Smart Investor Malaysia


Weathering the Storm with a Solid Financial Plan


No salesman, financial planner or fund manager could’ve possibly predicted this pandemic a year ago.

So which financial plan predicted Covid-19?

None, unfortunately. In the financial services industry, product pushers will always tell you “failing to plan is planning to fail”.

But is that true? Which product could have predicted Covid-19? No salesman, financial planner or even fund manager could have possibly envisioned this pandemic a year ago.

When unprecedented events like these occur, any plans you made, or were sold, are bound to crumble like a house of cards.

Is There No Point in Having a Financial Plan?

Well, yes and no.

Yes, because a financial plan is just a static document. It is only true today, and its authority will fade with each passing day when the assumptions used in the plan turn out to be different in reality. In fact, I believe that the plan has no tangible value at all.

No, because I believe that a financial plan is not the main focus. Rather, the real value lies in the planning process. It is here that the client reflects on their life, assesses their financial position, identifies challenges and issues, thinks of action plans, and sets KPIs that propels them forward.

Evidently, no one could have predicted Covid-19. However, if you have gone through a proper planning process, you may be able to deal with this better than most. Here are a few reasons why.

Liquidity in Net Worth

For many, their net worth is a good indicator of financial health and could even be in the millions. However, if this value is tied to illiquid assets, this means they are asset rich but cash poor.

In this case, the planning process would show the client that most of their net worth is tied to non-liquid assets that cannot be sold quickly. This may help the client to see things in different light, resulting in them using future cash surplus to build a portfolio of assets that is easily liquidated.

Emergency Fund

A fundamental part of my work is ensuring clients have an adequate emergency fund.

The current pandemic has shone a spotlight on emergency funds, as many without one have been caught out and now face a huge mountain to climb.

It is crucial to have emergency funds as this is our fallback plan when unforeseen events strike.

Cash Flow Management

Most people have a strong tendency to opt for instant instead of delayed gratification. Going through the financial planning process allows us to honestly assess our spending habits and lifestyle choices.

Looking at your cash flow also helps you understand if you are being hindered by excessive debt. If your debt-servicing-ratio is high (over 50%, or 60% in extreme cases), you will suffer greatly during salary cuts or retrenchment. Even if ignoring Covid-19, you are likely to be tied down to your job because you cannot afford to lose this income.

Prior to taking on new loans, look at your cash flow situation and be certain that you will still be able to work towards other life goals.

Are You Saving for the Future?

Covid-19 may have disrupted your plans for 2020 and even 2021, but it surely will not destroy what you want to do in five or ten years.

For example, if you began to prepare for a big event like a wedding at the start of this year, the MCO may have prevented you from building the funds required.

However, if you have been steadily saving for years, you would have your wedding money prepared by now. You might have to postpone your wedding, but not because you were not financially stable. We cannot control external factors, but we can certainly control our preparation for life.

Risk Management and Dependent Care

What if you unexpectedly left your family earlier than you wished, like many who fell victim to Covid-19? What about children or elderly parents who depend on you for their living expenses like food and shelter?

The process of financial planning forces you to think about the what-ifs in life. If you have not planned in advance, your dependents are at your life’s mercy. You could (and should) do better.

Diversification and Asset Allocation

If you make investment decisions on a piecemeal basis and only chase after returns, chances are your investment portfolio is not optimised.

With proper planning, you would have an asset allocation and portfolio strategy that fits your risk tolerance, risk profile, and investment objective. When the stock market fell earlier this year, not every asset class fell with it. That is why you will benefit from not putting your eggs in one basket.

If you are yet to sit down and plan your finances for life and finances yet, this is a good time to do so. It will help you build a stronger base so that during the next crisis, you can say, “it could have been worse”.

About the author

This article is contributed by Kevin Neoh. Kevin is a NextGen Money Coach at NextGen Independent Advisors. He is a certified member of Financial Planning Association Malaysia (FPAM), and was awarded the Malaysian Financial Planning of The Year Award in 2016 and 2017.

Kevin can be contacted at

financial plan kevin neoh

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