financial-planning-and-consolidation

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A wise man should have money in his head, but not in his heart ~ Jonathan Swift

Now that I am knocking at 30’s door, it would do me good to think about a few grown up things in my life. Things like learning how to stay faithful to hair braiders, not breaking my nails during hockey matches, buying at least one good pair of flat shoes instead of spending all my bucks on heels, maybe having my car washed more than once a month, drawing up a monthly budget and actually sticking to it, learning how to apply make up like all these makeup gurus floating around the interwebs and least of all, working out what sort of personal brand I currently have and how I can improve it and implementing the strategy the financial planner I am being forced to see by my boss has for my financial future.

I decided to start from the bottom of this to do list and work my way upwards so I met with the financial planner for the first time the other day. Considering that 80% of divorces in the US cited financial problems as the primary cause of the divorce, and that most people’s debt outweighs their savings significantly, I should really take this more seriously. Of course I have no significant bucks to speak of at the moment so my primary goals are to avoid being broke, increase my savings and to get rid of as much debt as I possibly can while doing it. In anticipation of my meeting I looked up some of the things I should be aware of financially in order to contribute effectively to my own financial plan.

According to Paul Leonard, a certified Financial Planner, here are the basics:

“Financial planning is the process of meeting your life’s goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education, planning for retirement, going on dream holidays and so on.

The financial planning process consists of six steps that help you take a “big picture” look at where you are financially, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.

1. Set measurable financial goals.

…specific targets of what results you want and when. Don’t just say you want to be “comfortable” when you retire or you want your children to attend “good” schools.   Quantify what “comfortable” and “good” mean so you’ll know when you’ve reached your goals. (Done. I would like to save a given sum of money by year end and I would like to be debt free as soon as possible).

2. Understand the effect of each financial decision .

… because it can affect several other areas of your life. For example, an investment decision may have tax consequences that harm your estate plans. Or a decision about your child’s education may affect your retirement goals. All of your financial decisions are interrelated. (In progress. I am assessing what I should be investing in and why I think I should be investing in it. Whether the amount I am saving earns more interest than the adverse interest I would save by paying off a debt faster. This is a real biggie for me because being debt-free is my primary goal).

3. Re-evaluate your financial situation.

Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. (I suppose this will be an on-going process then. As time and circumstance change, so will my needs).

4. Start planning as soon as you can.

People who save or invest small amounts of money early often do better than those who wait until later in life. Develop good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, so that you’ll be better prepared to meet life changes and handle emergencies. (I am already saving a little every month so that bit is covered. I could probably do better in this department but baby steps. My employer forces me to contribute (reluctantly) a hefty amount to my provident fund so that is covered.  I learnt very early on that a rainy day account is an absolute essential when I tried to move my car from my friend’s driveway one night and all I got in response to turning my key in the ignition was a faint blinking of the headlights. Apparently my battery died unceremoniously while my friend and I were having tea. In exchange for its replacement I forfeited a good chunk of unplanned bucks and I learnt my lesson).

5. Be realistic in your expectations.

Financial planning is a common sense approach to managing your finances to reach your life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your financial planning results. (I understand this to mean that I don’t need to be a guru. I just need to be sensible. I need to do what works for me and my plan and base those decisions on the most desirable outcome for my situation. Where I really don’t know, I should speak to someone who does).

6. Realise that you are in charge.

If you’re working with a financial planner, be sure you understand the financial planning process and what the planner should be doing. Provide the planner with all of the relevant information on your financial situation. Ask questions about the recommendations offered to you and play an active role in decision-making. (This is not about relinquishing control. This is about learning how to take charge properly and effectively.)”

So here I am, armed with just enough information to make a nuisance of myself and totally raring to go. It’s definitely time to take my finances into my own hands and make sure the goals don’t just happen, I make them happen. I intend to be completely debt free, save for a mortgage bond, by the end of 2016 and it really is up to me to make it happen.

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