How to Create a Robust Family Financial Plan

Published 24 Sep 2020

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By Fi Life Team
What are the elements of a robust financial plan for your family, that can thrive in good times, and withstand the bad times?

Guest Speakers:
1. Gunaseelan Kannan, CFP & Licensed Financial Planner – Blueprint Planning
2. Inderjit Singh, CFP

1. Roshan Kanesan – Producer/Presenter, BFM Ringgit & Sense
2. Malek Ali – Founder, Fi Life

Show Notes:
1. Basics of Family Financial Planning 1:28 4:21 6:25
- Life Value and Monetary Value:
- What is the aspiration of the family (what they want to achieve, experience)
- The culture, risk-taking habits and spending behaviour
- It is an inclusive plan that involves the children and spouse in the discussion (this is how it is different from an individual financial plan)
- the financial struggle is shared by all members of the family, can create a stronger bond
- Risk management: most families did not take into consideration unexpected deaths or accidents
- Malek has a family assets spreadsheet that is shared with his wife
- He does not disclose the exact figure of how much he earns to his children but gives them context

2. Priorities in terms of financial commitment 8:55 19:15
- Question to ask ourselves, what's important in our life so we can identify priorities
- Financial Goal: set a financial goal before a financial plan. We often get lost in the action of investing without knowing what is our goal
-Cash Flow Management: without knowledge of income and expenses, difficult to make financial decisions
- Plan for the worst, get your family protected then you can have peace of mind to grow your investments

3. Common Mistakes in Financial Planning 16:44
- Lifestyle inflation: as income increases, spending also increases
- Different opinions on big purchases, or who should manage the finance
- Emergency fund & immediate obligation funds are often missed out
- Financial plans should also be flexible so one can always reduce lifestyle expenses

4. Engaging a Financial Planner 12:21
- One can be emotional about their own money, an independent financial planner is able to help you identify your weaknesses and strengths
- Ask if the financial planner is representing you or the financial advisory company; how they are compensated, whether open to disclose the commission amount from products sold

5. Protecting the family 22:40
- Insurance as a form of protection and savings are equally important
- Buy term life insurance to save cost and invest the rest
- Look at what’s the worst that can happen and the context of the family
- Malek prioritises protection in the early days to make sure the family does not suffer should there be any accidents but switch to investment focus in the later years

6. Estate Planning 28:53
- Very important for new parents with young children
- Without a will, estates can be frozen for a long time
- Essential components in a will:
a. Appointment of an executor
b. Young children - appoint a guardian in case of common tragedy
c. 2 independent witnesses
- Life insurance for the estate to manage liabilities
- High net worth individual can have a trust to mitigate risk so your estates can be well preserved
- Use a trust structure while you are still alive to protect assets from bankruptcy
- The family fund is already put aside and will not be affected by the bankruptcy
- Minimum of RM1,500 to set up an insurance trust, living trust from RM 5000

7. Financial planning for young graduates 36:24
- Cultivate the habit to put away 10% of your pay
- Save before spend
- Start small and build it up over time
- With a RM 1,500 salary, you can still save RM 200
- As your income grows, put aside funds for emergency and immediate needs
- Do you spend or invest your bonus (lump sum of money)?
- Don't spend too much on your wedding
- Increase your financial literacy level, learn from the financial bloggers out there
- Learn to differentiate real investments or speculative ones. If it's good to be true, it probably is