What is financial planning?
Financial planning is the process of setting and achieving financial goals through smarter money management. This involves assessing your current financial situation, identifying future objectives and creating a roadmap to help you reach financial wellness.
Armed with a comprehensive financial plan, you’ll have expert recommendations to make confident, informed choices about your short-term goals and longer-term future.
What is the benefit of financial planning?
Personal financial planning can provide many benefits, including:
- Financial security: Build savings and insurance to handle emergencies, ensuring stability in challenging times
- Goal achievement: Define and monitor objectives like home ownership or retirement, mapping steps for success
- Stress reduction: Organise finances for confident decisions, adapting to enhance financial well-being
- Optimised savings: Analyse and manage finances for enhanced wealth accumulation and future goals
- Debt management: Prioritise and pay off debts to improve financial health and credit score
- Wealth protection: Assess risks and implement insurance to safeguard assets and financial security.
Effective financial planning is key to help you achieve long-term financial security and realise your life and savings goals. Your financial planning strategy should cover these key areas:
Strategically manage assets for growth and risk minimisation, tailored to financial goals through investment planning, risk assessment, and advisory services for long-term financial security.
Prepare financially for life after work by setting goals, estimating expenses, and creating a savings strategy to maintain your lifestyle in retirement, considering inflation and healthcare costs.
Plan your legacy to ensure your wishes are honoured and your loved ones are cared for. Use legal documents like wills and trusts to transfer wealth smoothly across generations. Include healthcare directives to manage your affairs if you're incapacitated, protecting your family's future and providing peace of mind.
With insurance planning, you can look at your risks and choose health, life, disability, and property insurance to protect against financial losses from life’s unforeseen events. It’s best to ensure coverage meets your individual needs, providing security and peace of mind for you and your family.
How to create a financial plan
Creating a financial plan is crucial for individuals and families aiming to achieve their financial goals and ensure long-term security. Speak to your financial adviser for personalised assistance with financial planning and budgeting. Broadly, here are the six fundamental steps involved in creating a plan for your financial future:
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Set clear goals
Start by defining your short-term and long-term financial needs and objectives. This might include buying a home, funding education, saving for retirement, or starting a business. Clear goals provide direction and motivation for your financial plan.
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Assess your current financial situation
Take stock of your current income, expenses, assets and liabilities. Make sure you understand how much money comes in and goes out each month. This will help you identify areas for improvement and opportunities for growth.
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Create a budget
Develop a budget that aligns with your goals and helps you manage your income effectively. Allocate funds for essentials like housing, utilities, food and transportation, as well as savings and for socialising and eating out. Having a budget ensures you live within your means and prioritise savings for future goals.
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Evaluate and manage debt
Review your outstanding debts, including credit card debt, loans and mortgages. Develop a strategy to pay off your high-interest debts first while maintaining minimum payments on others. Managing debt is an important part of freeing up funds for savings and investments, as well as for improving your credit score.
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Identify investment strategies
Determine how you will invest to achieve your financial goals. Consider your risk tolerance, investment timeframe, and your desired returns when choosing between stocks, bonds, mutual funds, and other investment vehicles. Diversify your investment portfolio to manage risk effectively.
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Plan for retirement
Calculate how much you need to save for retirement based on your desired lifestyle and retirement age. Make use of retirement accounts such as retirement annuities, pension funds, or provident funds to maximise tax advantages and compound growth over time.
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Consider insurance needs
Assess your insurance coverage for health, life, disability, and property. Ensure your policies align with your financial plan and give you enough protection against unexpected events that could derail your financial goals.
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Review and adjust regularly
A financial plan is dynamic and should be reviewed regularly, especially after major life events like marriage, career changes or welcoming a new baby to the family. Adjust your plan as needed to stay on track toward achieving your financial objectives.
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