Friday, May 25, 2007
Planning is a Essential Part of Life
by: John J. De Goey, CFP
Plan the work; work the plan. So much of getting ready to retire can be addressed by a qualified professional who knows the ins and outs of setting and maintaining reasonable expectations and who can assist in executing around those expectations once they have been agreed to.
It certainly needs to be noted that good financial advice is not a one-time event. Instead, getting and giving financial advice is an ongoing, iterative process. People graduate from school, find work, get married, start families, pay off debts, take on mortgages, get promotions, acquire stock options, endure disabilities, buy second properties, suffer temporary setbacks, and experience myriad other things. Life happens. Circumstances change and so should the plan. The trite little saying that many people in my line of work are fond of using is that "people don't plan to fail; they simply fail to plan."
Consumers need to be able to change with the times in managing the various developments in their lives, and good advisors (especially those holding themselves out as "planners") should enable their clients to focus on all aspects of their financial lives, with the most important things being addressed first.
A financial plan is usually done at the beginning of a relationship in order for the advisor to win an account, but it is usually not reviewed. Often, there isn't a formal plan, just a brief written action plan focused on narrow investment matters and perhaps the provision of insurance. Some commentators are fond of saying that if financial planners were charged with financial planning as a crime, most would be exonerated because there wouldn't be enough evidence in their files to support the charges.
Planners, advisors, brokers, and others who go by similar titles should all be engaging their clients in regular processes and procedures to make sure they are on track with their plans. This assumes there are financial plans in place to begin with. The universally accepted six-step process to financial planning is:
Understand the client's situation.
Clarify goals and objectives.
Identify any particular barriers or unique circumstances.
Make written recommendations with clear alternatives.
Implement the chosen route.
Review the plan regularly.
Clients can work together with their advisor to complete self-diagnostic checklists on a wide variety of financial matters including client awareness, investment planning, investment policy statement monitoring, debt management, tax planning, estate planning, disability and income protection, and asset protection. A qualified, professional advisor has a pivotal role to play in this instance. In the coming weeks, we'll take a look at some of these matters. In addition, we'll look at the increasingly important role being played by the concepts of transparency and professionalism.
More and more, there's a mindset taking hold that the details of a working relationship ought to be documented. Whether those details involve itemizing the terms of the engagement (working relationship), itemizing the manner and quantum of compensation that the advisor might earn, or disclosing investment or planning philosophies in advance, I'm seeing a clear preference from consumers who want to understand plainly what it is they can expect from the person they hire to look after their life's savings.
Plan the work; work the plan. So much of getting ready to retire can be addressed by a qualified professional who knows the ins and outs of setting and maintaining reasonable expectations and who can assist in executing around those expectations once they have been agreed to.
It certainly needs to be noted that good financial advice is not a one-time event. Instead, getting and giving financial advice is an ongoing, iterative process. People graduate from school, find work, get married, start families, pay off debts, take on mortgages, get promotions, acquire stock options, endure disabilities, buy second properties, suffer temporary setbacks, and experience myriad other things. Life happens. Circumstances change and so should the plan. The trite little saying that many people in my line of work are fond of using is that "people don't plan to fail; they simply fail to plan."
Consumers need to be able to change with the times in managing the various developments in their lives, and good advisors (especially those holding themselves out as "planners") should enable their clients to focus on all aspects of their financial lives, with the most important things being addressed first.
A financial plan is usually done at the beginning of a relationship in order for the advisor to win an account, but it is usually not reviewed. Often, there isn't a formal plan, just a brief written action plan focused on narrow investment matters and perhaps the provision of insurance. Some commentators are fond of saying that if financial planners were charged with financial planning as a crime, most would be exonerated because there wouldn't be enough evidence in their files to support the charges.
Planners, advisors, brokers, and others who go by similar titles should all be engaging their clients in regular processes and procedures to make sure they are on track with their plans. This assumes there are financial plans in place to begin with. The universally accepted six-step process to financial planning is:
Understand the client's situation.
