Wednesday | 08 April | 2020
By Jaco Mostert
The uncertainty that has developed over the last few weeks with Covid-19 gives the statement “uncertainty creates fear” a deeper meaning. However, what can we do to create greater certainty, and is there a roadmap that can guide us?
As a starting point for our roadmap to financial well-being, take a look at this free S-leer webinar on frugality in 2020 (“Spaarsamigheid in 2020”). In this webinar you will be equipped with the following: seven steps for financial planning in 2020; how to budget properly in 2020; investments; as well as risk management. Click here.
Based on the webinar, our roadmap consists of seven steps. We will briefly look each step and how it can be applied to create wealth.
Step 1: Set financial goals
We all have different needs and we find ourselves in different stages of life. The purpose of setting a financial goal is to write down the goal post that we would like to reach. Of course, we may have more than one goal over time, but at least start with one financial goal.
Step 2: Budget
This is the basis of any financial planning, but when was the last time someone told you how to draw up a budget? Refer to our article: BUDGET – FOUR STEPS TO ACHIEVE SUCCESS.
Step 3: Identify your risks
This step is critical, and it sometimes requires guidance from a financial advisor. The risks referred to here are closely linked to the financial goals we have set. For example, if your goal is to retire at the age of 65, then the effect of inflation poses a risk over time.
If the person in question is a young person, the time before reaching the age of 65 is quite long. In such a case, time in the market is our greatest asset and the investment will typically be positioned more aggressively for asset growth such as equities. However, if the person is within five years of retirement, the positioning will be more conservative with regard to the income component, for example the money market. Again, the risk will vary based on the financial goal we have set.
Step 4: Identify the right product for your financial goal
With this step, it is important to consider as many products as possible that will be relevant to your goal.
Therefore, to use the example of retirement planning again, it is important to consider whether the employer has a pension fund / provident fund for its employees. An employer fund will have an impact on a decision regarding a private plan such as a retirement annuity. Investment products such as a tax-free savings plan can also be considered.
Please read: Where do I start with my retirement planning?
Step 5: Draw up a plan of action
Once the first four steps have been completed, the road ahead will become much clearer. This is where the plan you have decided upon can be written down. The plan can also be revised over time due to changing needs.
Step 6: Implement the plan of action
This step is by far the most important step to follow. One may have a masterplan of action that comprises the most comprehensive research, but if the plan is not implemented, it means nothing.
Step 7: Review the plan of action
People’s financial needs and circumstances change over time. Therefore, it is important to review the plan that has been implemented. This can be done annually, and it should not be difficult to set aside one hour per year to ensure that you reach your financial goals.
Solidarity Financial Services (FSP 15556), provides independent advice for needs such as retirement planning, income protection and estate planning.
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* All information was correct at the time of publication.