There are a number of different investment strategies and every adviser will favour a certain strategy when providing you guidance on your investment and retirement planning, it is important for you as the investor to understand the strategy that your adviser is suggesting for you and to have it relate to you as an investor. If you don’t understand the strategy, you won’t stick to it, if the strategy doesn’t speak to you as an investor, you also won’t stick with it.
When it comes to investing and your financial plan in general, it is important to remember, this is your plan, it’s your investment, it’s your future, so you must own it, you must take responsibility for it and so you should always know and understand the strategy. Make sure you work with a financial adviser who takes the time to explain the products suggested and why, the funds suggested and why, the fees should always be transparent and justifiable, you should know as much about each aspect of your investment as possible, all the pros and cons and why and how each investment fits within your plan and your strategy, after all it is your money.
I believe in a step by step process when it comes to financial planning and especially your retirement planning, this process can be coined as “The Progressive Satisfaction System”. Simply put, if you follow the steps, you will not only have a higher chance of achieving the retirement you want but you will be able to live your best life possible given your personal circumstances. I tend to start at the end, the final goal (The Retirement you want to have) and then we work our way back through every life stage to the starting point (the here and now). Simply put, you identify how much you will need to retire (taking into account at what age you want to retire, what income you will need and how long you want to plan for that income to last) and then you work back through every life stage or key point in your life and take note of what needs to be done up to that point in order to achieve the next stage, by doing this you will identify your needs at every stage of your life, you will set your goals and you will be able to track if you are on target, ahead of target or behind target, you will also be able to identify any threats to achieving your goals, to you and to your families wellbeing (both personally and financially).
Even though we are planning far down the line for a future goal, our priority is always the immediate. What happens right now determines your future, if you don’t secure your present, your future is always in doubt. So how do I secure my immediate you ask? The first step is making sure you have financial security, that means establishing your emergency fund (you may want to consider a Unit Trust or a Linked Investment product for this need) and providing a risk management strategy that protects not only what you have now but what you want to build up for the future. Your emergency fund should be able to cover 3 – 6 months of your (or your families) monthly expenses (setting up a budget is critical to establishing the goal for your emergency fund). If you look at the amount of retrenchments that are occurring presently, for the rest of this year and possibly for next year as well and the unprecedented lockdown that we have experienced, you will see the value in establishing your emergency fund as quickly as possible. This is a priority for everyone!!!
Protecting your income in the event of a disability and protecting you and your family from a huge financial expense due to medical reason is key (you should be thinking about your medical aid, gap cover and dread disease benefits here)
If you are married and have children, your top 3 concerns are most likely going to be, can my family remain in their home should something happen to me, will my children be able to remain in their current school with their friends and have the financial opportunity to be able to go to university should they wish and will my family continue to be able to have medical aid should I pass away. You may have noticed that the 3 things mentioned above are also the 3 biggest expenses you have today and if you think you and your spouse are struggling currently to manage those big 3, then think for a second how difficult it will be for your spouse to cover those costs on their own?
So now you have your emergency fund in place and your risk management strategy is providing your all the protection you need, well done, you have step 1 nailed, you should feel pretty happy with yourself, if you feel satisfied with this step then it’s time to progress to the next step which is building your wealth and incorporating tax planning into your wealth accumulation strategy.
Every investment product has its own key qualities and benefits and it’s important for you to understand each of them, so you know exactly what each products benefit are and how bests to utilise them to achieve your goals in the most tax efficient way possible. (Read my blog on tax planning for your retirement).
If you would like to know more about what is written in this article or any other of our articles, select the “Request a Call Back” tab on our Website or go to our Facebook page and send us a message directly and we will get back in touch with you and arrange a complimentary no obligation, no cost Financial Analysis to determine at which life stage you are and what your needs are at this moment. It is vitally important to consult with an accredited Financial Adviser when making decisions of a financial nature.
The contents of this document are for generic information purposes only and do not constitute advice or intermediary services as contemplated in the Financial Advisory and Intermediary Services Act, Act No 37 of 2002 (FAIS). Whilst every attempt has been made to ensure the accuracy of the information contained herein, Myself, Liberty or Stanib cannot be held responsible for any errors that may be represented. You are requested to consult with an accredited financial adviser prior to making any decisions of a financial nature. Performance will depend on the growth in the underlying assets within the portfolio, which will be influenced by inflation levels in the economy and prevailing market conditions. Past performance cannot be relied on as an indication of future performance. Unless stated otherwise, returns can be negative as well as positive. Liberty Group Limited (reg no 1957/002788/06) is a registered Long-term Insurer and an Authorised Financial Services Provider (FAIS no. 2409)
