EVERY person’s financial plan for the year will look different. We, as individuals, each think and value things differently, and our individual needs change throughout our lives.

A financial plan is one of the most important and easiest ways to keep track of your goals and whether you are making any progress in achieving them. It is important to update your financial plan each year or whenever there is a significant change in your personal life or the world around you.

With everything that is happening in the world today, especially with COVID-19, now is as good a time as any to review and possibly update your financial plan. In order to have a good financial plan, focus on these key elements to help increase your chances of success:

Budgeting and taxes.

A budget gives you an overview of your income and expenses. It also helps you to keep your spending in line.

It is crucial to have a regular and updated budget if you wish to improve your circumstances and potentially save money.

In these uncertain times, avoid planning holidays, paying deposits and making financial commitments for flights and accommodation in anticipation of going on holiday after the pandemic.

Know what type of taxes apply to current and future investments, and how they will affect income and withdrawals in future. Beware of selling capital assets which may trigger a capital gain, unless you budget for CGT that will arise from the gain (like selling a second property from which you are currently getting rental income).

Quick access to emergency funds.

If you are in a fortunate position to have savings, manage liquidity by making sure that you have quick access to these funds in an emergency. If you need something urgently, pay cash for it if you have the funds.

Financing large purchases.

Know what you are getting yourself into when financing a large purchase. Typically, it takes longer to pay off the debt on large payments and you pay more interest.

Make sure that you can comfortably repay the debt, and do not take on more debt by falling behind on repayments. Pay debt off as quickly as possible, starting with the debt with the highest interest rate.

With the current pandemic, where job security is at an all-time low, avoid increasing your debt as much as possible. Cut spending on cars and other luxury items under Instalment Sale Agreements. Curb spending on personal expenses and don’t use credit cards and store cards unnecessarily.

Investing your money.

Look at investing in more conservative investments, like cash and bonds for shorter-term investments (over one to three years) and add more shares (equities) to longer-term investments (five years or longer).

Compare costs as some investments will be with you for a long time, and having better pricing from the start is better.

Often, investors only realise later that there are better or less expensive products available and when clients do decide to change providers or stop contributions to take out new investments. Depending on the product, providers will charge early cancellation fees when changing or stopping contributions before the maturity date of the investment.

Planning for retirement.

Start planning your retirement as soon as you can; the longer you wait, the larger the shortfall. An effective way to get used to higher contributions for retirement is to start on the maximum allowed contribution at your employer.

Those who are already working should ensure that they increase their contributions by a small percentage each year. This way you will get used to paying the higher contributions and can help form good habits of saving for long-term goals.

Communication and record keeping.

Form a close relationship with your financial adviser and feel comfortable asking any questions, no matter how insignificant they may seem. It is better to be educated and informed than to assume.

Keep a record of the reviews for your investments and go through them with your financial adviser. It is also a good idea to register on the online platforms for your investments so that you also have access to view balances and portfolios.

Get your will in place.

Having a will is often something clients think they should only set up later in their lives or when they have built up some wealth, are married or have children. The truth is, having a will in place is crucial for your financial plan at any age, for your final wishes to be carried out successfully.

Update or review your will whenever there is a significant change in your life, like getting married, having children or getting divorced.

We hope that these few important elements will provide some assistance to you when you start putting together a good financial plan, which should possibly be updated every year.

Please note that the above is for information purposes only and does not constitute tax advice. As each individual’s personal circumstances vary, we recommend they seek advice on the matter. Please note that while every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein. If you are in doubt about any information in this article or require any advice on the topical matter, please do not hesitate to contact any Nexia SAB&T office nationally.

Article prepared by: Aysha Osman

For any queries, please contact:

  • Hassen Kajie (Entrepreneurial Business Services Director)
    M: (+27) 82 333 3389 | E: hassen@nexia-sabt.co.za
  • Yousuf Hassen (Entrepreneurial Business Services Director)
    M: (+27) 82 333 3376 | E: yhassen@nexia-sabt.co.za