A financial plan is your map to achieving your financial goals. These could include education for your children, building a house, starting a business or, securing an asset. The risk of not having a financial plan is that you will most likely never achieve your financial goals.
Many people think that if you earn a good salary, you don’t need a financial plan. This could not be further from the truth. Those that are dependent on a steady income, must ensure they are building a solid financial future for themselves.
Without a financial plan, you may find yourself in a tricky spot should any unforeseen events occur and you find you are not sufficiently covered for the financial burden they may bring with them. Neglecting to save and plan for future risks is what gets many South Africans stuck in an endless cycle of debt.
Building a financial plan can be likened to building a house. You start out with architects that will draw up a plan for you that best suits your needs and your pocket. Once the plans are in place you hire builders and contractors to lay foundations and build the house according to your plan. You would never build a house without a plan as it would end in disaster.
Likewise, achieving financial goals requires careful planning. A financial planner, the “architect” of your financial plan, will design a financial plan for you that best suits your needs and affordability. The right financial plan can save you from future financial disaster by protecting you from unforeseen life events such as death, disability and expensive medical situations.
It can also help you to achieve financial goals such as education, investments and a retirement fund that you may desire for yourself and your family.
Here are some tips for getting started with your financial plan…
Step 1. Get in touch with a financial advisor
It is important to choose a certified financial advisor that has experience and knowledge of your financial situation.
Step 2. Analyse your situation
Your financial advisor will conduct an analysis of your current financial situation and your needs for the future. This will help with the development of your financial plan.
Step 3. Preparing the plan
Your financial advisor will present and explain the best solution to you in a way that can be easily understood and in a language you can clearly understand.
Step 4. Make a decision
Once your plan has been presented to you, you will need to decide if you want to move forward. Depending on your plan, you may choose to take some of the options up now and others later. The important part is to have a plan and try get covered as quickly as possible to minimise your risk.
Step 5. Keep building on your plan
Once you have taken the first step, remember to stick to your plan and continue to build on it. The financial services industry is always changing and bringing out new and better products. You should continuously monitor and review your position with your financial advisor to ensure you are on track with your plan.
Remember, even after a house is built it requires continuous maintenance and repair. Likewise your financial plan will need to be maintained and reviewed from time to time and as you grow older, get married, have children, retire or should you fall ill.
Some may find they are already too deep in debt and simply don’t have the means to save. For you, financial planning starts with getting out of debt with the help of a financial adviser or debt councillor .
Avoid falling into a debt trap! Start planning for your bright financial future now!