Financial planning is a great way to get your finances in order. Not only will it help you find smart ways to make your money work for you, instead of the other way around, but it can also help you reach your financial goals more efficiently. But where do you start?
Speak to a financial advisor
Your financial situation is different from the next person, so why deal with it in the same way? Unless you are a financial whizz who has all their coins aligned or you are a financial advisor, then you will not need a financial advisor.
However, for anyone who is looking for honest insight into their finances and finding practical ways in which they can grow their finances and make it work for them, will need to speak to a financial advisor.
A financial advisor will reveal the weak spots that are causing you to lose money, where you can cut back and maximise your money to its full potential, which can be beneficial in the long run.
Lay out the foundations
When it comes to financial planning the core components usually comprise of creating a portfolio that requires you to:
Grow your savings
Find beneficial investment opportunities
Budget effectively so that you don't lose money unnecessarily
Growing your savings will differ based on your income and expenses. It is crucial to always set a realistic savings goal that will be easy for you to maintain on a monthly basis. According to the Old Mutual Savings and Investment report, South Africans save anything between 14%-21% of their income. A general rule of thumb is to put aside at least 10%-20% of your income. Once again, it is crucial to speak to a financial advisor who can offer you a realistic savings target that will be suitable for you so that you do not overextend yourself.
Setting a realistic budget
There is no better time to start financial planning than now. However, to move forward we need to learn from our mistakes or we could end up in the same place financially over and over again. Start with small things such as setting a realistic budget by looking at all your expenses compared to your income.
To paint a clearer picture, you can get three months’ worth of bank statements to get a real picture of where your money is going to. You can also monitor your expenses through apps such as the 22Seven app to keep you on track each month.
Aim to find affordable alternatives for your expenses and areas where you can cut back to ensure that you do not put a strain on your pockets or end up in debt.
Remember that it is a learning curve
The key to financial longevity is remembering that it is not a race- there are no short cuts and you will have to constantly adapt and change. Always focus on assessing and improving how you can go about building financial safety nets in the form of savings, income protection and having life and funeral cover. Gradually build these and work on improving how you spend your money. There are free financial services that are offered by banks and financial advisors that you can make use of to give you a better sense of direction.
