“The number one problem in today’s generation and economy is the lack of financial literacy.” — Alan Greenspan, Former Chair of the Federal Reserve of the United States.
In the current fast moving global environment, we are expected to take a deeper accountability towards our financial literacy. The term financial literacy, or to explain it in layman term, personal finance has gained the attention of the government, financial institutions, central bank and the public.
Hence, the rise of a complex personal finance environment in today’s world which requires us to have high financial literacy and actively engage with technology to manage our finances effectively.
However, the current concern is are we ready with the right personal finance skills? Lack of knowledge on the concept of personal finances and being unable to use the correct tools to make financial decisions are the main challenges faced by us when it comes to gaining the most advantageous results for our financial wellbeing.
Since the influx of sophisticated technology in our lives, personal finance faces a complex environment with the latest financial services and the current marketplace scenario. Under these circumstances, I will say there is a renewed attention into financial planning.
Financial planning can be optimised to develop the right personal finance skills, knowledge and behaviour. Thus, the simplest definition of financial planning will be “The process of determining whether and how an individual can meet life’s goals through the proper management of financial resources”.
Financial planning can be a tool to solve our personal finance problems. Financial planning has a systematic process where we can follow, a step by step process to achieve our financial goals. What are the benefits of having a financial plan? Here they are:
To identify one’s financial goals
A financial plan can help us set the right financial priority in our lives, since the first element in financial planning is setting goals. This will help us to realise our objectives and keep us on the correct track, even when there is distraction.
Many people think that financial goals are all about monetary value but in reality it’s more than that. What really makes you happy? What motivates you?
What is important to you in life? These questions will be answered by a proper financial goal setting as financial goals are more than just money and success.
A well planned finance gives us an opportunity to identify the unnecessary or wastages in our expenses. It helps us track our expenses, understand our strength and weaknesses when it comes to money management.
By getting to know the leakages, we can take corrective steps to improve our cash flow. Am I spending my money in a worthy manner? How do I want to spend my money? A good money management is actually very much related to our characteristics.
Peace of mind
Good financial planning will give us holistic solutions of our personal finance, which avoids us into getting into financial turmoil and woes. When we have a peaceful and clear mind, we can concentrate on our daily routine and proceed with the right decision making without hesitations. If we are not at peace with how we are managing our money, we will always be worried thinking on how to handle our financial emergencies and there is a high chance we will end up in a financial difficulties.
Build’s better future
Our future lies in our hands. For the better or worse, we are the determiners in shaping our future. Therefore, design your future by developing a good financial plan. A proper financial plan shows us a brighter future, helps us keep an eye on our financial goals and helps strategise our savings plans towards our retirement. When we have sufficient control on our own money, we are able to focus on shaping our future by ensuring our financial journey is all well planned and taken care of.
The above are some of the important benefits that all of us want in life, which can be achieved through proper financial planning. Developing a good financial plan is a tedious and a technical process but brings you life-long security and content. Guidance from a licensed financial planner or advisor will enable you to have a good financial plan for your future.
In Malaysia, the Securities Commission and Bank Negara are the only regulators for licensed financial planners or advisors. These are the official people who are able to provide you professional advice on developing a good financial plan.
They can guide you through the six step financial planning process to achieve your financial goals. Your money is your responsibility, hence make sure to engage the right people who care for your financial journey, as much as you do.
Gunaseelan Kannan, a licensed financial advisor by Bank Negara Malaysia and a licensed financial planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his PhD research on financial planning and financial technology. He also lectures on accounting, finance and business fields. He is the Malaysian Financial Planner of the Year 2018 and 2019 Award winner (1st Runner Up), from Financial Planning Association of Malaysia.He can be emailled at [email protected]