Clarify goals and objectives.
Identify any particular barriers or unique circumstances.
Make written recommendations with clear alternatives.
Implement the chosen route.
Review the plan regularly.
Clients can work together with their advisor to complete self-diagnostic checklists on a wide variety of financial matters including client awareness, investment planning, investment policy statement monitoring, debt management, tax planning, estate planning, disability and income protection, and asset protection. A qualified, professional advisor has a pivotal role to play in this instance. In the coming weeks, we'll take a look at some of these matters. In addition, we'll look at the increasingly important role being played by the concepts of transparency and professionalism.
More and more, there's a mindset taking hold that the details of a working relationship ought to be documented. Whether those details involve itemizing the terms of the engagement (working relationship), itemizing the manner and quantum of compensation that the advisor might earn, or disclosing investment or planning philosophies in advance, I'm seeing a clear preference from consumers who want to understand plainly what it is they can expect from the person they hire to look after their life's savings.
A SECRET OF FINANCIAL MANAGEMENT
By: Safir Senduk
From IndoExchange.com
A huge earning is usually considered for measuring the wealth of someone. However, why do so many people with huge income frequently end up running out of money in the middle or at the end of the month? What is the problem?
If you have a job now, do you remember the first one you ever had? Usually, the first experience on work is the most unforgettable experience.
Let's take an example. Anto was still living with his family until he got a job at the age of 23, as a clerk in a trading company. At that time, he had just graduated. Although he had to go through a probationary period, Anto was so excited when he knew that he would get his first salary. His salary was Rp 600,000, which he would receive on the 27th.
We can guess what he would want to do: he wanted to treat his family. He wanted to express his gratitude for getting a salary for the first time in his life, and he also wanted to show them that he was independent now.
Let's see: he received the salary on the 27th. On the 29th he took his family out for a meal in an all-you-can-eat restaurant, so each of them could satisfy their appetite. The pre-tax cost for one person was Rp 22,000, and after tax was Rp 24,200 per person. All of his family members were 7, consisting of his father, mother, one big brother and 3 annoying younger brothers. All was 6, plus Anto made it 7. It means that he had to pay the dinner bill of Rp 169,400. Which means, only 2 days after he received his salary, he had already spent 28% out of his salary for that month. So, he had only Rp 430,600 left for the rest of the month.
"No problem", thought Anto. "It's my own family that I treated, not other people. Besides, it's not every day I do that. Once a month is enough." Days went by. One week, 2 weeks, 3 weeks. "Hmm…that stuff in the mall looks pretty good. There is a very interesting looking shirt. Okay, it costs Rp 28,000. There's also this nice pair of trousers to wear for work. Very cheap, costs only Rp 65,000. It won't hurt to look stylish at the office". He then started buying things. "Okay", Anto thought, "one shirt and a pair of pants for this month. The rest of my salary would be used for transportation and food until the end of the month" .
What happened? On the 24th of the next month, just three days before his second-month payday, he had only Rp 50,000 left.
Anto started thinking. Okay...., such was because he spent most of his money to treat his family. Also this was his first time working. Within the coming months, his finance would be better.
The second month, he got his salary again. Still in the same amount. No raise yet. The difference was no more treating the family. Days and weeks went by. A few days before his third salary, he only had Rp 75,000 left.
Three months passed by, he was finally accepted as permanent employee. He got a Rp 150,000 raise to Rp 750,000. "Not bad", Anto thought. This meant that I would be able to "breath" and save a little. But strangely, a few days before even one month period ended, his still had only little money left. The sixth month, the seventh month, the eight month, although he got a raise, but he still ran out of money and could not put any into savings.
As a matter of fact, Anto is not the only one, whose income is under Rp 1m, with this problem. Even people with millions per month income still have trouble saving money.
What is really happening? Many people think that by getting a raise, they will not run out of money in the middle of the month and they can save for sure. Every month they hope that they will get a raise the next months. But after they really get a raise, they still run out of money.
