Financial planning advice to get you financially fit for 2021

The Covid-19 pandemic has taken a toll on a lot of people. The effects of the pandemic have been drastic, some families have lost loved ones, some businesses have been brought to its knees, while others have come to a halt. However, planning for the future, more so financial planning in these challenging times becomes even more important. Independent Financial Advisor and Director Capital Wealth Counsel Edward Banda provided The Servestian with these insights on financial planning:

While many think that financial planning is a daunting exercise, it can actually be simplified. Here are some easy tips to help you start with what you have today, to get you to where you want to be tomorrow:

Create a new budget

Anytime your earnings change you need to revisit your budget and adjust. If you are new to budgeting, the first step is to create one. Include all your monthly expenses and label which expenses are needs and which are wants. Review your bank statements to make sure you don’t neglect easy to miss recurring expenses like entertainment subscriptions, insurance etc. Next to each expense, note if it’s a need or a want. For example, rent or mortgage would be a need while DSTV or Netflix subscription a want.

Cut back on non-essential expenses

The non-essentials are often items you don’t really need such as takeout meals or new clothing purchases. Start small, cut 10% – 15%. If you need to same more increase that percentage. You would have already identified these expenses when doing the budget exercise and review of your bank statement.

Save on necessities

While working towards a viable budget for your household, review the list of necessities and identify items you can save money on. For instance, if grocery bills are high, create a meal plan around food items you can buy on sale or afford and look for bargains and special. Involve your family – Before you put the new plans and budget in motion, you may need to sit down with your family to explain the new situation and new course of action that everyone is part of the plan and involved int the new adjusted lifestyle.

One of the most intimidating aspects of managing your finances is saving and many have no clue on where to start.

Its always a good habit to put away a portion of your earnings to meet either unforeseen events or goals. If you are new to saving, first set goals for what you want to save for. Goal setting will help keep you motivated towards that savings plan you’re trying to build, be it saving for children’s education, holiday or even purchase of an asset.

Once you have a goal in place you will then need to determine the timeline you wish to achieve this goal and with guidance from financial planners, they will help you determine how much you need to save and also select the appropriate saving vehicle e.g., Bank notice account or unit trust investments etc among the many savings platforms available.

In addition, regardless of your income or wealth, everyone will have these components in their financial structure, assets, debts, income, and expenses. This is the basis to which we all need to have some form of a financial plan.

There is no one size fits all in financial planning. To determine your financial planning needs, you will have to consult with a financial planner who will conduct a financial planning needs analysis and start the financial planning journey with you.

Financial planning is crucial as it helps you determine your short-term and long-term financial goal and creates a balanced plan to meet those goals. In addition, financial planning provides you with the structure and frame work that will guide you on the path to achieving your current and future goals.

Fulfilling your future needs and improving your standards of living depends on the plans you make today.

Understanding budgeting can go al long way in helping you achieve your financial goals. These are three tips on the basic principles of budgeting to help you start budgeting this month:

  • Prepare the budget,
  • Negotiate and agree on budget and
  • Monitor or review your budget at the end of the month (You will need your bank statements so you can see the fixed and variable month costs as well as miscellaneous).

Remember, even in challenging times, there are always opportunities and seeking expert advice can set you up to thrive in 2021, and for many years to follow.

We would like to thank Edward Banda for his contributions to our January 2021 issue of the Servestian. Edward is an independent financial advisor. For more financial insights you can contact him on edward@capitalwealthcousel.co.za