• Daniel Lee

Things you must know before you start your financial planning

Updated: Nov 26, 2020

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.

It is an exercise that helps us better understand how our final product - goals and outcome - would look like before we shop around for the pieces – instruments and products – to piece together the final product that we want.

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 is he or she simply just another product distributor.

Read Also: Things you must know before you engage a financial advisor

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?

Just as there are no free lunches in the world, the cost associated with trying to do everything yourself comes in the form of time. It all boils down to how much is your time worth and are you willing to spend the time to pick up the technical know-how when you can easily leverage on the time of an advisor.

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 leverage my time, skill, and expertise to short-cut your financial planning process and get the performance you need to accelerate your progress, you can reach out to me directly via telegram on Whatsapp and we’ll see what we can do together!

In the following weeks to come, I’ll be publishing more guides relating to financial planning in general so do join my telegram channel to stay updated!

Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides advice in the following areas:

  • for investment and portfolio management advice - find out more here

  • for insurance planning and portfolio optimization advice – find out more here

  • for retirement planning advice– find out more here


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


Join the Telegram Channel!

Telegram Updates From Daniel (1).jpg

Get in touch today!