organize all your salary statements, receipts, bills, tax returns and other financial data into a clear record of how much you earn and how much you spend each month of the year. List down and scrutinize each item of your expenses to see which ones can be trimmed so that at the end, you will have a positive cash flow - that means more money coming in than going out. Some of the items that go into, and questions you should ask, while doing your cash flow exercise include:
Set your Financial Goals A simple way to setting financial goals is to plan ahead for two years, five years, 10 years, 20 years and so on. Next, think of the needs and wants you (and your family) have, and translate them to become a specific goal for each of the time frames. Your goals could range from the obvious (like a house in five years, or your children's university education in 10 years or a nice nest egg upon your retirement), to things you keep promising yourself but you never did have them (like riding the Oriental Express train on your next holiday abroad). However your goals should be specific, appropriate, worthwhile and not pipe dream fantasies. Next, compute how much money each goal is going to require. Don't be intimidated by the sum. Unless you have massive sums saved up, most of us are going to have to earn the additional funds to realize our goals - and these funds will be acquired through your investing efforts. After all, this is what this website is all about - to learn how to plan your finance wisely. But, of course, these are just basic advice on financial planning. To make it a success, you should have a proper face-to-face consultation to decide what is the best platform that you need. This is where my workshop comes in. Those interested to have a good financial planning from a certified financial coach should come and listen to my presentation (refer to the events on the www.smartplanner.my homepage)
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| Last Updated ( Monday, 11 May 2009 01:09 ) |
