At the beginning of a new year, I would once again like to emphasise how important financial planning is. Do not postpone it.
Financial planning involves managing your finances in order to achieve specific goals. It is an essential process that everyone should undertake, yet we often hear people say they cannot plan yet because they do not have money. Financial planning helps you look at the “bigger picture” so that you can see where you stand financially at any time, regardless of how much money you have.
An experienced financial planner should follow six basic steps when assisting someone with the planning of their finances. The first step involves establishing a professional relationship with the client. This is followed by gathering relevant information and setting objectives.
The next step is to analyse the information and prepare recommendations for consideration. The financial planner then implements an acceptance plan and ensures that it is reviewed regularly.
Some people are able to do their own planning, but a professional planner has expertise that you may not have in certain areas. Estate planning, which includes taxes like estate duty and capital gains, is an example. A planner can also help you evaluate the risk level of your investment portfolio or adjust your retirement plan according to changing circumstances.
Often, people do not have the time to plan their finances thoroughly and objectively. Or they may have developed a plan themselves but would like to obtain a professional opinion.
Many people realise that they need to improve their financial situation, but they do not know where to begin.
A professional planner can give them direction and keep them on track.
A competent planner can help determine your overall needs, including estate planning, budgeting, savings plans, and planning for tax, insurance, and retirement.
In addition, he or she can work with you on a single financial issue, but within the framework of your overall financial situation.
To achieve the best results from your commitment to planning, you should seek advice on measurable financial goals and how to proceed in order to reach these goals. Instead of saying you want “comfort” in retirement or that your children should attend “good” schools, you should determine the amounts required so that you will know when you have achieved your objectives.
Every financial decision you make can affect several other areas of your life. For example, an investment decision may have tax implications that could negatively impact your estate planning. Or a decision about your child’s education may influence when and how you achieve your retirement goals.
Remember: all your financial decisions are interconnected. Financial planning is a dynamic process, and your goals may change. Therefore, it is necessary to review your plan at least annually and revise it in consultation with your financial planner.
Never postpone your financial planning. Those who start early and consistently save or invest small amounts usually achieve better outcomes than those who wait until later in life. Another piece of advice is to be realistic in your expectations. Remember that factors beyond your control, such as inflation, changes in the stock market, and interest rates, can affect the outcome of your planning.