None of us are able to predict our financial futures, we cannot say for sure that we will always have a stable job and a regular source of income, and we do not know whether we’ll we encounter an unexpected event which will result in us having to pay out a lot of money. Yes life is uncertain, but you can certainly prepare yourself financially should you wish to do so. “Punyisa Koysomboon” or Khun Pueng, grew up in a family that was able and understood the need to save money, and they made her understand and recognise the importance of financial planning. In the following article you’ll get to know Khun Pueng, and the financial lifestyle of a professional accountant.
Khun Pueng graduated from the Faculty of Commerce and Accountancy, Thammasat University with a Master Degree in Finance; she is now Assistant Finance and Accounting Manager of one of Thailand’s biggest companies, The Charoen Pokphand Group (CP).
Q: When did you start financial planning?
A: When I was younger and still at school my parents got me into the habit of saving. I would get a daily budget to go to school with but I would always save some, it actually became like an addiction. When I reached university I realised that all those little bits of money I had been putting away had become quite a large sum. I felt very proud as I could go out and buy something without having to use my family’s money.
Once I started work and I was receiving a regular salary and sometimes bonuses, I knew that I could start to plan the use of my money and what I would need to save if I wanted to buy something big. As an example, I thought that in two years I would like to have a car and I knew how much money I would have to save each month to ensure that in two years time I would have enough savings to put a down payment on a car. However, at this time I also realised that I would then have financial liability and that at some point it may be possible that I would find it hard to make the payment for the car and that I may not be able to save, I therefore looked into investing in stock markets or mutual funds”.
Q: What is most important thing about financial planning?
A: For me it’s about having a “goal”, everybody has their own requirement or expectation in life. For example, let’s say I intend to start my business in say 5 or 10 years time. I know that in that time I will need to have saved a large amount of money. Perhaps there is another more beneficial way in which I can reach the required amount other than just relying on savings. There are a number of ways of reaching your required amount if you know about money management.
Q: So is it too early for say a student to start planning for retirement?
A: No I don’t think it’s too early at all. If you start planning your retirement early how fast will you be able to reach the goal. For me, at retirement I would want to open my own business to give me my daily money and also to keep me busy so I am going to need the funds for this. To raise these kinds of funds one would need to invest in real estate so that they can be guaranteed a profitable cash flow.
Financial Planning: It’s About More than Money
Traditional financial planning is all about math and money. You look at how much you earn, figure out how much you will need in the future to maintain your desired lifestyle and try to come up with an investment plan that will help you reach the magic number that will allow you to retire. The process is generally about as exciting as balancing a checkbook and as emotionally draining as paying taxes. Unfortunately, many people choose not to deal with it all, preferring to put off worrying about the future until it arrives. Others go about the process with a sort of resignation born of the fact that, aside from death and taxes, your bills are just another part of life – they need to be dealt with because you don’t have much choice. However, there’s a quiet minority of investors that are taking a different approach. It goes by a variety of names, but “life planning” is one of the more frequently heard terms.
Life planning is different than traditional financial planning because the focus is more about who you are and who you want to be than it is about money. Unlike people engaged in the traditional planning process, people engaged in the life planning process don’t look ahead in an effort to figure out how to maintain their current lifestyles in retirement. Instead, they look at how to change their current lifestyle to achieve the lifestyle of their dreams.
Financial Planing Tips
- Managing Your Budget
- Know the difference between a “need” and a “want.”
- Track your daily expenses closely for four to six months, until you know your spending habits well enough to develop a realistic budget.
- Periodically review your fixed and variable expenses; don’t assume fixed expenses can’t be adjusted, too.
- Save 5 to 10 percent of your net income every month. Pay yourself first—don’t just save the “leftovers.”
- Write down your goals—short-, medium-, and long-term.
- Check your net worth at least once a year to make sure you’re making progress.
Managing Your Credit
- Pay your bills on time to maintain a good credit record. If you get into trouble, contact your creditors and explain your situation.
- Stay below 20 percent! Avoid getting into total debt that exceeds 20 percent of your annual income.
- Reserve consumer credit for major purchases, such as a car. Avoid using your credit cards unless you plan to pay the total amount due at the end of the month
Managing Your Insurance
- Make a household inventory. In the event of fire or loss, you will need it to document insurance claims.
- Protect yourself with the right insurance, but don’t buy insurance you don’t need. If you have a whole life insurance policy, review it to make sure the return on the investment portion of your premiums is competitive with other investment vehicles.
Managing Your Investments
- Establish an emergency fund first, before you invest. Your emergency fund should have the equivalent of three to six months’ income.
- Work with someone you trust, and who understands your financial objectives. Interview the experts until you find a good fit; don’t let yourself be pushed around.
- Analyze your tolerance for risk, and don’t exceed it.
- Never invest in something you don’t understand.
- Don’t put all your eggs in one basket. Work for a balanced investment plan that permits your capital base to grow, and that can provide income when you need it. Diversify!
Managing Your Retirement and Estate Planning
- Keep records in a system that others can understand and access. Should something happen to you, it will be easier to sort out your affairs. Both partners in a marriage or long-term relationship should know where all financial and legal records are, as well as the names of lawyers, accountants, and other advisers.
- Periodically check the balance in your social security account.
- Ask your employer’s benefits administrator to explain all your employee benefits, so you can include information in your personal records, make maximum use of benefits when they’re needed, and decide whether you should supplement them.
- Periodically check the amounts accruing in pension plans, supplemental annuities, etc.
- Make a will and review it periodically to ensure it continues to reflect your wishes. Couples should avoid mutual wills.
Information Source: Investopedia, financial-planning.com