December 19, 2004

Syed Jamal Mohsin is well known in the Pakistani community in the United States. Having worked in the financial service industry there for more than two decades, he has a rich experience and a keen insight into money matters, especially in respect of investment opportunities for expatriates. He has worked in such reputable financial institutions as the MetLife and Prudential Securities. Now he has set up his own brokerage firm, the MJM Investments. Given the background of the author, this book is worth reading for anyone who lives in the US and has money to invest.

It is interesting that the author has chosen to write the book in Urdu. The reason, in his words, is that we prefer to read in our own rather than a foreign language. His first article published some seven years ago in Urdu Times brought a tremendous response and he had to begin writing regularly for this newspaper. He also writes for the Pakistan News and the Muslim Weekly. He says, “Devoting five hours every week to writing an article is my humble contribution to my community.”

Those living in the US ask themselves: Shall we have enough money when we retire? Can we rely on social security? What is the amount that we need to save now in order to retire in comfort? These questions have become of greater significance because now people are living longer — for about 20 years after retirement. This renders their savings insufficient because of inflation. Besides, one-third of all the money you earn goes into taxes. In other words, your earnings for four months every year drain off into taxes.

Hence one has to consider six important factors for good financial planning: (1) cash management; (2) risk management; (3) investment planning; (4) tax planning; (5) retirement planning; and (6) estate planning. The book discusses all these aspects in considerable detail.

In fact, part of this planning is also useful for those living in Pakistan although our dimwitted bureaucrats and shortsighted finance managers have deliberately kept social security from benefiting the common man, and policies have not been implemented in their true spirit.

The book does not tell you how to get rich but it does tell you how to benefit from your life’s earnings. Therefore, it suggests that while you are earning, you must start investing regularly in a scheme that affords dividends good enough to beat the rate of inflation. That would be your retirement plan.

It is prudent to have enough money in your savings account to meet 3-6 months’ expenses as ‘emergency funds’. If the emergency prolongs any further as in case of a disability due to disease or accident, you must have a means to provide you appropriate cover. That is where insurance comes handy. Moreover, you also have to consider where and how you get better returns on your savings; of course, you must prefer depositing your savings in a deferred account.

A number of benefits accounts such as children’s education, housing and retirement plans are offered by various banks and insurance companies. Therefore, it is worth knowing more about their benefit plans. With some intelligent questions put to the financial advisers whom you feel comfortable with, you can make your future financially more secure. It is a good idea to deposit the money that you do not need immediately with diversified financial institutions or mutual funds instead of common banks, or to invest your capital in good stocks but it is not prudent to pursue the hot stocks. You can also multiply your savings by investing your returns in more schemes.

What to do when you turn 50?

In Pakistan, people begin to think that they have grown old and useless. In the West, it is the period when you begin reaping the fruits of your savings and correct the course of your life to get the best out of it. Among Muslims, there are several misconceptions regarding interest and insurance. They have been created and promoted by the so-called religious scholars who have no insight either in the social or economic conditions of Arab society of nearly 1,500 years ago or today’s cosmopolitan society where weak economies must depend on strong economies.

Few people know that even in the early days of Islam, Muslims used to have a fund in which every trader would deposit some part of his money and this investment would ensure that he had some insurance money in case a trade caravan was robbed.

The book attempts to clear cobwebs of doubts in the minds of those who shun modern banking practices or abhor them because of their ignorance. It certainly makes interesting reading for the lay reader as well as for an investment professional. The foreword is written by Mr Shaukat Aziz, who was then the federal finance minister.

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