Be Your Own Financial Planner


Shopping sprees, frequent vacations, and fine dining; Titus Maccius Plautus would be proud – afterall, you’ve lived by his words that one must spend money to make money.

Yet upon closer inspection of your bank account, you’ve come to realise that you’ve spent more than you’ve made. Your mistake? Aside from being too literal, reckless spending.

In your defense, there should have been more context in the saying; luckily for you, it’s not too late to take control of your finances. If you can afford one, engage the expertise and knowledge of a financial planner (find out how here), but if not, put on your thinking cap, dust off your calculator, and start planning your own finances with these five steps:

Step 1: Assess your current financial position

The first step to planning for the future is to understand your net cash flow (net monthly income minus average monthly expenditure) now. There are tons of applications for smartphones and tablets that can help you keep track of your monthly income and expenses.

Knowing your net cash flow can help you decide what you want to do with excess cash (if you have a positive net cash flow) or if you need to find other sources of income or cut costs (if you find your net cash flow falls into the negative).

Next, ask yourself what your risk appetite is, which will have a direct impact on the amount of protection you’ll want to take up and the type of investments you make. A higher risk tolerance means you are comfortable living without certain form of insurance or comfortable making riskier but potentially higher return of investments.

Step 2: Have an idea of where you want to be

The next step is to set your goals. These goals can range from achieving financial independence to establishing an emergency fund or paying off a mortgage.

However, to be effective, the goal(s) that you’ve set yourself for yourself must be specific and measurable, but most of all, realistic.

An example of a good financial goal:

To increase your savings by RM100,000 by the year 2024 – this goal is specific (i.e it clearly states the amount to be saved up), measureable (i.e. it has a time limit of 10 years), and realistic (it is possible to save RM833 per month)

The next important thing to do after setting a financial goal?

Step 3: Devise a plan to achieve your goal

Good intentions and knowing what you want for yourself in the future alone is not enough to get you there. There must be a game plan in place to achieve those goals you’ve set for yourself.

Using the example above, in order to increase your savings by RM20,000 by the year 2024, you may be required to look for other sources of income to supplement your monthly salary.

A relatively popular investment to make – if you can afford one, is properties. Unlike most assets, properties appreciate in value and can pay for itself if rented out.


Assuming you take a 35-year home loan of RM351,000 at an annual interest rate of 4.25% to purchase an apartment unit costing RM390,000 and rented it out for RM1,800 per month:

be your own financial planne-table

Looking at the calculations above, you would have achieved your goal of increasing your savings by RM20,000 by 2024 just by earning rental income alone (after deducting monthly repayment), and after 18 years, you would have reclaimed your initial investment.

Conversely, Eric Tyson, the author of “Investing for Dummies”, defines futures and options as “gambling instruments”.

Futures and options work much the same way in that you’re putting down money now in hopes that you will make a gain on a commodity such as coffee or natural gas (in the case of futures), or be able to buy or sell a share at pre-designated price (in the case of options) in the future.

If the crop fails or the price of the share doesn’t do what you think it’ll do, you lose out. The larger your investment in these investment instrument, the bigger your loss. With that said however, if things do work out, you stand to make a huge gain.

Step 4: Build in milestones

If all of us are true to ourselves, we would all agree that sticking to a plan – especially a long-term one, can cause frustration, which can ultimately lead to us abandoning the plan altogether.

Hence, it is important to build in little “wins” or milestones in your financial plan to keep yourself motivated. Again, using the example of increasing your savings by RM100,000 by 2024, one of the milestone that you can build into your financial plan is to save RM833 per month or save more than 50% of your goal amount within 5 years.

You can even build in a little reward plan for yourself for hitting or exceeding each milestone. Be creative with your milestones but keep in mind that they too must be specific and measureable.

Step 5: Perform progress evaluation

It is said that the best laid plans of mice and men often go astray, which is why it is important to review your progress at least bi-annually (or monthly if possible). Re-evaluate your plan or make changes to it if you find your progress unsatisfactory,  while keeping in mind that some goals require more time to yield results.

No doubt, planning your finances is a tedious process requiring tremendous amounts of time and discipline (and in some cases in depth financial knowledge) but in this troubled economy, having a sound financial plan has become increasingly important.

This is further underscored by a statement made Maybank Investment Bank chief economist Suhaimi Illias to The Star in which he expects an increase in price pressure for the next three years due to the impending Goods and Services Tax in April 2015, as well as, the ongoing subsidy rationalisation.

Being your own financial planner can be tough, but by consciously planning what you do with your money, it will make a huge difference in the way you manage your finances. Arm yourself with the right information and constantly share experiences with financial experts can direct you to the right investment vehicles that will yield your desired result.

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