Wednesday, February 17, 2010

Financial Planning

I found this brochure and it's contents are worth sharing.

Source: The Moneysense Guide to Planning for your Family's Financial Future
*** my non-professional comments/opinions are in italics.

6 Areas of Financial Planning

1. CASH FLOW MANAGEMENT - this deals with how you allocate your income to meet daily expenses, and how you set aside sufficient money and other assets to meet future financial goals.
This would be your family budget. This will help you plan your daily or monthly cashflow. The goal is to always have a positive cashflow at the end of the month, which means you have savings and not using up all of your income.

2. RISK MANAGEMENT - this is one of the most important areas of financial planning. It means making sure that you have enough family income in the event of unforeseen circumstances such as premature death, disability or illnesses.
This is means we should have enough protection for emergency scenarios. This involves taking up insurance policies which protect our income. It can be health insurance, life insurance, education insurance, etc.

3. INVESTMENT PLANNING - this involves putting your assets in different financial instruments to meet your investment goals and to grow your wealth.
We can choose from a whole lot of options available in the market. Stocks, bonds, unit trusts, fixed deposits, real estates, business ventures, etc etc. Each investment option carries a different level of risk with it. Knowing your goals for the long term and also your risk appetite can help you choose which investment best suits you.

4. RETIREMENT PLANNING - this focuses on building up wealth during your working years to achieve financial independence when you retire.
I think this part of financial planning is also very important. We usually work during our younger years so that we could save enough for our retirement years. How long should we work so that we would have enough savings for retirement? That is the big question. This part will help us compute for a rough estimate of the amount we need for retirement.

5. TAX PLANNING - this deals with minimising your taxes through the use of various tax benefits and incentives.
We could be saving a lot if we are familiar with the tax benefits and incentives. It is best to know how we can do so.

6. ESTATE PLANNING - this final phase of planning allows you to plan for the transfer of your assets to beneficiaries with minimal hassles and estate taxes.

Some people would have wills written in their golden years. Others would actually allocate their assets long before they perish. For our CPF, we should nominate who are beneficiaries are, otherwise, the government will follow according to the law, which some people might not be aware of or agreeable to. It is worth the while to check our options.

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