Purpose of financial
planning
Creating a financial
plan helps you see the big picture and set long and short-term life goals, a
crucial step in mapping out your financial future. When you have a financial
plan, it's easier to make financial decisions and stay on track to meet your goals.
Working with a financial planning professional can secure your financial
wellbeing and give you peace of mind and help you reach financial planning
success.
The major purpose and
reason for financial planning is to line up our financial and lifestyle ducks in a row.
Most people have a lot going on financially and with life in general, Retirement
Annuity plans, Tax-free Savings Account, Life insurance, Pension plans,
Education funds, Taxes, Employee benefits, Wills, cash flow to mention a few, it’s very important that we have informed reasons to base our financial and
lifestyle decisions on. A personal plan becomes like a rudder for your
financial ship. Most importantly it gives you control financially which in turn
reduces stress and will give you an improved quality of life. Plus it
just makes sense; we plan everything else in our life so why wouldn’t we plan
for the best use of the money we work hard for and create some financial
freedom.
Before you start a plan
you must first identify what your personal objectives, goals and dreams are.
This is the first step in personalising your plan. Record your assets and liabilities and
expenses so we can identify our starting point.
The second step is for a
financial planner to interpret all of this information. A professional
financial planner will have a clear understanding of risk management
requirements, wealth accumulation products and purpose, taxes, retirement rules
and regulation, government benefits, estate planning etc. Without this
professional knowledge and understanding, it would be impossible to complete a
comprehensive personal financial plan.
You will now have all of the information to make informed decisions.
Once more you need to clarify your objectives and then take action that will
allow you to accomplish each of your identifiable goals. Your financial planner
will give you a step by step process based on your priority of importance. Some
goals you will change immediately with perhaps a slight adjustment to what you
are currently doing. Other goals may need to be re-designed to accomplish your
intended result. But remember that financial planning is like a rocket ship
going to the moon, it is of course 90% of the time and corrections must be
made. As long as you clearly know what your objectives and goals are, you will
always have a clear target to aim for and can make the required adjustments.
What can I expect from this process?
You will have a clear and concise alignment of your assets, liabilities
and expenses to your personal objectives, goals and dreams. You will then
proceed with confidence knowing exactly what needs to be done to accomplish
your objectives. Words that I have heard other people say are: "relief knowing
it can happen", "feelings of confidence", "excited about the future", clear
direction to mention a few. The whole process takes a non-tangible position and
makes it tangible by attaching actual numbers and time-frames to your plan
which will be taking the guess-work out of future financial decisions.
I have been asked before; “when is the best time to start a financial
plan?” My answer is always the same; “the best time was twenty years ago and
the second best time is today”. It’s one of those things where the sooner you
start; the better it is but it’s never too late to start.
Financial planning has value at all stages and ages of your life because
your priorities will change:
·
First stage (Starting out years) –When starting out, most of our income
goes to providing for lifestyle expense. At this stage there are normally few
assets but there could be liabilities with debt (mortgage etc.) and perhaps new
family members so Life insurance planning is important. If there is no house or
family as yet then most of your surplus income will go to saving for a down
payment for a house purchase, paying off school debt or planning a family.
Little money for retirement savings. This is the best time to purchase life
insurance because of the young age and most often there are no health issues so
it’s easier to get and the costs are very low.
·
Second stage (Growing years) – Objectives change as your needs change.
Children’s education may be important, starting retirement plans and reducing
debt may also be the major priorities.
·
Third stage (High income years) – This is the time that you must save
the majority of your retirement assets. It is often your highest earning years
and cash flow is commonly more abundant. Income tax, deferral plans will be
your focus.
·
Forth stage (retirement) – Your lifestyle expenses are paid for from
your retirement assets, pension plans and government benefits and you are
enjoying life and managing your health. Managing your taxable income will be
key for maximising income efficiency.
·
Fifth stage (estate planning) – You have accumulated several assets and
you need to plan the distribution of these assets upon your passing. You may
want to leave a legacy to your family and or contribute to a charity or church
of your choice. Taxes will be an issue and proper planning will be necessary
for a tax effective distribution of assets. Wills, trusts and power of
attorneys need to be up to date.
BENEFITS
Financial planning provides direction to financial decisions and gives insight on how each decision affects other financial areas of life. Viewing each financial decision as a whole allows one to consider its effects on short and long-term goals.
COMPONENTS
Financial planning provides direction to financial decisions and gives insight on how each decision affects other financial areas of life. Viewing each financial decision as a whole allows one to consider its effects on short and long-term goals.
COMPONENTS
The components of financial planning include, but are not limited to, the following subject fields:
·
Financial statement preparation and analysis
·
Investment planning
·
Income tax planning
·
Education planning
·
Insurance planning and risk management
·
Retirement planning
·
Estate planning and Will drafting
THAPELO MASUPYE'S PROFILE
Thapelo
Masupye is a financial adviser with 7 years in the financial service industry
in which 4 were spent as a financial adviser. He believes his previous two
years as a Risk analyst at Momentum’s employee benefits department were an
ideal foundation for his work as a financial adviser. He was given
an opportunity by Liberty Life to kick start his career in financial planning
and gained a great wealth of knowledge and experience. At the end of 2016 a
leap to become an independent financial adviser was initiated with Legacy
Wealth Management then mid 2017 joined he The Advice Network Independent.
Attention to detail, good listening skills and
great empathy are symbols of his appreciation by his clients. He is
effectively supported by a team of administration, group
benefits and investment products specialists whose teamwork and professionalism
help him build long-term relationships with his growing client base and provide
excellent customer service.
Thapelo is a proud recipient of University of Limpopo B.com Graduate and a
Wealth Management Certificate NQF5 awarded by the Insurance Sector and Training
Authority. His focus is on young professionals and Business owners. Thapelo
strongly believes in entrepreneurship and encourages his client to see themselves as
their own business when dealing with their personal finances, it helps to deal
with your own finances in a more logical way than emotionally driven.
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