If you have not gone through a thorough financial health check, where experts would look at key measurement indices and ascertain your state and readiness for financial freedom, then you have not done a proper planning.
It is a holistic approach to all that life will present now and in the future. So, understanding how this affects your children and dependants whether or not you are there is critical aspect of financial planning.
Oguike Martins, a personal finance expert with one of the top three insurance companies in the country, said “Many people seem to ignore the fact that their dependants are part of their financial planning”.
Experts from Old Mutual, say like any other type of plan, a financial plan is a map of how to achieve a set of objectives using financial products and services. These products and services can be presented and explained to you by a registered broker or financial adviser.
A thorough financial analysis is an assessment of your current position, including your – will and estate; marital status and contract; age; current earnings and future earnings potential; family circumstance & dependents; contractual obligations; goals; plans and preferences.
The combination of these factors determines your risk profile. Your appetite for risk will also be a factor. This refers to whether you are willing to risk great losses for potentially high returns or, whether you prefer lower potential returns and reduced risk.
Having a financial adviser is a long-term relationship that will involve a few planning sessions at the outset and then regular follow-up sessions.
The first planning session
The first meeting is used to define your financial goals. Among other things, your adviser will want to know your current and future income and capital requirements.
Use this session to ask questions about goal setting and financial planning. Make sure that the adviser understands your priorities and objectives.
It is vital that you share your goals with your financial adviser as he/she is the person who will help you structure a financial plan that will help you achieve them. Your adviser will also need to know your current financial circumstances.
This includes your budget, any additional sources of income such as rental or investment income; your debts; the provisions of your will; details of your assets and liabilities and business involvements.
The following documentation is also important will, marriage certificate and contract; salary slip or income statement; a record of all income streams; all policy and investment documentation and any recent correspondence.
Other important documents include a balance sheet detailing your assets and outstanding liabilities, including any business assets or liabilities; a copy of your current pension/provident fund statement, and any other corporate benefits.
Follow-up planning session
Your adviser will provide you with the findings of the financial needs analysis that has been completed, based on the objectives you set and the information you provided.
Your adviser will introduce you to a selection of products that will suit your needs and risk appetite.
The law requires that your adviser provides full disclosure. This means they must provide a full breakdown of all the benefits and drawbacks of each product.
Listen carefully and ask as many questions as you like. Ultimately, you are investing into your future. You now have a financial plan that sets out your objectives and goals, and an action plan for achieving those goals.
Review
You need to review your financial plan at least once a year to make sure it’s on track. It is also important to review your plan whenever your circumstances change. Adjust and fine-tune your financial plan over time. Your investment portfolio at retirement will look very different to the portfolio you had when you were younger.
Don’t change for the sake of change. Changes normally have cost implications, and they should be carefully considered. Make sure you understand any changes your adviser recommends. And don’t be afraid to ask questions.
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