Smart Investor Malaysia


Financial Planning In The Crypto Age


A very simple definition of Financial Planning is the process of managing our resources to help us achieve our life goals. Now that we are in the cryptocurrency age, how do embrace crypto in our financial planning?

It is a process which we proactively look at our financial situation and determine the better routes which can allow us to use these resources to help us accomplish what we hope to have to call it a good life.

Many people seem to think that when we have got a financial plan done, we have done financial planning, and hence we can then on our way to become richer, and retire early, or sending our children to study abroad.

The truth is that financial planning is a process but not a touch-and-go activity that produces a document called financial plan. Life is full of changes, so any plan we make today will always be challenged or need to change in response to the actual situation in life.

Financial Wreck Caused By The Pandemic

For instance, no financial plan will have predicted COVID-19 and prepare everyone for the Movement Control Order (MCO) and all the consequences from having these shutdowns in the past two years.

Our money is one of the resources we have that can be used to help us accomplish our goals, and money itself is not the goal.

If our reason to invest in good deals or engage in financial planning conversation is to have more money, this reason itself invites more questions than being an answer.

“More money for what?”

“More money to do what?”

“Why do you need to have more?”

To have more, there’s a trade-off that we must accept.

More Work = More Money = Less Rest

For example, to earn more, one must work more, to work more, it could mean one has to let go of time for rest, or to not spend more time with loved ones, or not able to enjoy activities that they like.

It could also means taking more risk so that we have a potential higher return from our investing activity.

So, in our pursuit for more money, we may fare better if we adopt a big-picture view but not only focus on having more money.

Sometimes, we decide to delay, or postpone doing things we really want or hope to because we are afraid to do it. And often, it is due to our feeling of afraid we don’ that enough to ‘just do it’, or the fear of “cannot afford to”.

This is not abnormal, and I can totally understand this emotion. When we do not know how much we need for the rest of our life, how are we able to feel we have got enough, right?

A good financial planning process is one where we spend more time to understand the person, identify the values (what’s important for this person), then take a look at their money management habit and their net worth (what they have left after minus what they owe), then we can have an idea if this person will have enough money for the rest of their life.

What Are Your Life’s Goals?

This process helps us understand a few important answers, such as:

  • Do I have to reduce my spending today?
  • Should I get a side hustle to boost up my income today?
  • Do I have to take more risk on my investment?
  • Can I change my car or house without affecting my future?
  • Can I quit the job I hate and accept a new job with lower pay?
  • At what age may have a huge cashflow deficit?
  • At what point (or age) will I run out of money in the future?
  • If I lose all my investment money today, how bad will my future looks like?

Establishing a good financial planning process can help us to bring our future to the present, and by looking at this future we can assess what are the thing we do not like so that we can make the change to it today.

Imagine having to wait for 20 years only to find out that we will still run out of money at a certain age, versus knowing this scenario is likely to happen 20 years earlier and we have 20 years of time to change something, which route would you prefer to take?

Through proper financial planning, we get a ‘preview’ of our future today, but at the same time, we make some assumptions of what might happen, such as inflation, potential investment return, our spending and potential future income, taxes, etc.

Hence, one of the things we will be thinking about is where or how should we allocate our money, to what kind of asset classes. And nowadays, it is likely most people have heard of and are quite keen to understand where cryptocurrency or crypto assets can fit into their plan.

Dawn Of The Crypto Age

Before the emergence of crypto assets, people have allocated their savings to various types of asset classes like stocks, debts, some keep most of their savings in cash or cash equivalent, businesses, real estates, arts, collectibles, gold or silver, to name a few.

Some of the assets have a low risk and value tend to not fluctuate too much and are ‘predictable’, while some the value may deviate quite a lot, and are considered ‘risky’.

One of the key considerations in determining our asset allocation, is to understand if we need the investment to generate additional income, or to have the value increase in future for us to have ‘gain’.

Essentially, crypto assets are assets that are non-income generating but more for the investment objective for capital gain.

While it is undeniable that crypto currency has helped make many new millionaires, for this wealth to be sustained into the future, one may want to explore how this new wealth can be protected or kept, so that even if the value of the asset class reverses its course, this person will not be knocked back to the ‘pre-crypto’ life.

Of course, it is perfectly fine if we remain having our 100% of our wealth be invested in crypto assets. However, that will also mean we tie our future financial health and possibility in life to a single asset class.

Imagine a person putting all their savings for old age to the stock of the single company they work at, and over the course of years for whatever reason, this company went out of business, or the company’s business dropped a lot due to new competition, or innovation.

The above example is not just pure imagination, we have seen a few big company’s gone through such trajectory before. Will this person be better off ‘putting all the eggs in different basket’ instead of ‘in the only basket’?

It does not matter what asset classes we are thinking about, it seems that it is not a bad idea to limit our downside risk and avoid over-concentration.

What about people who have not experienced the explosive growth or have not invested in crypto assets before?

Diversification Is Key

Generally, crypto assets or digital assets are one new asset class for us to incorporate to our personal investment portfolio to achieve diversification beyond the common asset classes mentioned above.

Depending on your tolerance for risk, and your investment objective, you will then understand how expose you can be, just like on every other asset classes. A person who is conservative or cannot sleep well even with a small up and down may want to limit exposure to volatile asset class, regarding the potential upside, and vice versa.

For asset class that can have a large swing in value, non-income-generating, it is advisable that we limit our exposure and do not over commit our wealth to it.

However, if one decides to do so, it will be prudent to ensure that we have prepare sufficient savings that can offer us liquidity and peace of mind during challenging time in life, or when the asset value is not at a good level for us to make withdrawal.

It is also very important that people only invest into cryptocurrency via digital assets exchanges that are operated by operators approved by Securities Commission Malaysia [1]. This ensures your investment will not fall into schemes that are unregulated or hands of scammer.

Regardless of what we do with our money, it is important that we understand why we want to do certain thing, and how this fit into the overall big picture of our life. By having a proper asset allocation that can support our future and lifestyle, we can avoid overexpose to certain asset classes, or certain asset.

A good financial planning process is about setting a good foundation, and manage our risk, so that we can increase our chance of living a life we consider well lived.


About the Author

kevin neoh

Kevin works with people to transform their relationship with money and support them to use their money to live a meaningful life.

He is a CFP professional, a certified member of Financial Planning Association Malaysia (FPAM). Kevin can be contacted at

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