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Having a detailed financial plan provides you with a roadmap to make practical financial decisions in all aspects of your life. A financial plan gives you the best possible chance of success in achieving your life goals and long-term financial security. Below we highlight 10 important areas to be included in your financial plan.

1. Goal Setting

A financial plan allows you to identify and budget for any goals you may have into the future. This could be anything from purchasing a new car, travel aspirations, family needs, education, or any other future cash flow event.

2. Emergencies

Individuals need to have a sufficient emergency saving reserve to provide for any unforeseen or unavoidable event. The general rule of thumb is that one should have at least 3 months’ worth of income stored away for a “rainy day”. Financial planning involves being prepared for such situations so that primary objectives are not affected. Providing security to your family is an important part of financial planning and as the old saying goes “prevention is better than cure”.

3. Retirement

Retirement planning is arguably the most important aspect of a financial plan. Recent research in South Africa suggests that only 6% of individuals can retire with financial independence. A big part of this grim statistic is a direct result of individuals not having any retirement plan in place. A retirement plan provides visibility of where you are heading, what lifestyle you can afford and how long your retirement savings will last.

4. Tax

A major part of formulating a financial plan involves structuring investments and incomes in a manner that mitigates taxes as far as possible. Small tax savings can make a substantial difference to the sustainability of your investments over the long term. A qualified financial planner can help guide and structure your investments in the most optimal way.

5. Inflation

Inflation is the biggest destroyer of buying power and needs to be considered within a financial plan. Assuming an inflation rate of 6%, the purchasing power of R1,000,000 today will halve in 12 years’ time. With a detailed financial plan, you will be better prepared to deal with rising inflation into the future and limit the risk of experiencing a cash or income shortfall.

6. Risk Planning

A detailed financial plan involves putting measures in place to protect your income, family, dependents, and financial well-being. A financial plan also helps identify the level of investment risk that is required to provide for a certain lifestyle and for that lifestyle to be sustainable.

7. Estate Planning

A financial plan helps individuals understand the various tax implications that may be payable upon death and how quickly their dependents/beneficiaries will have access to money. An estate can take up to 18 months to finalise if not structured correctly, which could leave dependents in a precarious position and cash strapped whilst assets are frozen in the estate. A financial plan will help structure your local and foreign estates optimally for the benefit or your beneficiaries/dependents.

8. Liquidity

Liquidity means having access to enough cash to meet your financial objectives and obligations (such as your monthly living costs).  A good financial plan will ensure that you have access to enough liquid cash in retirement, in financial emergencies as well as upon your death (for your family). Individuals need to ensure that they have a good balance between liquid assets (cash) and non-liquid assets (retirement funds) so that income can be structured in the most tax-efficient manner. Liquidity ensures that there are sufficient funds available to supplement your goals, any unforeseen costs or tax liabilities that can be paid for without having to sell a fixed asset.

9. Investment Strategy

It’s imperative to devise an investment strategy that matches your personal risk profile and supports your long-term goals. The strategy should incorporate the right balance of risk assets such as equity, bonds, property, cash and offshore, to ensure the desired return profile is achieved.

10. Partner with a Qualified Financial Planner

Appoint a qualified and experienced Financial Planner to construct and monitor a comprehensive, personalised financial plan. Ensure that the financial planner has a trusted planning process in place, will regularly review your plan, has a backup support team, and is registered with the FSCA.

Conclusion

At Investonline we have developed the most state-of-the-art financial planning process which can be created for you by one of our qualified Client Portfolio Managers. Without a good financial plan in place, you are essentially driving without a clear direction of your end destination. Once a financial plan has been created, the next phase involves putting the financial plan into action and reviewing the plan annually to ensure that you stay on track. Any changes to your personal circumstances need to be accounted for so that the plan can be adapted accordingly. Investonline has a team of qualified client portfolio managers who can guide you throughout the process.

How Investonline can help you with a financial plan

• We can have a 15-minute introductory video or telephone meeting to introduce ourselves and answer your initial questions.
• Thereafter, you can provide us with the relevant information such as your financial goals and existing investments. This can be provided via an online questionnaire, email or fax.
• We can then have a 60-minute financial planning session where we share our screen with you and model your financial future and different scenarios together.
• Following the session, you will receive a full financial planning report with detailed scenarios.

Speak to a qualified financial planner.