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WHAT IS FINANCIAL PLANNING?
Financial Planning is the process of meeting your life goals through the proper management of your
finances. Life goals can include buying a home, saving for your child's education, or planning for
retirement.
The financial planning process consists of six steps that help you take a "big picture" look at where you
are financially. Using these six steps, you can work out where you are now, what you may need in the
future and what you must do to reach your goals.
The steps are to:
1. Establish and define your relationship with your financial planner;
2. Gather your financial data and identify your financial goals;
3. Analyse that data, and evaluate where you are today;
4. Develop your plan and scrutinise alternative courses of action based upon those goals;
5. Put that plan into practise by working closely with a planner and other pertinent professionals; and
6. Regularly monitor the plan.

INSURANCE
Insurance is probably the most useful financial instrument ever devised by man. Most individuals,
however, do not clearly understand the mechanics of insurance to fully utilize its potential as a tool to
protect their loved ones. The basic concept of insurance is simple but elusive to many individuals.
Insurance is primarily to protect the economic value of individuals or assets from unforeseen events.
Economic value is derived from the earning capacity of an individual and the financial dependence of
other lives on that earning capacity. Insurance will be able to replace the loss of earning capacity of
individuals due to unforeseen circumstances and ensure that the standard of living of dependents are not
affected financially.
As a basic guideline it is vital that you understand why are you buying insurance -- it should primarily be
for protection and not for investment. These form of insurance are generally known as term insurance.
Term insurance offers the modest form of coverage since it is the most basic, plain vanilla, version of
insurance. Apart from life, other forms of protection offered are hospitalisaton & surgery, permanent
disability, etc. Individuals should also consider the adequacy of protection on their assets from events
such as fire, theft, etc.
There are other life insurance products in the Malaysian market which combines protection and
investment into a single product. Common insurance products which suit the description above are whole
life, endowment, & investment linked insurance.

RETIREMENT PLANNING
A small proportion of people seem to dread the thought of retirement. Enough stories are told of
individuals --usually male --, who, having spent their whole live toiling and finding significance solely in
their careers, then inexplicably keel over and die within a year of retirement.
But for most of us the thought of a happy, well-funded retirement is an attractive one. Such thinking is
certainly justified in this day and age. After all, prior to the Industrial Revolution the very concept of
retirement was essentially unheard of.
But the exponential growth in human wealth this century and the accompanying increase in expectations
and lengthening lifespan have all worked together to stamp what we may well call the 'Right of
Retirement' into our very souls.
That is a good thing. Yet to be able to truly enjoy retirement we must be wise in converting a portion of
our active income into swelling streams of passive income. For only when our retirement is free of the
worries common to all who lack sufficient money, can we truly say that our latter years will be a period of
reaping the just rewards of a lifetime of industry.
The road to this happy destination may be a trifle narrow, but it is not difficult to embark upon.
The objective of Retirement Planning is to first analyse your retirement needs and then to project
the estimated future retirement cost through the Retirement Planning Calculator.

HOME OWNERSHIP PLANNING

It's been said that a man's home is his castle. That is probably true for most of us, but with one proviso that the home is our own and not a rented abode.
Because of that, most of us dream of owning the roof over our heads. That ambition is most natural. In
the middle of this century, psychologist Abraham Maslow discovered a fundamental truth about human
beings - is that we unconsciously work toward the step-by-step fulfillment of 5 distinct levels of need.
One facet of that remarkable discovery is that because shelter is a base level, or level 1, need, those
struggling merely to make ends meet will be satisfied with even a rented shack. But as expectations rise
and level 4's dictates of self-esteem and prestige come to the fore, the desire to own a beautiful home to
call your own is completely natural.
However, owning a dream home requires a lot of thought when financing is concerned. Financing can be
obtained from various sources, such as bank loans and EPF withdrawals. The question is, can you afford
the house of your dreams? .
The objective of Home Ownership Planning is to first analyse the cost of your dream home, plus the
necessary renovation costs and then to project the estimated future cost of home.

