The Real Goal of Financial Planning

Financial planning is a systematic and effective way of organizing our financial affairs to achieve our life goals. The much-quoted phrase "Failing to plan is planning to fail" is all-too apt in this context. It's better to start planning early than regretting later. In very simple terms, financial planning is really about knowing where you are, where you want to go and how to get there.

Direction in life

Dr Stephen R Covey says in his book,

T

he 7 Habits of Highly Effective People, that a lot of us get caught in the "busyness" of life, working harder and harder at climbing the ladder of success only to discover, upon reaching the top rung, that the ladder is leaning against the wrong wall! Through proper financial planning, we can identify what is most important and meaningful to us. Then we can organize our finances and lives so that we do not end up leaning on the wrong wall.

Understanding trade-offs/sacrifices

Though our wants are infinite, unfortunately, our resources are finite. Financial planning helps us realize and understand that, in life, there are always trade-offs or sacrifices to be made. By trading in our good old car for the newest model or changing our "not-so-trendy" hand phone to the coolest model in town, we are affecting our retirement nest egg without realizing it. If we really want to achieve our important goals, we need to exercise delayed gratification and distinguish between our need and wants.

Coping with changes in life

The only constant in life is change and learning to cope with it early in life is a plus point. When single and carefree, we can practically live like there is no tomorrow. However, when we settle down and have a family, our world changes dramatically. If you were to lose your job or be diagnosed with a critical illness, the effects would be magnified. With proper planning, you would be better prepared to face such challenges.

Creating wealth

Almost everybody wants to be wealthy but few have a game plan for achieving it. Wealth creation is not a sprint but a marathon. It takes time, discipline and a lot of financial stamina. With the help of a qualified investment adviser, we can select appropriate investments that suit our risk appetite. By adopting various investment strategies and proper asset allocation, we will cross the finishing line.

Security

We want to feel assured that no matter what happens, our goals can be realized, either for ourselves or our loved ones. Through proper risk management and insurance planning, we will be able to provide ourselves and our loved ones with total peace of mind while we go about our daily lives.

Success

With proper financial planning, we will be able to successfully realize our life goals. Our goal should not be just having a lot of money in our bank but also knowing what money can do for us. With its help, we can take care of our health with better-quality food and health supplements, provide our children with quality education and expand our horizons via travels. Last but not least, it allows us to contribute to society through sharing of our knowledge, resources and time with the less fortunate. Therefore, true success is not merely about how much we have (quantity) but our quality of life.

Financial planning is really a means to an end. Ask yourself whether this is the kind of success that you want.