The Seven Cardinal Mistakes of Financial Planning — How Many Have You Made?

The Seven Cardinal Mistakes of Financial Planning

1️⃣ Putting all your eggs in one basket ❌

The biggest goal of diversification is 🌟to effectively reduce risk🌟, and what you diversify is not just the type of investment vehicle. Take investment funds: you need to diversify across ✅ different asset classes (Asset Class) ✅ different sectors (Sector) ✅ different geographical regions (Geographical Sector) ✅ different currencies (Currency) ✅ different fund houses (Fund Houses) 👈 and not only investment vehicles — insurance is the same! You also need to spread across different insurance companies. After all, each company has its own strengths.

Remember, spreading "too" thin becomes Di-worse-sification — that is, over-diversifying into something worse 👎. For example, investing in too many things that all have similar correlation loses the effect of reducing risk. I once had a client who ran a shop; whenever different regular customers asked him to "support" them, he bought, thinking more is better, "better than doing nothing" 🤦‍♂️. In the end he bought 3 medical cards from 3 different companies 🙄, and his investments were an utter mess — he didn't even know what he had invested in, turning it into diworsification ❌. Diversification is important, but it must be 1️⃣ in the right amount and 2️⃣ effective.

2️⃣ Blindly following the crowd without thinking ❌

With the internet so developed, information spreads very fast. Smart people use this to make money; ordinary people follow blindly and lose money. That "money game" from before was so aptly named — "rescuing" ordinary people, how ironic! Following a trend is not scary in itself, nor is it bad; it even shows you can accept new things ✅. What's scary is following blindly, with no independent thinking or judgement of your own ❌ — because you've lost to the weakness of human nature! 👉🐑 herd mentality 🐑👈

"*So many people did XX, it can't be wrong*", "*So-and-so also did XX, it must be true*" — and slowly you become too lazy to think, too lazy to verify; whatever others do, you do too. If I don't follow, it feels like I'm falling behind 🤦‍♂️. In the past this wasn't so bad; what's bad is that times have changed — you know a person's face but not their heart, and even if something is good you might 👉 miss the timing and gain no advantage 👉 what suits others may not suit you 👉 what earned big yesterday may not earn tomorrow. This is the downside of blindly following and copying, so 🌟 everyone must have the ability to think and judge independently 🌟.

3️⃣ Haste makes waste ❌

People often hope to get rich overnight 🤑, especially in investing. Sorry, but let me first break your illusion. That's not called investing — that's speculating, even gambling! 🎰 Speculating isn't wrong; I've seen skilled traders around me who are very disciplined, very calm, very patient, and when they act, they're fast, ruthless and precise 🎯; when the market trend isn't clear, they'd rather watch from the sidelines. Being anxious to make money and eager to get rich are understandable, but the key is that haste doesn't help 🤷‍♂️. Investing is for future returns; investing needs time and patience. Patiently wait — the one who "remains" is king 👑.

First, be clear whether you're investing or speculating. I've seen many people just starting to "play" stocks buy on their remisier's tips and then stare at the screen. Every now and then they refresh to see if it's gone up 📈; up 20% and they rush to show off in their friend circle 🤩, saying stock investing is great, thinking they should have put in more. Down 30% and you don't hear a peep; if someone asks, they'll say, I'm investing long term 🤣. I'm not knocking anyone — it's just human nature to report the good and hide the bad. When someone reports the good, whatever you do, don't blindly follow! Investing is like red wine — it all needs time to ferment 🍷.

4️⃣ Bias is further from the truth than ignorance ❌

In daily life, we easily come across various stereotypes and even biases. These quietly influence our beliefs and decisions ☢️. A mentor once shared with me 🗣️✳️ bias is further from the truth than ignorance ✳️. Think about it: making an ignorant person understand is often easier than a person with bias. The most common examples of bias: ❌ I have no money, I don't need to manage finances ❌ Where can investing make money, you'll only know when you get burned ❌ I'm still so young, why do I need retirement planning ❌ Insurance is a scam lah, who knows if you can even claim later ❌ Touch wood, I won't die so soon, why make a will ❌ Managing money just means investing lah / just means insurance lah ❌ An insurance agent is just a financial planner lah 🙄🙅‍♂️

Many biases come not only from your own experiences, but also from friends and relatives around you, and even from the spin and misdirection of social media. In talks, and even in the papers, I often urge everyone: this is an era where anyone can be an online guru, so don't blindly follow any information — take it as reference only! When necessary, you must verify! And don't spread unverified messages around. So keep an open mind, but also don't fully believe others! Take everything with a pinch of salt, do due diligence if you have to!

