Is there value in a financial plan if money is tight?

Everything starts with a plan

Whether you’re baking a chocolate cake with the kids or laying down ideas on how to tackle the week ahead, you have specific elements to work with, you need to follow a particular process and work towards a particular outcome – creating a delicious cake or helping you have a less chaotic week.

Financial plans are no different

There are individual parts that work together to make up a comprehensive and sound financial plan. These include looking at your current financial situation, what your family financial goals are and how you can reach them, an overview of your savings and debt, the assets you own, your investments, risk protection policies and your retirement planning.

Follow through

The biggest mistake you can make with any plan you put in place is not following through with the steps in the process. Setting goals is the easy bit, measuring and constantly tweaking the plan requires a little work. And when you have to tighten your belt during tough economic times, reviewing your financial plan ensures that you have a measure of control over your finances.

The good news is that there are three basic steps at the core of reviewing your financial plan that you can follow:

Define your financial goals.

When last did you sit down with an exam pad and re-assess what you want for you and your family?

This is the start of regathering your thoughts and resetting the foundation of your financial plan. Make sure that you break your goals into short, medium, and long-term targets because some things take a little longer than others.

  • A short-term goal (under a year) could include saving up to buy your eldest daughter a reliable second-hand car for her birthday next year or paying off smaller amounts of debt.
  • A medium-term goal (less than five years) could involve saving up to take your family on an overseas holiday in a few years’ time.
  • A long-term goal (more than five years) could include saving for your young child’s tertiary education or planning to retire comfortably in 25 years from now.

Save for the future, while protecting against any risks.

The one thing life keeps reminding us of, is that we aren’t 100% in control of our destiny.

Making sure you mitigate any risks that can derail your plan is the second part of the financial planning process. Before you get rid of that exam pad, jot down easily identifiable risks in your life and “what if” scenarios that could hurt your financial ambitions and set you back.

  • What happens if I get ill and I can’t work and earn an income?
  • What happens to our chances of going overseas if I don’t address my credit card debt?
  • Will I even be able to retire when I want to, without significantly boosting my retirement savings now?

Track your progress.

The last step in the financial planning process involves tracking your progress and making sure – that you can reset targets when ‘life happens’ and your personal circumstances change.

When your finances take a hit, what should you do?

It’s very seldom that things go exactly as we want. And life often throws us curve balls that we never could’ve imaged. COVID-19 is just one case in point. Our 175 years in business has shown us that downturns are followed by upturns. It’s staying on track and being focussed that matters. And playing the cards we’re dealt.

We’re here for you

If you need advice and support on how best to manage your money and achieve your financial goals, why not partner with a qualified, accredited Old Mutual financial adviser to co-create a financial plan that works for you and your family?

Visit us at talk to a financial adviser today.

Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and Life Insurer