The past couple of years have changed how we live and how we view life – both good and bad. Most of us have experienced working remotely or from home, while some of us may have moved or even lost our jobs. Changes, whether in our control or not, should prompt a review of our financial plan.
This is according to Duann Cronje, a financial planner at Fiscal Private Client Services, who shares five points on how women can take charge of their financial plan. Women specifically, as it is reported that they make 90% of the household’s financial decisions.
1. Be the master of your cash flow
Your cash flow forms the basis of your financial plan, and this should guide your savings and investments. “If you have recently moved jobs or started working from home, chances are your income and expenses have changed too. Keeping an up-to-date budget will assist you to optimise your finances. It will also highlight areas where you can save money, ideally to be put aside in an investment,” says Cronje.
2. Capital expenses
“For many, the Covid environment has altered the way we prioritise, for example, we are finding that as people spend more time at home, they are wanting to enhance their environment. This means they are spending capital on home maintenance, upgrades, and renovations.
“Before going ahead with these big expenses, make sure you have researched the costs involved to ensure you are paying market value, and that there are no nasty surprises down the line that require more money. It is a good idea to have saved towards these kinds of projects to avoid going into debt at an uncertain time like this, for nice-to-have expenses,” says Cronje.
This is also true for examples such as holidays and travel, car services, additional medical costs, education fees, and similar. Prioritising these big-ticket expenses will change as your life changes.
3. Staying true to your path
“Looking at your financial plan, it will be obvious what you want to prioritise. This year it may be home upgrades, and next year it may be paying tertiary education fees. All of this will impact your plan, and your retirement may look completely different to what it was five years ago.
“Having a long-term view and staying true to that path is important as you need to align your goals with the life you want to live when you are no longer earning a salary. A clear long-term goal will keep you on the correct path financially and motivate you as you see your money growing and compounding. Make sure that your investments will result in you reaching your goals rather than the opposite being true, i.e. having your investment results determine how you will have to live in the future,” explains Cronje.
4. An astute asset allocation
Your financial plan should allow for a well thought-out asset allocation, and risk-adjusted returns are important for reaching your investment goals. Cronje explains, “If you are planning to upgrade your kitchen in two years’ time, it makes little sense to invest funds allocated to this expense in shares as they are volatile in nature, and you could end the investment term with less than you started, which is obviously not ideal for reaching your investment goals. The same applies when you are investing for retirement. Being invested in cash, as an example, will most likely provide you with less than what is required at retirement age. Ensure your investment asset allocations tie into your capital expenses, goals, and retirement planning.”
5. The end in mind
Planning for death is no fun exercise but everyone should go through it at some stage. “Ensure your Will and Estate planning is up to date – this will give you peace of mind that your family will be provided for when you are no longer around. Your will should be reviewed at least annually or whenever there are big changes in your life such as getting married or getting divorced or having children.”
Cronje concludes that if you are not confident to review your financial plan yourself, it is a good idea to contact a certified financial planner to assist you. The peace of mind that an updated financial plan brings cannot be stressed enough, not only does it add a lot of value to your life, but it should be one of your top priorities, each year, every year.
For more visit: fiscal.co.za