A good financial plan is imperative to a secure financial future. It needs to be fluid and flexible just like life – it needs to be a ‘living breathing’ plan that is interchangeable, that grows. You need to have a full circle understanding of what your financial plan is, how it works and how best to utilise it.
There are six essential elements to having a full proof financial plan. With each step playing a vital role in securing you a sound financial future.
Budgeting & Debt
Every good financial plan needs a good budget and a plan for paying off your monthly debt repayments. This can be done through various mediums of budgeting apps or drawing up a monthly spreadsheet to help you keep track of your expenses. It is important to be able to identify your particular spending habits and patterns as a way to better manage your money.
Beating debt and budgeting are two vital component of a good financial plan – but no financial plan is complete without a savings component. Your financial plan savings component should have both short and long-term saving elements.
A good place to start is with a saving account. A savings account is a place where you can put a fixed amount of money into your account each month aside for a rainy day. Keeping it for when you need it most, making it a good way to save for large annual expenses. It allows you to slowly build the balance necessary to pay for larger, long-term expenses without having to tap into credit.
Investing in the next step after saving. Once you have saved, you should then invest the money you saved, however, investing can be daunting. But all you have to do is make a start, even if its just small amounts you just have to start.
The big daunting question is what do you invest in?
There is a lot of investments options and products out there, so it is important to get financial advisors in to help guide you through all your possible options.
Tax-free saving products are the most popular, informal way of saving in South Africa. They were introduced because South Africa has a poor savings culture. The product ensures any growth on an investment is tax-free – putting lump sums in a money market account can ensure a lot more financial growth than just keeping your money under the mattress.
Your financial plan should include an insurance plan – specifically around risk planning. It is essential for a ‘full circle’ financial plan and should be discussed with a professional financial consultant or advisor.
Don’t underestimate the importance of planning for retirement. It is vital for financial empowerment in the future –, especially for women. As in general a woman on average will live a longer than men – roughly eighteen years after retiring at sixty-five. That’s why medical aid, gap cover and starting to save soon rather than later so important. No matter how small the saving – anything saved now will ensure you are better off than the latter of people at retirement
*Note it is important to never draw from your provident or pension fund when you change jobs.
Estate Planning – Your Will
Life is full of unexpected uncertainties, so it is important to have a will to set out all your wishes clearly. Ensure you comply with the requirements of validation an ensure it is updated regularly.