Excuse me, do you have a financial cum retirement plan?

by ChingFoo Lieu on 05/02/2013

A lot of people have doubts on the need to have a financial plan. Some even ask – what’s that for? If you look at it from personal level, what is our ultimate goal in life after studying and working so hard for 30-40 years? The ultimate goal is retirement, and along the way we derive pleasure modestly from the life enjoyment with our spouse and/or kids. And while we are at it, we try out best to achieve multiple financial goals (more on this below).

Even corporations have sales and profit forecast or target, so why is having a proper financial plan is so hard of an idea to sink into many people’s mind?

Of course, the path or roadmap to our financial goals is laden with various upheavals that life just loves to throw at us. Some minor, some major. So no roadmap is 100 percent accurate because there are so many assumptions in it.

For instance, we assume nominal inflation rate at 3 percent, personal inflation and tertiary education rate at 6 percent, ROI of 8 percent. There will always be deviation from our assumptions, so that makes the plan dynamic, or a living document, just like FMEA (ignore this if you are not exposed to Six Sigma methodology :).

However, the financial or retirement plan will not lose its value although it is not 100 percent accurate.

The purpose of financial cum retirement plan is not to predict our financial future. Its ultimate purpose is to give us useful and personalized guide for our personal financial management.

But people just have a hard time paying for a piece of paper, even it is about your financial independence. Most are more comfortable paying for products- be it financial products or expensive gadgets, which doesn’t really add value aside from short-lived self-satisfaction.

Anyway I digress. But the point is, as a result of the financial cum retirement roadmap, we have better idea of how much we should save, how much we could afford to live during retirement, how much to spend for children education and so on.

financial retirement roadmap

Despite the fact that our financial destiny would not happen exactly like what is outlined in the roadmap, it won’t be too far from it if we were to follow the key performance indicators developed from the exercise.

I believe this could be achieved if reviews are done to our financial cum retirement roadmap at least once  a year. In a year, there would normally be some changes in our financial situations that warrants an updated plan

Investment assets might have grown, and expenses would have shot up in tandem with our lifestyle.

Other major life events would warrant more frequent or possibly, immediate review. For example, allocating a few hundred thousands for kids education or, you just inherited a large fortune from your dead grandparents.

This essentially improves the overall accuracy of the assumptions and projections.

Therefore, we look at the financial cum retirement roadmap as a substitute for not having any roadmap at all, instead of dismissing it as just a stalk of paper with theoretical figures and projections.

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