My Realisations of What Wealth Planning Is Really About

I have been doing my own personal finance planning for the past 10 years or so ever since I got my first paycheck and wondering what to do with it. Being a numbers driven person and a bit of a perfectionist, my goal was always to achieve the most optimal setup, whether in terms of insurances or investments. I would pore over data, articles and research and map them out into my spreadsheets so that I can maximise where every dollar goes. Needless to say, I have also been tracking every single cent of my cashflow, and allocating them like pieces on a chessboard.

It was not until about 4 to 5 years back, when I started realising that I had been overly focused on the means without first having clarity about the end. And that the success of a plan is not measured by the numbers on a spreadsheet.

The most important in wealth planning is not money

This was probably my biggest mistake early on. I was too focused on trying to grow my money as efficiently as possible. More is always better was what I told myself while trying to find the perfect strategy, whether it is in finding the right asset allocation or learning how to pick stocks to get higher returns. My realisation began when I truly reflected on how exactly do I want the finances to support the goals that were truly important to me.

This realisation was further compounded in my work and conversations with clients. Our journey and partnership with clients is a lifelong one. The typical progression of conversation usually starts off with wanting to grow their money more effectively and then to achieving greater clarity over whether they have enough. This subsequently leads to exploring what matters the most to them and working through some of the priorities and trade-offs needed to build a life that is purposeful and fulfilling. I like to see this process similar to being an architect designing and building a strong foundation for our clients’ life goals and aspirations. I also like to say that I don’t have the right to tell you how to manage your money until I truly understand what are your important goals, concerns and aspirations.

Time is also an important resource

While we tend to focus on money as the main resource in wealth planning, we must not forget that time is also an equally, if not more important factor to consider. At the most basic level, most people exchange their time (and energy) at work in return for money, and then deploy their money towards things that are important to them.

If the end goal is to ensure a purposeful and fulfilling life, how do we choose to spend our time and money, balancing between the now and the future? There is a common saying that you can have anything you want, but not everything. This just means that management of your resources, is less about managing, but more about being focused, intentional and deliberate in our life choices. And these typically involve choosing between spending more time with family, pursuing career aspirations, and engaging in personal pursuits or interests. And the key question to ask is are you managing money in a way that is improving your life?

Don’t forget risks

I tend to get a lot of questions asking about the expected returns of investments but very seldom on what are the risks involved in order to get the returns. This is not surprising. I have been guilty of focusing on returns in the past as well because it is a much simpler concept to grasp. Every decision we make in life involves some degree of risk and probability whether it is about career, family or investments. In my work, the actual implementation of investments usually comes in only after about 2 months of work because we spend most of the time assessing what returns do our clients need to achieve their goals, whether they have the ability from a financial health and time horizon perspective and if they are willing to go through some of the volatility involved. There are a whole range of asset classes to invest in, which all of them are sound if you assess them individually. This goes from cash to bonds to equities, all the way to private equity or cryptocurrencies, which have their own merits and drawbacks to consider. There is no free lunch in investing. If you wish for high certainty of goals, you will have to give up potential returns, and likewise, if you aspire outsized returns, then you should be comfortable with the potential pitfalls that might come with it.

Our job is to help demystify how to navigate these decisions and guide clients towards making prudent and confident decisions when it comes to allocating their financial resources.

A typical journey

To give an example, I have been working with a very nice couple who are still in their early working years, and wishes to support their children’s education overseas while ensuring that they are on track to their retirement with at least $10k per month of income. Given that they have above $2m of liquid investible assets today and an annual savings of about $100k a year, they should quite comfortably be able to achieve their desired goals. However, in addition to what they like for their children and their own retirement, they also wish to purchase a property in the near future, large enough to allow them to house 3 generations of family. This is particularly important to them as this meant spending quality family time together, especially when parents are growing old. As a result, this requires making trade-offs where the potential options are either providing for local tertiary education for their children instead, working longer, accepting a lower retirement income or saving more today.

After going through the scenarios, they decided that this quality family time is important enough that the adjustments needed on their expectations for their retirement and children’s education were acceptable. Subsequently, when there are additional resources available such as income increments or bonuses, they can then further allocate and build towards their original goals that they were short of. This way, the initial foundation helped made it clear on what they were working towards, and to drive future decisions on allocating their resources.

As a conclusion

I hope that gave you some food for thought on the areas outside of just finances that you want to go deep into when crafting your own personal wealth plan. I sometimes call it a life plan instead. Ask yourself what are your lifetime aspirations and areas you like to achieve that fulfils you. Who and what are your most important priorities in life. And then create your plan that aligns and supports where you like to go. Lastly, make sure you review your plan on an ongoing basis as it is almost guaranteed that our life goals and situations do change along the way. As the famous baseball player, Yogi Berra says, “If you don’t know where you are going, you’ll end up someplace else.”. And we only have 1 shot in our life.

This is an original article written by Tan Chin Yu, Lead of Advisory Team at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.

For more related resources, check out:
1. Client Case Study: At 40, Are You on Track to Retirement?
2. RetireWell™ Epilogue 1: Purpose-Driven Retirement Planning
3. Providend’s Money Wisdom Podcast S2E35: How Does Providend Coach Our Clients Through Financial Crises?

*Providend is very excited to share that we are now ready to extend our service offerings to the younger accumulators who are looking for holistic, independent, conflict-free wealth advice!

For this group of younger accumulators, we know that it is not easy to make retirement planning a priority when other financial goals – buying a first home, for example, or saving for a child’s education – appear more pressing. Learn how we can help here.

We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.

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