Anyone who earns a salary or receives an income should make sure that their finances are on course, but drawing up a financial plan can seem like a daunting task.
The following questions can muddle your thinking if you don’t have all the answers:
- Where do I start?
- What is the most important saving or investment product to have for financial security?
- Should I focus on paying off my debt or saving?
- How do I put an appropriate risk plan in place?
Financial planning is much like building a house – it starts with a solid foundation and you cannot cut corners as it is important to your lifelong financial stability.
The wealth creation phase
Start your financial plan by planning as early as possible considering your needs in retirement and taking into account any tax implications. Make provision for your life after retirement top of mind from day one of your working life, as the sooner you start saving towards your retirement the more likely you are to secure a comfortable quality of life.
We can never speak of financial planning and not think of the tax implications that come with. Having your tax affairs in order plays a major role in maximising your finances and having them work for you, and not the other way around. Keeping up to date with submissions of tax returns and complying with the law will prevent you from incurring penalties.
Consider and discuss tax implications on withdrawing from your retirement fund upon resignation with a certified financial planner to avoid unnecessary tax. Remember to keep your financial foundation in mind and look to preserve your savings for maximum benefit on retirement.
The wealth protection phase
This phase includes all things risk planning – life cover, dread disease cover, disability cover, medical aid, and car and household insurance. The worst situation you can ever find yourself in is not being sufficiently covered for an unforeseen event. However, before going out shopping and opting into a certain risk cover, find out from your employer about any group risk benefits you may qualify for under the employer fund. In this way, you eliminate the risk of being overinsured.
Once the foundation of our house has been successfully set, we can move on to the structure of the house – growing your money.
The wealth growth phase
This final phase of your financial plan is the ‘roof’ of the house – growing your assets. This includes putting in place solid investments and savings plans, as well as planning for the education of your children. Here, estate planning becomes crucial as your asset base grows. Having a valid last will and testament in place will make sure that your estate and legacy which you worked so hard to build for yourself and your family remains protected after your death. Your wishes will be carried out accordingly. Using a qualified financial planner will and ensure that you improve your financial outcomes and give you peace of mind knowing that the administration of your estate is done in the most cost and tax-efficient way possible.
Bringing together all three phases is the key to ensuring that your financial structure stands firm and is long lasting.
Article credit https://moneymarketing.co.za/make-your-money-work-for-you-using-financial-planning-abcs/