Islamic Financial Planning: Guiding Principles
Financial Planning, as defined conventionally, is “a process which helps individuals set and achieve their long-term financial goals, through the proper management of your finances.” Financial planning normally covers the areas of investments, tax planning, asset allocation, risk management, retirement planning, and estate planning. In other words, financial planning can also be broadly divided into five areas or pillars of focus, which are wealth accumulation (retirement planning), wealth enhancement (investment planning), wealth maintenance (money & tax management planning), wealth protection (insurance planning) and wealth distribution (estate planning). It is not hard to envisage that Islamic financial planning by definition would read something like this: “A process which helps individuals set and achieve their long-term financial goals in accordance to the principles of Islam, through investments, tax planning, asset allocation, risk management, retirement planning, and estate planning which are syariah-compliant”. Other than using syariah-compliant products, the management of a Muslim’s wealth should be based on a fundamental principle in Islam, that is, wealth is held in trust for Allah swt. As such, everything within the chain of what a Muslim does in connection with his wealth – how he accumulates, distributes, enhances, protects or maintains it – must be in line with the role he undertakes as a trustee, and thus in accordance to the wishes of its true owner, Allah swt. What then are the conditions or guiding principles that govern a Muslim’s (the trustee) responsibility towards managing his or her wealth? In general, three are conditions serve to guide how a Muslim should administer his or her wealth as a trustee: (1)
Wealth must be accumulated in an absolutely honest manner; (2)
Wealth must be managed in a highly responsible manner to benefit not only its owners and family but the community as a whole;...
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