Financial Planning for Women
Financial Planning has been a hot topic for the last couple of years. Thanks to the media, Smart Women should have more knowledge and greater understanding about Financial Planning.
Some might even have started planning. If you still have not learnt about Financial Planning by now, then read on.
You will get some basic ideas of the dos and don’ts of the smart women in their daily life. And what’s more, it’s Financial Planning!
All smart women do understand the importance of being financially independent at their desired stages of life. The last thing they want is financial worry to overshadow their lives.
Most importantly, they know what they can achieve through Financial Planning.
There are four phases in Financial Planning, namely Wealth Creation, Wealth Conservation, Wealth Accumulation and Wealth Distribution.
Each phase has individual goals and objectives which ultimately strive for financial freedom.
The smart women choose to work closely with licensed professionals with qualifications like RFP, ChFC or CFP.
Smart Women are clearly aware the importance of having Individual Financial Identity. A person’s earnings determine such identity.
You will be recognized individually by the financial institutions when you are applying loans for the purpose of starting up business; purchasing of house/car, funding of children/own education and even applying visa for traveling.
Also, the recognition from legal authority is vital in the event of marriage dissolution.
In the process of Financial Planning, Wealth Conservation comes before Wealth Accumulation. To illustrate the statement, imagine that you try to store a pail of water but it leaks.
To these Smart Women, they know the ‘leakage’ in a financial plan refers to unemployment, business failure, premature death, total and permanent disablement, strike of critical illnesses, lawsuit, marriage dissolution and fire.
They cause severe consequences especially in great monetary losses. The losses come in terms of the ‘ruins’ of our after tax dollar, future possible income/profits, investment, property or business interest and most importantly, our earning capacity.
To avoid them, a smart women will learn about risk management. They transfer away whatever risks that are beyond their affordability to insurance company. They seek advice from their Financial Planner/Advisor of what a Trust can do to help them.
Besides this, smart women are usually being very analytical and alert when they lend out money to relatives and friends or asked to be their guarantor, because they experienced that most of them will end up become their enemies.
“Do not pamper your excess money, let them work harder for you” is the golden rule in this stage of Financial Planning for Smart Women. Smart Women know money depreciates due to inflation and understand the cost of waiting.
Therefore, Smart Women never procrastinate and start planning for wealth accumulation with her monthly surplus.
Firstly, Smart Women will seek advice from financial planner/investment advisor in identifying her short term and long term goals.
They will specifically set her personal financial goals and objectives according to their life stages.
They must gauge their level of Risk Tolerance and Loss Capacity before determining the appropriate type of financial instrument to be used.
Smart women also acknowledge the fact that generally women will live as a widow for about 8-9 years due to female longer life expectancy. They also realize that women tend to sacrifice their career even though that could be a rewarding one. After all, it is a norm for women to take care of the sick in the family.
Hence, smart women will start accumulating wealth from the very first time they earn an income and the wealth accumulated herein will then continue generating income for her one day if she really forced to give up her career/business for the aforesaid reasons.
Assuming life expectancy of women is 79, Smart Women realize that Employee Provident Fund could only contribute up to 25%-50% of one’s required retirement income. Therefore, maintaining lifestyle after retirement has been one of the key objectives of wealth accumulation before planning for Education Fund.
Besides, aided by the qualified Tax Consultant, Smart Women will seriously look into the matter of Tax Planning. This is because tax savings can increase surplus. It can be channeled for investment purpose.
The primary objective of planning for wealth distribution or Estate Planning (you name it with other term) is to make sure one does not ‘died bankrupt‘ / ‘go bankrupt’ / ‘is not declared bankrupt’.
Under the normal estate distribution procedure, the deceased creditors’ rights in claiming the estate are more superior to the deceased heirs.
The secondary objective would be making sure of who gets what; by when and how should the distribution be done. The prevention of wealth shrinkage is equally important in the planning process because possible law suits or divorce might reduce your wealth into half.
Thus, Smart Women will always ensure the followings:
- they have sufficient provision for Debts Cancellation at death;
- they understand properly of Distribution Ordinance Act,
- the usage and benefits of Wills and Trust to determine what/not to Trust and whom to trust;
- the availability of Funding Mechanism;
- the legality of their Marital Status and Proofs;
- the implications of Faraid;
- they have discussed Estate Planning with their husband.
This knowledge will only be powerful when you put it into real life’s practices!!! Another thing that Smart Women will ensure is Act and Plan NOW for FINANCIAL FREEDOM tomorrow.
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