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  • Writer's pictureDaniel Lee

Things you must know before you start your financial planning

Updated: Aug 11, 2021

In Singapore, the term financial planning had been so badly abused by black sheep agents and bankers that the true meaning behind financial planning is lost.

Whenever the term: “Financial planning” or “financial planner” is brought up, the first association that most of us have in mind is either insurance or insurance agents.

The purpose of writing this article is to correct some of the misconceptions and give you a crash course on what financial planning is and how you can approach your financial planning.

What is financial planning?

The concept of financial planning can be best explained using a Jigsaw puzzle analogy.

You see, when it comes to fixing a Jigsaw puzzle, it is natural that all of us would like to first know how the final product of the puzzle would look like before we start piecing the pieces together.

Financial Planning is no different from that.

Financial Planning is an exercise that helps us understand how our final product - goals and outcome - would look like before we look around for the pieces – instruments and products – to complete the puzzle.

Unfortunately, most of us are doing it backward.

Most of us tend to look for the pieces first without having clarity as to how the final product would look like. As a result, we would purchase and invest in the wrong instruments and products which jeopardizes our progress.

Financial Planning is a goal-oriented and outcome-focused process. Its focus should never be on products and instruments. Figure out your destination and the different plausible paths will naturally emerge.

The role of a financial planner’s job is to help you, in order of sequence,

  1. understand and quantify your goals and expectations

  2. shed light on the pros and cons of the different plausible ways to achieve the goals

  3. identify the suitable instruments and portfolio allocation

  4. compare and identify the suitable products and companies to purchase from

  5. manage your portfolio and adapt to future changes with your goals

So, the next time you speak to a “financial advisor”, understand if the “advisor” is acting the role of a financial planner or just another product distributor.

What are the areas of financial planning?

In order of importance:

Risk Management (Wealth Protection) – Deals with the “what-ifs” in your life. Before you grow and accumulate wealth, you must have in place measures that can protect it from any external forces.

Wealth Accumulation (Investment Planning) – Deals with the strategy and systems to help you grow and accumulate your wealth. It helps you understand how you should position and manage your portfolio to achieve a suitable return and risk exposure based on your goals.

Children’s Education & Retirement planning – Deals with having an understanding of how much you will need to have and how much you will need to set aside for your children’s education and your retirement.

Tax Planning – Deals with how you can lower your taxable income and balancing the trade-offs between the returns and cost associated with doing so (i.e. from CPF contribution or SRS contribution).

Estate Planning – Deals with how you can retain the values of your assets in your eventual demise and smoothly distribute it to the parties of your wishes without any legal delays or disputes.

To properly plan your finances and manage a portfolio that provides you with the benefits and returns that you need at the lowest possible cost, you must consider ALL areas of your financial plan simultaneously.

Like it or not, the different areas of financial planning are all interconnected.

You cannot address one section of your financial plan without taking into consideration how it will affect the other areas.

Failure to do so will result in mistakes that will jeopardize your performances resulting in your inability to achieve your goals.

How can you start? (and self-plug of course)

Financial planning is a systematic process that is goal-focused and outcome-oriented. Having said that, the first step to starting to plan for your finances is to understand and quantify your own goals and expectations.

The second step is to understand where you stand today, the type of lifestyle you’re leading, the type of portfolio you’re managing, etc, in relation to your future goals and expectations.

The third step is to understand the gap between your present and desired state and come out with an implementation plan that would bridge this gap. Naturally, this requires you to be equipped with the necessary know-how which is technically demanding.

Now here’s where the self-plug comes in.

Let it be known that I believe everybody has the capabilities to pick up the necessary knowledge to “do-it-yourself”. However, is it worth trying to do everything on your own? Also, what would “doing everything yourself” cost you?

Are you prepared to make mistakes that would cost you both time and money during your learning journey and risk delaying your financial plans when these could be easily avoided by working with an advisor?

If you feel that you do not have the time nor interest to do so and would like to understand how you could benefit from working with an Independent Financial Advisor and Certified Financial Planner, do reach out to me here:

Connect with me on social media platforms to receive updates on future content! You can also slide into my DMs if you have any questions, I’ll be happy to help :)



  • This article is meant to be the opinion of the author

  • This article is for information purposes only

  • This article should not be seen as financial advice

  • This advertisement has not been reviewed by the Monetary Authority of Singapore

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