As your trusted Advisors, we will help you with the six steps of Financial Planning:
Be thorough when selecting a trusted financial advisor. After all, you'll be entrusting this person to help you turn your financial dreams into reality.
Many financial advisors specialise in providing both investment and insurance advice. The following are some questions you might want to ask before hiring a trusted financial advisor.
Is he or she registered?
With which organisations? For example, the Life Underwriters Association of South Africa and the Financial Planning Institute.
How long has he or she been in business?
Does he or she have any credentials or professional designations demonstrating his/her commitment to continuing education?
Is he or she a member of a professional association such as the MDRT that stresses professionalism, client services and ethical conduct?
How is he or she remunerated and by whom?
Spend some time creating a unique life vision for you and your family. Write down your goals, indicating which ones are the most important to you. Make sure that you cover all areas of your financial future.
It's not easy, especially when you get down to the specifics, including why, when, where, and for whom you want to build assets. But your goals need to be concrete, specific and, if possible, quantified so that you can move on to the important question of how you are going to make it all happen. It's often best to complete this step in conversation with a trusted financial advisor. Here are a few questions to get you started:
What are your short-term life goals, such as having children or buying a house?
When do you want to retire?
What financial issues keep you awake at night?
How much do you worry about how your family will meet expenses if you or your spouse die or became disabled?
Have you thought about the cost of your child's education?
How do you want to pass along your life's financial achievements?
Also, make sure you address your most basic income needs and cash needs.
Income Needs
Retirement - How much income will you need to maintain the lifestyle you want for yourself and your family when you retire?
Disability - How much income would you and your family need if you became disabled, and could not work, between now and retirement?
Survivor - How much income would your family need if you died between now and retirement?
Cash Needs
Education - How much cash will you need to cover future education expenses?
Debts - How much cash would your family need to cover your debts if you died?
Now that you have a clear image of your financial goals including why, when, and for whom you want to build assets, you need to draw up your financial plan.
There are two more steps that are vital to a successful plan.First, assess your current financial situation: what you've already built, what liabilities have been accumulated, what your current cash flow is and what financial tools you're already using.
To complete this survey, gather all your financial documents and information in one place so they are readily accessible and easy to review. Next, collate the current financial information so you can easily review it.
Make sure that your survey includes:
Current tax return information
Current assets, including your bank accounts, investments, insurance, personal property, real estate, and retirement plans, pension plans and business interests.
Current liabilities, including car loans, property bonds, credit card and student loan debt.
Your monthly cash flow, including an itemisation of your income and expenditures (food, clothing, bond payments, living expenses, retirement contributions, etc.)
Now that your goals have been articulated, your current financial position has been surveyed, and a trusted advisor has been selected, it's time to draft a financial plan. Most sound financial plans should, at a minimum, cover the following areas (and ask your advisor if there are others to consider as well):
Uncontrollable Risk (Life insurance, health insurance and disability planning)
Investment Planning
Children's Education Funding
Retirement Planning
Estate Planning
It is essential to include a description of each step and in what order it should be taken. For example, most financial plans begin with life insurance planning, savings accounts, and contributions to employee benefit and retirement plans. Only after a secure foundation is created -and you can rest easy that your dependents will have the income they need should you die or become disabled -should you proceed to the next level of investing, which might include mutual funds, annuities, and eventually stocks, bonds, and perhaps, real estate.
Once you and your trusted advisor have developed the plan and put it in writing - implement it. Even the very best plan is useless unless it is enacted. Build a secure foundation before undertaking a program of investment - plan your expenses for home, necessities, emergency cash reserves an adequate insurance protection first.
You now have a sound financial plan, but your work is not finished. Together with your trusted advisor, you will need to evaluate your plan at least once a year, making certain that you are on track to meet your goals and that your plan reflects your most current stage in life. When your plan needs to be revised, meet with your advisor and, together, take the proper action.
Financial planning would be a lot easier if changes in life were predictable - such as marriage, births, deaths, divorce, and new career opportunities - but they are not. However, a sound financial plan can provide peace of mind for you and your family so that no matter what life changes you experience, your financial future is secure. If your situation has changed over time, it may be necessary to review this process to ensure that your financial planning is optimal.