EDUCATION PLANNING
A well-known proverb goes, " Give a man a fish, and you feed him for a day. Teach him how to fish and
you feed him for a lifetime."
Whether or not your children love seafood, that pithy saying holds a valuable deepwater truth: There can
be no greater gift than leaving your kids with the best university education you can afford.
Time spent at university usually results in countless experiences, both inside the lecture hall and outside,
that enrich a young man or woman's life for decades after. The Chinese have a compelling way of
describing this phenomenon: " Learning is a treasure that will follow its owner everywhere."
On top of that, a tertiary education translates into a markedly higher earning capacity than a mere
secondary education can. Over the course of a 30-year working career, that difference can amount to
several million ringgit.
Because of that stark truth, most of us dream of being able to say not proudly but honestly, " I have more
than enough money to pay for my children's university education."
Sadly, the vast majority of Malaysian parents cannot make that statement, and mean it, if the university
education they're eyeing for their kids lies far beyond our shores. The reason: Current and future
exorbitant costs.
Simply put, the real cost of obtaining an education can be daunting, especially at private local colleges
and overseas universities.
To add salt to that particular wound, education costs have been escalating faster than the overall cost of
living in most countries, including Malaysia. That's why so many people feel that saving or generating
enough money to pay for their kids' tertiary education seems as unattainable to them as a tantalizing
piece of cheddar dangling out of reach is to a lab rat.
If that describes how you feel, please don't despair! Public Mutual has created an Education Planning
service to help you turn that seeming impossibility into reality.
The objective of Education Planning is to first analyse your child's education needs and then to project
the estimated future education cost.

ESTATE PLANNING
Fear of death is a major concern for almost all people; that's understandable. But trust us when we say
that the optimal course of action lies not in ignoring its possibility - sorry, certainty! - but in planning for it.
Sadly, there is an aversion, particularly among Asians, toward estate planning. This reluctance arises out
of an often palpable dread that revolves around the issue of 'tempting fate' . The unspoken concern is
that the mere act of employing estate planning tools like a Will or a Trust catapults the 'presumptuous
tempter' closer to the grave! Unfortunately, such thinking often leads to devastating problems for those
left behind.
Barring supernatural intervention, death will come to each of us. But hopefully not before we have had the
opportunity to make our lives count for something bigger than ourselves. The desire to leave a lasting
legacy is universal. And, ironically - given the fear that's sometimes associated with it - writing a Will is the
best way to make sure the legacy you want to leave to your heirs is the one they actually inherit.
Clearly, writing a Will is the most considerate, responsible thing you can do for them now, while you are
still of sound mind and body. The organisation and planning required to prepare a Will may seem
daunting and not terribly urgent. But failure to arrange your affairs well today may cause costly, painful
losses to those you leave behind tomorrow.
You see, most of us tend to carry much of our personal information around in our head. We seldom
disclose it to our family in a comprehensive manner, often assuming we'll eventually get around to it.
Sometimes we don't.
If you were to pass on beyond the veil without getting around to doing so, your loved ones will be left in
the lurch struggling to sort out your personal affairs. For instance, some questions they may have no way
of answering will be:
- Did you own a life insurance policy, pension or annuity? Where are the documents stored?
- Did you have money invested in stocks, bonds or unit trusts? Where are the records?
- Who is the best person to look after your kids?
- Who will oversee the distribution of your estate?
- Who should get what exactly?
Estate planning, done well, guarantees that those you leave behind get to focus on grieving for you
without the unnecessary distractions represented by such questions. And when estate planning is done
competently, it boils down to a methodical process of planning for the accumulation, preservation, and
then distribution of your estate according to your wishes. As mentioned, the tools you will use are a Will,
definitely, and a Trust, perhaps.
To learn more about these important estate planning tools, click on these links:
Organise your estate: Where there's a Will, there's a way!
Achieve your distribution goals, effectively and efficiently: Use a trusty Trust
Muslims, however, should note that these estate planning tools are less relevant to them than to nonMuslims because of overriding Islamic constraints. A Muslim can only will away up to one-third of his or
her estate to relatives, friends, or public welfare, as long as the beneficiaries are not entitled to a fixed
share under the Syariah Law. (The remaining two-thirds must be distributed in accordance to the Syariah
Law).

OTHER FINANCIAL GOALS

Most people will generally wish to accumulate funds to increase their net worth in order to provide
themselves with a greater margin of financial security and freedom. These funds serve as a reserve for
other specific financial goals such as buying a car, traveling or even a new furnishing set for their home.
The investment objective of these funds is usually to maximize returns (Total Real Return) on investments
whether it is in stocks, unit trusts or an insurance policy after taking into account for inflation. Since
provision for a general investment fund should be undertaken only when other specific objectives such as
protection, emergency funds, education needs, and retirement needs have been funded, the person is
generally willing to accept considerably greater risks.

Summarize By:
ADI SHAHRIL B ABD RAIS
FINANCIAL PRACTITIONER
MAYPARTNERS IKHLASJAYA SDN. BHD.
012-5225075
adi@maypartners.com.my