(Even ants have a method to their madness.)

Just the thought will make you think: snotty, snobbish, arrogant. Financial planning only for the rich?? Get outta here. After all, you are reading MoneySmarts, where people from all walks of life – with or without cash – converge to help each other reach financial independence.

Truth be told, however, a lot of people still think financial planning as it should be practiced is only for the rich. Really.

First of all, don’t forget that 50 percent of Filipinos live below the poverty line. That is quite a reality bite that chumps tremendously on the influence of financial planning on the lives of Filipinos.

But what of the emerging middle class? A recent study from Citibank showed that even middle class Filipinos have a financial IQ of 47.8 percent, not even a passing grade. This highlights the crucial need for financial planning especially among the middle class who worry about a bleak retirement. (Read my previous blog post on this here).

Having said that, there is rising popularity for financial planning among the middle class. Only…people are in a do-it-yourself mode.

A recent interview with Money Makeover client Sheldon (not his real name) revealed that while the strategies he has learned from financial planner Efren Cruz in the last nine months proved to be very useful to him, Sheldon is not that crazy over formally engaging a wealth management expert into creating a financial plan for his retirement.

First of all, having a professionally made plan created for him is expensive, Sheldon reasons. He would rather invest money than pay for a professional financial planner, Sheldon says.

This mentality has given rise to do-it-yourselfers — people who scour the Internet for advice and wing it by themselves. Hey, I’m not about to complain. Personal finance content has driven traffic consistently to the business pages of INQUIRER.net for the last seven years. Readers who regularly visit MoneySmarts has allowed it to stay in the top three blogs in the entire INQUIRER.net blog network (thank you, readers!)

Hopefully, MoneySmarts and INQUIRER.net can provide the bridge between readers and a variety of experts with their varying opinions on financial planning. Knowledge is key, after all. But at some point, a customized approach will be needed. When that time comes, we hope readers will eventually seek a face-to-face encounter with their financial adviser – and know which ones to keep and which ones to turn away from.

In the meantime, this article written by Rex Ma. Mendoza, one of the oldest practitioners of financial planning in the Philippines in terms of experience, not age, will help you ask the right questions that can set up your own financial plan. Or at least give you a clue how a good financial planner would interview you!

Here’s an excerpt, but you can read the entire story here.

The first step is to know what you want. A philosopher once said, “Take care to get what you like or you will be forced to like what you get.” Your goals have to be laid out and specified. Maintaining your current lifestyle, your children’s education, a comfortable retirement, a completely furnished house, a wonderful vacation, involvement in charitable causes, and a second honeymoon can all be important to you. But how do you rank these? What are your priorities? Setting your objectives right is the most crucial first step in creating your plan.

Second, you have to study your financial position. How much income do you receive and what proportion of this do you spend? How much have you saved? In what instruments are these invested? Do you have loans? It will be worthwhile to know how your current situation is and check if it matches the prioritized goals you have established. The answer to this question is critical: Are you on track with what you want to achieve? If your answer is yes, or if you are quite close, then you will not require any radical changes. But if the answer is no, or if you are “way off,” then you will have to either change your lifestyle, reposition your investments, check on your inflows and outflows, thereby effecting a change in your financial position to direct your track towards your goals. Another alternative is to alter your objectives altogether because they may be too unrealistic.

When you have completely analyzed “where you are” and “where you want to go,” you can now evaluate your investment options. This particular step will define the vehicles that you will choose to reach your desired investment targets. In more technical terms, this is commonly referred to as the creation of a “portfolio.” At this stage, you have to differentiate instruments as to their capability to earn (yield), the probability of losses (risk), the time horizon that you will be committed (liquidity), and the taxes that you may be exposed to. These factors are very important in the selection process because there has to be a match between specific goals and the choice of vehicle.

There is no such thing as an ideal investment for everyone at all times. Much depends on your financial situation, risk appetite, investment acumen, and the time frame you have in mind. Another reason why this evaluation is important is the fact that these factors are manifested in varying degrees within a given instrument. For example, a high yield may naturally mean that you will be taking greater risks. It may also mean that you are committing yourself to a longer time horizon. It is ironic that many people focus on earnings alone without thinking of what they are sacrificing in return for that higher yield. On the other hand, too much focus on safety and liquidity may limit what you will earn. This can result to the under performance of your “portfolio” thereby making it difficult for you to meet your targets at your desired timeline. You also have to keep in mind that you have many choices. Savings and time deposits, life insurance, real estate, mutual funds and unit investment trusts, money market placements, and many other instruments are there to build up any investment basket. In the end, matching and balance is the key to portfolio creation.