Wealth Management Is For Everyone, Not Just For The Rich
Whether you are a young couple who want to save for the education of your new bundle of joy, a middle-aged couple planning for retirement, or the primary breadwinner in your family, you still need wealth management.
Wealth management is essentially a combination of investment management and financial planning.
Investment management is about the art and science of making proportional investments in stocks or bonds, which includes selection of asset mix, security selection and oversight. On the other hand, financial planning often involves structuring personal financial affairs such as income and expense management, tax planning, will and estate planning, credit and loans, and insurance. Both have a common goal: to achieve our personal or financial goals.
Wealth management can be divided into seven categories of financial commitments to which we are all, in some way, committed.
For the sake of accumulation and preservation, asset managers set up a strategic financial roadmap according to individual needs. Therefore, it is natural to include all the elements of your financial situation and needs in order to create an effective money management system.
When done effectively, one can potentially reduce investment risk, taxes, and unnecessary spending while improving financial returns and increasing assets. It functions to provide both efficient consumption of assets over its lifetime and efficient transfer of assets upon death.
Why is wealth management not just for the rich?
Managing your money helps determine the best way to invest and save to meet your various financial goals – which could help you build, manage, or preserve wealth. An ordinary individual would need to accumulate wealth more than his rich counterpart, as he would have more pressing needs for money than the latter who would focus more on preserving wealth.
A. Have a sustainable retirement
Everyone needs to plan for retirement, whether they are public sector employees funded by their pension plan, private sector employees who have their savings from the Employee Provident Fund (EPF) or ‘self-employed, who must essentially acquire their own savings.
According to a recent Malaysian Department of Statistics (DOSM) survey, nearly three-quarters of Malaysian employees said their savings could only last two months, while those who had worked for more than 30 years had sufficient savings for only four months. Since the average lifespan of a Malaysian is 75 years, we need to be able to generate enough income to support ourselves for at least 15 years after retirement based on the official retirement age. retirement currently set at 60 years.
Meanwhile, EPF statistics show that 65% of retirees cannot afford to spend RM208 per month. This amount is inconvenient as they would need to cover their overheads, health care, outstanding debt repayments, etc. This amount is inconvenient as they would need to cover their overheads, health care, outstanding debt repayments, etc.
To truly enjoy retirement, you need to have enough savings to cover your expenses or generate passive income streams such as dividends on investments or develop a retirement plan.
An asset manager will be able to advise you on the best way to save for your retirement – from the right investment vehicle to the full amount you will need when you retire. If you are not already contributing to the EPF, you can start saving for your retirement through the Private Pension Scheme (PRS) or on the EPF i-Saraan if you are self-employed.
B. Save for a child’s education
There is never a better gift than leaving your children with the best possible education. The cost of getting an education can be intimidating, especially at private colleges (over RM 60,000) and universities abroad (over RM 200,000), with the costs of education rising. quickly. Without an education savings, they will have to choose to study loans such as PTPTN or work their way into a scholarship.
To save and generate enough funds to pay for higher education in 18 years, parents should consider different investments that will meet their needs and tolerance for risk. A wealth manager can advise you on the best course of action. Some of the options are government bonds, unit trusts, capital finance, and real estate.
For those with a greater risk appetite, they can invest in commodities, gold or FOREX. These investments carry higher risks, but can provide investors with substantial long-term investment returns.
vs. Make sure your family is financially secure
Insurance is an integral part of all financial planning. It is necessary to have adequate insurance coverage to ensure that you and your family are financially protected against unforeseen circumstances. Depending on your needs, you can invest in life insurance, medical insurance, home protection, and many more options to choose from.
The key is not just to get insurance coverage, but to get adequate coverage. With good wealth management, an individual will know the sum insured that is considered adequate, based on family commitments and affordability.
RE. Ensure that your assets are passed on smoothly
Wealth management, done properly, can potentially grow your money and assets over time. Therefore, it is important for you to make sure that your assets are allocated correctly to the right beneficiaries should something unfortunate happen to you.
Identify the beneficiaries of your investments to ensure that your hard-earned investments are passed on to your loved ones with minimal legal formalities. It will be a time of mourning and it would not be fair to put them through another hassle to sort out finances.
E. Manage your short-term goals
You could very well have shorter-term financial goals, like buying a car, saving the down payment for a new home, furnishing your new home, or even traveling. For these goals, you may want to consider investing in equity financing, money market, or term deposits as they give you high liquidity and lower risk given the short time frame.
A balanced wealth management portfolio should consider long and short term goals before coming up with an effective strategy to achieve all goals based on current capabilities.
Everyone needs wealth management
In other words, money management plays an important role in making our personal and financial dreams come true by taking a multidisciplinary approach that allows us to foresee a wider set of opportunities and risks. Wealth management can be the key to peace of mind and financial security for everyone.
The nature of this management does not require that only the rich can benefit from it. In fact, everyone, whether you earn RM 30 million, RM 30,000, or RM 3,000 a month, needs a solid financial plan.
No matter what you earn or own right now, you should always make a plan to protect, grow, and ensure that the wealth you accumulate can continue to increase over time.
This article was first published on August 6, 2014, and has been updated for freshness, accuracy and completeness.
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