It is clear that the solution here lies not on how big your income is. The amount of your income does not guarantee that you will not run out of money in the middle of the month. The size of your income does not guarantee that you will be able to save. The key here is not how much money you make, but how you manage your income so that it can be stretched in a one-month period.
There is no fixed way on the right method to manage your finance. However, based from experiences, there are several things that can help you manage your finance well each month:
Plan your income and outcome every month.
Carry out the plan strictly.
Have reserved fund.
Join insurance plan.In the next number, we will discuss each of the approaches.
From IndoExchange.com
A huge earning is usually considered for measuring the wealth of someone. However, why do so many people with huge income frequently end up running out of money in the middle or at the end of the month? What is the problem?
If you have a job now, do you remember the first one you ever had? Usually, the first experience on work is the most unforgettable experience.
Let's take an example. Anto was still living with his family until he got a job at the age of 23, as a clerk in a trading company. At that time, he had just graduated. Although he had to go through a probationary period, Anto was so excited when he knew that he would get his first salary. His salary was Rp 600,000, which he would receive on the 27th.
We can guess what he would want to do: he wanted to treat his family. He wanted to express his gratitude for getting a salary for the first time in his life, and he also wanted to show them that he was independent now.
Let's see: he received the salary on the 27th. On the 29th he took his family out for a meal in an all-you-can-eat restaurant, so each of them could satisfy their appetite. The pre-tax cost for one person was Rp 22,000, and after tax was Rp 24,200 per person. All of his family members were 7, consisting of his father, mother, one big brother and 3 annoying younger brothers. All was 6, plus Anto made it 7. It means that he had to pay the dinner bill of Rp 169,400. Which means, only 2 days after he received his salary, he had already spent 28% out of his salary for that month. So, he had only Rp 430,600 left for the rest of the month.
"No problem", thought Anto. "It's my own family that I treated, not other people. Besides, it's not every day I do that. Once a month is enough." Days went by. One week, 2 weeks, 3 weeks. "Hmm…that stuff in the mall looks pretty good. There is a very interesting looking shirt. Okay, it costs Rp 28,000. There's also this nice pair of trousers to wear for work. Very cheap, costs only Rp 65,000. It won't hurt to look stylish at the office". He then started buying things. "Okay", Anto thought, "one shirt and a pair of pants for this month. The rest of my salary would be used for transportation and food until the end of the month" .
What happened? On the 24th of the next month, just three days before his second-month payday, he had only Rp 50,000 left.
Anto started thinking. Okay...., such was because he spent most of his money to treat his family. Also this was his first time working. Within the coming months, his finance would be better.
The second month, he got his salary again. Still in the same amount. No raise yet. The difference was no more treating the family. Days and weeks went by. A few days before his third salary, he only had Rp 75,000 left.
Three months passed by, he was finally accepted as permanent employee. He got a Rp 150,000 raise to Rp 750,000. "Not bad", Anto thought. This meant that I would be able to "breath" and save a little. But strangely, a few days before even one month period ended, his still had only little money left. The sixth month, the seventh month, the eight month, although he got a raise, but he still ran out of money and could not put any into savings.
As a matter of fact, Anto is not the only one, whose income is under Rp 1m, with this problem. Even people with millions per month income still have trouble saving money.
What is really happening? Many people think that by getting a raise, they will not run out of money in the middle of the month and they can save for sure. Every month they hope that they will get a raise the next months. But after they really get a raise, they still run out of money.
It is clear that the solution here lies not on how big your income is. The amount of your income does not guarantee that you will not run out of money in the middle of the month. The size of your income does not guarantee that you will be able to save. The key here is not how much money you make, but how you manage your income so that it can be stretched in a one-month period.
There is no fixed way on the right method to manage your finance. However, based from experiences, there are several things that can help you manage your finance well each month:
Plan your income and outcome every month.
Carry out the plan strictly.
Have reserved fund.
Join insurance plan.In the next number, we will discuss each of the approaches.
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