With the rising cost of living and uncertainty in life, personal finance is getting increasing important for all Malaysians. Personal financial planning spans wide range of money topics including savings, insurance, investments, loans (mortgages, car & personal), credit cards and debt management, retirement, tax, and others. We need to learn and understand these financial topics so that we can lay a solid foundation for ourselves and our family and to achieve our life goals. The other solution is to seek the help of a qualified & licensed financial advisor or financial planner.
The most common financial products we can relate to are those offered by the banks and finance companies such as savings, deposits, checking accounts, credit cards, mortgages, overdraft, loans, etc. It’s important to understand basic concepts like interest rates, calculations (daily or monthly rest), compounding effects, blr (base lending rate), principal, installment, tenure, etc. so that we can compare and evaluate the suitabality of the financial products. Getting the wrong savings account may cost inconvenience and a loss of potential return while getting the wrong personal or home loans may mean losing money due to the higher interest payment.
Insurance is the other product the most Malaysians are familiar with. Insurance is an essential part of financial planning as it gives protection for our loved ones and our assets. We have personal insurance that includes life insurance (which may comes in various forms & structure like endownment, term life, universal, annuity, riders, etc.) and general insurance such as medical or health (also sometimes referred as hospitalisation & surgical), fire insurance for the home, auto insurance for cars, etc. As insurance is a rather complicated financial product, it is best to get an adviser to evaluate your protection needs to get the one with the right covereage to ensure you don’t overpay the premium while getting adequate protection. You also want to avoid wasting money by being over insured.
Besides using insurance to safeguard your assets, we would want to grow and accumulate them for our retirement planning. This is where investment comes in to play. With virtually limitless investment options from the traditional bonds, equities & properties (including REITS) to alternative asset classes like gold, commodities, offshore, etc., investors need to be clear about their investment objectives, horizons, risk appetite so that they choose the right products with the risk and return that matches their needs.
Tax planning and retirement savings needs to become a priority instead of an afterthought. You should be wise in seeking ways to minimize your tax payment legally for example claiming for deductible expenses, etc. For retirement planning, it’s never too early to start as many have come to realize that the epf contribution alone is not enough. Along with that, it may also be appropriate to think about will writing and plan for estate & asset distribution to the next generation.