5️⃣ Not shopping around ❌

Human nature is like this: if you can sit you won't stand, if you can lie down you won't sit 🧍🪑🛌. It's the same in thinking: if you can follow, you won't think 🐑. So we very easily follow others' advice, especially those using NLP sales talk — targeting human nature with scripts to persuade you 🙊. In personal finance, the most common example, the line an agent says most often 💥 no need to compare lah ~~they're all about the same~~ 💥. This line targets your ✅ comparison mindset — you want the best option / plan ✅ decision paralysis — you're afraid of choosing wrong and find it hard to decide. Saying this lets you decide more comfortably and more quickly! Was your decision really right? No one knows, but at least you feel comfortable 😂, because his script successfully persuaded you!

Remember, what actually matters more is 🌟 Make an Informed Decision 🌟. What is an Informed Decision? ✅ Making a wise decision only after you have all the relevant information about your options! Just as Bank Negara (BNM) requires financial planners to have a comparison of at least 3 insurance companies, and the client must sign that comparison table ✍️ before we can complete the policy submission 🎯. If everything were "about the same", then why would BNM go to that trouble, right? Do you need to find 3 different insurance agents? 🙅‍♀️🙅‍♂️ No you don't — just find a real financial planner 🙋‍♂️🙋‍♀️.

6️⃣ Getting the order of financial planning backwards ❌

The rich person's mindset = the Golden Circle ⭐. What is the Golden Circle? A goal-centred way of thinking 💡: goal (WHY) 👉 method (HOW) 👉 action (WHAT), thinking from the inside out, in that order. Most people's thinking is the reverse❗ That is, starting from action (WHAT) — for example you know ✅ you want to earn money 👉 action (WHAT) ✅ how to earn money 👉 method (HOW), but you don't know ❌ why you want to earn money 👉 goal (WHY). Here, WHAT can also be a product.

👇 Here's a good example 👇 Everyone's discussing #versa #KDI #ASM and so on 👉 many people ask, should I buy or not? If it were only to earn your money, I'd definitely say buy! And then give you my Referral Code 🤣. That's jumping straight to the product, WHAT. But as your financial planner, without knowing your goal (WHY), how could I know whether this method (HOW) and product (WHAT) suit you? 🤷‍♂️

If I knew your goal (WHY) 🎯 — say you want to save up to pay a 100k 🏡 down payment in 3 years — and I knew your method (HOW): you'll save 2,000 a month 💰, do you think a 2.5% MMF is still suitable❓ You don't even need a financial calculator to know it's not❗ Of course there are still many factors to consider, so it's not that I won't tell you whether to buy, but that without understanding your situation, anyone's opinion has no reference value 🙅‍♀️. But in the online world, who else cares about you 💁‍♀️? Hiding behind a keyboard, anyone can say whatever, without taking responsibility and maybe even making money 🤭. When things go wrong you may not even remember who gave you the advice!

7️⃣ Being afraid to make your own decisions ❌

Every day there are decisions big and small to make — as big as choosing a job or a partner 👰🚗🏠💰, as small as what to order for lunch or what to wear out. If you get a small decision wrong, at worst you complain on social media; but for big decisions you hesitate to make up your mind, especially when it involves hard-earned, blood-and-sweat money 💸 — scared to death! 🙈 In the end it becomes a vicious cycle: worry 👉 anxiety 👉 avoidance, like an ostrich burying its head in the sand to escape 🤫.

✅ acknowledge it ✅ face it ✅ solve it. To borrow a line TV host Wu Zhong-Xian often says: face a problem and it's half solved; avoid a problem and it doubles. So face problems bravely, and if you need help you can also find a neutral financial planner — use leverage to do more with less effort!