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Financial Planning is Only for the Rich, Myth or Truth?

Financial planning has oftentimes been regarded as something only reserved for the rich. Is this a fair observation? Is it true that if you are not rich, you should drop the idea of financial planning altogether?

Regardless of our experiences or background, we basically build wealth via the following means for example – inheritance, employment or entrepreneurship. There are many ways to get rich but not many are able to remain rich.

Firstly, let us understand financial planning. According to the Financial Planning Standard Board (FPSB), financial planning is a “process of developing strategies to help people manage their financial affairs to meet life goals.” It’s a process to manage our financial affairs to ensure that we will have the financial stability to help us achieve our life goals. 

Contrary to the popular belief that we only can manage our financial affairs once we have surplus, ironically, people who have surplus are those who have done proper planning beforehand. Those who have started managing their cash flow and debt obligations would end up being in a better position of having surplus. If one has handled the risk management process correctly, then one’s savings will be protected.

In the event of financial losses, a person who has invested the savings in a way that is right and in line with his risk capacity will see his wealth grow and become inflation-proof in the long run. This combined with savvy tax planning will minimise the “leakages” and maximize the retention of income eventually enabling the person to pursue life goals that are inevitable such as retirement and education planning.

Real estate planning allows the smooth distribution of estate and wealth to prevent the next generation to be trapped in financial struggles and protect the wealth that was built to ensures that the family does not backtrack in the event of death.

Based on the statistics published by Agensi Kaunseling dan Pengurusan Kredit (AKPK), reasons people requested for their help are generally of the following nature:-

Nearly 75% of reasons are due to improper management of money and poor financial planning.

One misconception is that when we embrace financial planning, we will have to accept a frugal lifestyle. Instead, the whole point of financial planning is to put the aspirations and life goals of a person at the core. Thus, it would be counter-intuitive if you have to live a frugal lifestyle.

By embracing financial planning, you will essentially have to look at your personal finances in totality and then make decisions that are smarter and less attached to your desires and emotions for instant gratification. 

In addition, sound financial planning is another way to sustain wealth. Unlike any other ways, financial planning is up to us and it is a process we have full control over.

Also, a Financial Planning Professional is NOT required in order to start taking control of your personal finances and financial affairs. All it takes is to have awareness and determination to follow the approach. One of the critical qualities is for us to have a strong financial foundation. 

The best, simplest approach is to save a fixed portion of your income before you even get to spend it. Instead, open savings account and set up a standing instruction to transfer a portion of the salary from the receiving account to the savings account monthly to start building up your savings and reservoir via this method.

So, do not procrastinate. Start saving for your future today!

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