Risk Management

The second element of financial planning is Risk Management. In other countries, risk management is seen as an important element for everyone and have received good response from the people. However, this is quite different in Malaysia. Another term that is best described risk management is insurance. When Malaysian heard about insurance, the first impression is that the insurance agent is cheating money. Well, no doubt some of the agents approach you because of your money. Once they receive your money, you never see them anymore unless there are some new products. But you must be clear that the problem lies on the insurance agents and not on the insurance. This post might be a little offensive because it deals with accident and death. This is real life and I do not mind you shouting 'Touch wood' while going through this post. =)

Why insurance is so important? Just imagine if one day, suddenly Mr. A diagnosed with cancer. He does not have much money for the medical cost. If he has relatives or friends who are willing to borrow him money, then the situation is not so bad. However, if he does not have any insurance and none of his relatives and friends willing to borrow money for his medical cost, then what should he do?If Mr. A buys insurance policy (36 critical illnesses policy) from any insurance company, then his situation will be better. The insurance company will pay him a sum of money when he is diagnosed with cancer. The amount vary depends on your what type of policy you are buying. This will definitely lessen his burden at the initial stage when he can go for his treatment with the money he has. Illness can be cured easily at the initial stage rather than later stage right?

Actually human are very weak. Our lives are in God's hands. We do not know what will happen to us next year or even next minute. Illness, accident or death can happen on anyone at anytime at anywhere. This sounds threatening but this is reality. Someone might ask what can insurance do for us except giving us money? No doubt money is not everything but at least it can free you temporarily from financial crisis, at least it can help to reduce the financial burden of your love one at the initial stage. You will not feel how insurance can help you by reading this post. Maybe you should try and approach those people who really receive money from the insurance company.

There are various types of insurance products offer by the insurance company. It actually depends on the person on which type of insurance product should he/she buys. The rule of thumb when you are getting insurance is to make sure it covers the losses you need to protect. For example, medical and health insurance. This type of insurance will cover all or most if not all of your medical expenses you spent in the hospital as long as the insurance company acknowledges the hospital. Therefore, you do not need worry when you are admitted into the hospital. Those who do not have medical and health insurance or do not realize the importance of medical and health insurance will always agree to this saying, 'A person can died of illness but must not get sick'. This is because the medical cost is really scary!

People will realize the importance of insurance when they really need the insurance. However, most of the time, people will only realize the importance of insurance when they cannot buy the insurance due to the term and conditions. Thus, buy an insurance that can cover the losses you need to protect and make sure you choose the correct insurance agent.

Cash Management

As mentioned in my previous post, I am going to share about the 6 elements in financial planning. Therefore, I will share cash management in this post.



If you are lucky enough and have been given a bag of money, what are you going to do? Spend all the money you have in the bag to buy whatever things you like? Go for holiday? Invest the money? This is what happened when someone wins in the lottery. When someone wins the lottery, the person will first invite relatives and friends for meal. If got extra, then buy something he/she or the family members want very much or take the money and go for gambling. I would say this is the standard way how people spend their money when strike lottery. How I know? This is secret, cannot tell you. =)

If people who strike the lottery have to learn cash management, people who does not strike the lottery even have to learn how to manage cash. A research has been done in US on 602 people between 18 to 34 years old. About 24% of them spend more than what they earn and 31% just enough to pay their expenses. If you can still save 10% of your income, congratulations, you are a lot better than around 50% of the people in US.

The birth of credit card has actually worsen some people's life. No doubt we do not have to bring a lot of cash with us if we have credit card. However, when you are buying things with credit card, you do not feel the pain when you are buying. You will feel the pain only when the statement is sent to you. How true is it? Maybe you can check with those who rely heavily on credit cards.

What need to be done when managing your cash? Well, one should have budget to manage their cash. Budget is a plan for saving and spending. Therefore, it will guide you on how much you can spend and how much you should save for the month. If you have cash machine that can print out money notes for you to do transaction legally, then it is really fine for you not to do any budget. But do you really have? When comes to budgeting, most of the people have fear on budgeting because they think that they have to sacrifice something when they are doing budgeting. This is not really true as you can still spend on anything you like as long as you have save the amount of money according to your budget. The money that you have to save is not RM 1 million or more, it is just 10% of your salary. Many great financial planners out there saying that pay yourself first before you pay to anyone and if you do not have enough to pay others, then make sure you can have your seond stream of income. What they mean by paying yourself is to pay yourself for the future instead of paying yourself now. In simpler term, it means that you should save money for future use instead of paying all your monthly income to house loan, car loan and others. If suddenly you need money urgently, at least you can still have

Budgeting is simply just a guide on how you should manage your income. How much of money should the individual save, invest and spend, maybe you can refer back to my previous post on saving. There are a lot of information of budgeting in the internet as well. What are you waiting for? Start your financial budget now. =)

Financial Planning

After sharing information that I have read in my last few posts, I think it would be better for me to share the fundamental of finance so that you can get a clearer idea.Therefore, I would like to share Financial Planning in this post.

Dream, dream, dream. Who do not have dreams? Everyone of us does have our dream. Kids dream of growing faster so that they do not have to study. Teenages dream of following the current fashion. Adults dreams of having a lot of money to buy their dream car and dream house. Parents dream of providing the best education for their children. Senior citizens dream of enjoying their retirement. We only have dreams and we dare to dream but most of us do not achieve our dream at the end.

Why we cannot achieve our dream at the end? Go for holiday, get yourself your dream car, get yourself your dream house are the dreams. However, all these things require money. That is the reason why everyone should do financial planning. Do you know how much do you spend and save daily? When we are still kids, we tend to save our extra money in our piggy banks. We put 20 cents, 80 cents, 50 cents and sometimes no cents inside it. Yes, the amount is very small, but at the end of the day, we can still have a large amount of money. Nowadays, how many of us still practising the saving habit when they are teenages and adults?

The purpose of this post is just to advise you to start your financial planning before it is too late. As I mentioned earlier, everyone has his/her dream. If you do not have any money for your dream, your dream will just stay as your dream. This concept is also highlighted in the movie. For example, the movie 'UP'.

In this movie, we can see how Mr. Fredickson and his wife have a dream. They dreamt of moving their house to Paradise Fall in South Africa. However, they faced financial problem to achieve their dream. Therefore, they worked hard to earn money in order to achieve their dream. However, Mr. Fredickson's wife passed away. Mr. Fredickson still kept the promise and moved the house to Paradise Fall. From here, we see that there is the element of financial planning. If Mr. Fredickson and his wife did their financial planning earlier and manage their finance well, it is certained that both of them can move the house to Paradise Fall together.

Financial planning is essential for everyone of us and it has six elements which I will share in my next few posts. Even Bill Gates and Warren Buffet, the top two richest person in this world are doing financial planning, who are we to say that financial planning is not important?Nobody will help you to achieve your dream if you do not help yourself to achieve your dream. Same goes to financial planning. Nobody will do financial planning for you if you do not do it yourself.