Financial planning is simple and logical. It’s not as complicated as you think it is and, it is very likely you have the means to do it properly.
A lot of people I meet in the course of my work tend to think financial planning is difficult or, it’s something only the rich can afford. When I come across someone who is resistant to this basic idea of making their money work harder for them, I cannot help but probe further. Why?
Well, for starters, it’s my job. If I gave up on a potential every time someone told me, “I’m not ready for financial planning”, I don’t think I’d have gotten very far in this line. The second reason is because I’m curious about why some people seem so fearful of the idea of planning for their future.
And it’s when I dig deeper, I realise that most people have some serious misconceptions about the role money should play in their lives.
1. “I’m still healthy so I don’t need insurance”
The saying “Health is Wealth” is not a cliche. Just as you can never be too wealthy, you can never be too healthy for protection. Many of my clients started out believing themselves too young and too healthy to require health or medical insurance.
That’s a big risk you’re taking not only with your finances but also with your loved ones.
Financial planning is about taking care of yourself so you’d not be a burden to the people around you.
I’d say that, at the very least, get a hospital insurance. The cost of medical care can be quite shocking and, given the affordability of such coverage, it’s something you shouldn’t scrimp on.
2. “I’m still young – retirement is a long way away”
Another attitude about money that needs to change is the idea that retirement planning is something that can wait. I understand how in your 20s, fresh out of school, the last thing you want to think about is retirement. However, I’ve met clients who are already in their late 30s and still think they are too young to think about retirement!
Or, some clients would tell me, “There’s no need to plan for retirement. By that time, I’m probably close to dying.”
Newsflash, guys: DYING is not the worst thing that can happen to you.
Say for instance you start work at 25 and plan to work for 40 years. The average Singaporean dies at 85. That’s 20 years of no work and no income. What are you planning to do?
Singapore is not a country that gives handouts to the poor. We don’t have a pension scheme. Even if you plan to count on your children, there’s no guarantee they can be depended upon to take care of you.
Retirement is unavoidable so while you’re at the peak of your earning prowess, plan on how you’re going to support yourself during your golden years.
3. “I have no money, how to invest?!”
Whenever I broach the topic of investing to potential clients, many of them would tell me, “I’m living from paycheque to paycheque, I can’t find the money to invest.”
Perhaps this is the case when you’re an entry-level hire but what about the increments, bonuses and promotions you’ll receive over the course of your career? Is it really impossible to find a bit of money to invest?
As a financial advisor, I make it a point to follow my clients through their careers and life stages. I look at their lifestyles and ask if their habits are sustainable, I ask if there are changes they can make to save $5 or $10 a day for investments. Small changes do add up and, if it’s a change you can make, I’d say make it happen.
Changing your attitudes towards money, ultimately, is a matter of discipline. We are all very vain and we crave acceptance from our friends. In doing so, many of us spend beyond our means to keep up with appearances. We hate to be confronted with these hard truths and we dread having to face up to the reality that we could retire in poverty.
A good financial advisor should help you look at the positives and keep you focused on your goals. Of course, the client needs to fulfil her side of the bargain too. If, after a period of time, I see that you are not making the commitment to improving your financial status, I will have to end our working relationship. I say this because it is important for you to find a financial advisor who is genuinely interested in your future, and not just your commission.
