The misnomer commonly perceived by the “ordinary” person is that financial planning is just for the wealthy.
Far from it! You see, a successful financial plan does not set out to make you rich, especially in a short space of time. Rather, it sets out a framework which makes provisions to maintain the lifestyle that you are accustomed to, using your resources in the most efficient and effective way possible.
So, whether you need to maintain a lifestyle of R10 000 per month or R100 000 the approach is the same. Your plan will answer to three basic questions:
Where am I now? Gathering information on all your current provisions that you have.
Where do I need to be? Establishing how much you and your dependants need to living on in the event of a life changing event such as your death, disablement or retirement. It also includes, getting married, divorced, having children and even caring for a retrenchment. The bottom line is your monthly income need to maintain the lifestyle you and your family are accustomed to.
How do I get there? This is where you will need to explore the many options of assurance and investments. If you have the time and inclination to do it yourself then you can avoid the services of a financial advisor. If you need help then you could call on the advise of a financial panner and pay for a few hours to set up a plan which you could implement yourself. Of course, if you have a complex plan that needs more attention you will have to depend more upon your financial advisor.
It is essential for everyone to have a financial plan. Don’t avoid it because of the complexities and accompanying jargon. It is relatively simple and having a basic plan is certainly better than no plan at all.
There are many tools and calculators on the web that can help you to quantify the provisions required to maintain your lifestyle if you experience a life changing event.
Read more from Paul Roelofse at www.investforlife.co.za