MANY people think they need to accumulate a certain magical amount of money – “enough” is the ambiguous term they use – before they can even start to think about financial planning.

This, of course, begs the question of what exactly “enough” is.

For most (if not all) of us, the number just does not seem to pop up in our minds, and for good reason too.

And this is also where procrastination – yes, that conniving thief that robs you of your time – rears its ugly face and sticks its heels in the earth below you so you never get off the ground.

Look, there is never a minimum amount you need before you can start, simply because the process of financial planning is not tagged to the numbers.

It is simply about knowing where you currently stand and then determining what you might like your future financial state to look like.

And this is achieved by taking stock of your assets, loans, income, and expenses, before planning the necessary actions to help you achieve these future goals. Simply put, it is knowing where you are now and then asking where you want to be.

In a study conducted by OCBC Bank among 500 emerging affluent families, 40% stated they found it a challenge to get down to financial planning.

Perhaps the operative words here are “get down”. The 40% just needed to be told that it is never too early (or, okay, too late) to start planning as financial planning is neither for the “ready” nor is it simply about long-term goals.

And it is certainly also not about complex investment products with sexy headline rates!

Take the example of 24-year-old Sarah, a fresh graduate who had set her sights on a two-week trip to Europe.

Since she knew her trip was going to set her back by RM20,000, she was already in a great position to start the financial planning process. Sarah’s financial plan included factoring in the reality that after contributing RM330 to the Employees Provident Fund, paying RM500 for her car loan instalment, and RM1,500 for daily expenses such as food, entertainment, petrol and tolls, she could only set aside RM670 into a savings account that pays 2.90% a year from her RM3,000 salary for her trip.

Based on this, Sarah knew she would be on that plane to the airport in Rome in 28 months if she stuck to the plan.

More complex

Admittedly, as one journeys through the various phases of life, financial planning gets more complex as multiple future goals are at play at any given time.

For the typical couple in their 30s, the goals would include buying a house, getting that second family car, paying for the children’s education, saving for retirement, and setting aside funds for ageing parents – all pretty much simultaneously and based on their two incomes.

And the couple would do well also to explore the myriad combination of instruments beyond fixed deposits such as unit trusts, bonds, endowment plans, shares and even foreign currencies when planning for a foreign education for their children.

Whilst most people view financial planning as something related to the somewhat scary word called “investing”, a crucial component of any good financial plan is, really, simply to ensure you don’t leave yourself or your dependents exposed to substantial unexpected expenses.

These include substantial surgery bills, medical bills from a critical illness discovered 10 years down the road, damages to your home and furniture caused by a burst water tank or fire, and so forth.

A proper assessment of your potential risks would show you the types of insurance coverage you may require.

This helps you transfer your financial worries to the insurer instead of having to shoulder it all by yourself.

Having a good financial plan helps to alert you to changes that must be made to ensure a smooth transition through life’s financial stages. These changes may include decreasing the budget for annual family trips, changing the composition of your investment portfolio, holding back on investing in a second property or increasing the coverage on your term insurance.

Remember, a financial plan should be fluid and reviewed periodically for changes in your financial situation.

If you have not already started, take the first step today by coming up with a list of financial goals.

Thereafter, you or your wealth planner will be able to put together the optimal set of action plans for you to achieve those goals. Financial planning starts with the will to plan, not the money you have accumulated.

With this in view, now is probably the best time to heed Benjamin Franklin’s time-honoured words of advice, “By failing to prepare, you are preparing to fail”.

Evelyn Yeo is Head of Wealth Management of OCBC Bank (Malaysia) Bhd