In order to prepare for your future, it is necessary that you find a way to properly manage your finances. For many, the term financial planning is a far removed principle that we know we ought to be subscribing to, but we simply don’t get around to. For others the idea of even having money left over to save towards future plans seem unrealistic. But according to financial planners it is a necessity.
“Having a detailed financial plan provides you with a strategy to make practical financial decisions in all aspects of your life. Following and sticking to a plan allows you the best possible chance of success in achieving your life goals and long-term financial security,” states the Financial Planning Institute (FPI) of Southern Africa.
Financial planning is also about peace of mind, knowing that if something unforeseen happens you and your family are looked after for when you are no longer able to earn an income, adds Insurance Busters’ Will Keevy.
Why is financial planning important?
“Everyone has wants and needs in life, but most people do not have the financial means to meet all of these wants and needs. Financial planning gives people the education necessary to prioritise their life goals and the tools to start making these goals a reality. In South Africa a lack of financial education and a heavy reliance on debt means that millions of people fall into the trap of misusing their finances because they either do not monitor their money usage or fail to make strong goals for their money,” says Tapuwa Mwashita from Insurance Busters.
We, as a nation, are extremely under insured for our risk and on top of that we don’t have a culture of saving, adds Keevy. “Instead of getting financially educated people tend to avoid the issue, but the reality is that the only way to create and save guard our own and future generations’ wealth is by taking planned steps and making the correct financial decisions. Take for instance retirement planning, less than 5% of South Africans can retire on what they currently earn. The result is their children need to help look after them with money the children could have saved for their retirement and so the cycle continues.”
The financial planning process is dynamic and as you move through the different stages of your life, your goals and needs will change, and so your financial plans will need to alter too.
As people differ, so do financial needs. Financial planning can help you prepare for the different phases in your life, like buying a car, further education, buying a house, marriage, children and even retirement, highlights the FPI.
According to Mwashita, financial planning allows people to:
- Make more well-informed decisions about their money: There are hundreds of insurance companies, investment houses and financial service providers offering thousands of different products. It is impossible to know which product is the best for an individual. Having a proper financial plan helps people to understand which products they really need and how to get them.
- Have better financial security: Financial planning also takes a person’s risk into account. By asking the hard questions such as “what will I do if my car breaks down today?” or “how will I take care of my family if I become disabled?” A financial plan can account for such risks and help people make provisions for unexpected events.
- Use their money more efficiently: Should you open a savings account or a unit trust fund? Should you take out a funeral policy rather than taking out debt to pay for a funeral? By having a financial plan a person can ensure that the little money they have is working in their best interest.
Who offers financial planning?
The banking services industry is known for their guidance in this department as a majority of the banks offer this service.
“Standard Bank offers financial advisory that allows us to assist you with your personal and business financial planning requirements. Financial consultants will conduct comprehensive financial plans with you and recommend appropriate products. This will ensure that you and your family are adequately protected and you are working towards achieving your financial goals. It is important to review your financial plan regularly to ensure that your goals are on track and adjust it as your circumstances change,” explains Standard Bank.
Nedbank further offers a suite of services and products under the financial planning umbrella, such as education planning, personal retirement planning, estate planning and investment planning to name a few.
Alternatively investment houses for example Allen Gray and Old Mutual, as well as independent financial advisors offer the service too.
Planning for your financial needs is about peace of mind.
It is always advisable to enlist a trusted financial advisor who can work with you in planning according to you financial needs.