Financial Planning is everything about planning your finance. It is all about money from the money you earn & the money you spent. Generally, financial planning involves planning for spending and saving future income. This plan allocates future income to various types of expenses, and also reserves some income for short-term and long-term savings. Broadly, it is a process of determining an individual's financial goals, purposes in life and life's priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. The individual's goals are used as guideposts to map a course of action on 'what needs to be done' to reach those goals.
Steps in financial planning:
1. Cashflow management: o Knowing your current net worth. Generally your total asset minus your total liabilities. o Eliminating bad/ doubtful debts. o Frequently save some of the money. o Lifestyle management
2. Takaful/ Insurance Planning o Managing risks by ensuring all your family members and assets are well protected with comprehensive takaful/ insurance coverage. This includes education planning for your kids.
3. Investment Planning o Consider where to channel your saving to a better place where it can generate higher return or the dividend
4. Retirement Planning o Planning to ensure financial independence at retirement. Surely you want to retire rich and not poor. This is important aspect of financial planning and somehow many people did not think for the future.
5. Tax Planning o Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes, under the local tax regime.
6. Estate Planning o Planning for the creation, accumulation, conservation and distribution of assets. An estate planning or a will can provide financial security for your family, thus your property is preserved and passed to beneficiary in a proper manner. For muslim, you can hire an Islamic Estate planner so that the Will is in accordance to Syariah.