IWM CHPTER4

• Financial planning


  The process of determining whether and how an individual can meet life goals through proper management of financial resources
• Objective of financial planning


  To help an individual achieve his/her financial goals
• Financial planning


  A mechanism that enables an individual to mitigate the uncertainties in life based on his/her existing wealth and liabilities, potential earnings, retirement plan, and setting up his/her personal and family goals
• Islamic financial planning (IFP)


  The development and implementation of a plan of action to efficiently make the most of available resources to meet one's financial objectives or goals which are consistent with the principles and practices of Shariah
• IFP

  Involves the management of financial resources in accordance with the Shariah as well as through the lens of Maqasid Shariah in order to seek the pleasure of Allah the Almighty, leading to felicity both in this world and in the hereafter
• Sources in developing IFP

  • Conventional financial planning model
  • Primary sources of Shariah
  • Secondary sources of Shariah (Ijtihad - evaluation of existing financial instruments)

  
• Islam


  • A comprehensive, integrative, and holistic religion that governs all aspects of life, major and minor, personal and social, spiritual and material, and relates this worldly life to the hereafter
• Concept of Allah's bounty

  Considered very important in Islam because a Muslim is required to have a proper balance between the fulfillment of his spiritual and worldly obligations
• Muslims


  Encouraged to plan their life and put effort to achieve the goal setting before proceeding to "tawakal" (putting trust), which is one's destiny as bestowed by Allah (swt)
• Financial planning for Muslims


  Even if a person possesses no form of wealth, he must still commit to the financial planning process because either he would leave debt or children to the trusted one
• Parameters of IFP

  • Cash flow
  • Debt
  • Education
  • Takaful
  • Investment
  • Medical
  • Retirement
  • Hajj
  • Estate
  • Zakat & Infaq
  • Tax
• The Prophet: 'A Muslim should prepare himself for the next world as if he is going to die tomorrow, but at the same time work hard to improve all his worldly comforts as if he is going to live forever'
• As Muslims, we are not discouraging from acquiring wealth, but we must know how to earn and spend it in accordance with the Islamic principles
• Islam encourages reasonableness and moderation in the pursuit of wealth
• Six steps to financial planning

  1. Establish your financial goals

  2. Determine your current financial condition

  3. Analyze your financial data to determine deficiencies

  4. Customize solutions in accordance with your condition and needs

  5. Take appropriate action to implement your plan

  6. Review and align your plans periodically to meet new circumstances
• Importance of IFP

  • Proper financial planning allows us to identify what is most important and meaningful in our lives
  • Financial planning helps us to realize and understand that there are always tradeoffs or sacrifices to be made
  • Financial planning leads not just to financial enrichment but material, emotional, and mental enrichment as well
  • To acquire a deep sense of security in our lives