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Understand Financial Planning
“Financial Planning” is the last phrase anyone wants to hear this time of year. Christmas and New Year are synonymous with spending! This is a time of year to spoil yourself and those you care about.
The last thing you want to hear is someone telling you how to spend your money. That is not what financial planning is all about. There is a misunderstanding that financial planning has got something to do with the future. Instead it's all got to do with creating money today.
Look at the following diagram:
The Full Circle of Financial Understanding ©:
It's about: Savings; Investments; Retirement & Estate Planning; the process of Budgeting and knowing how to deal with your Debt. Once you understand each segment of this circle you will begin to understand your financial potential.
A good place to start is “Your Spending Plan”. Don't confuse this with Budgeting – that can be a restrictive process that closes your mind to possible opportunities. Robert Kiyosaki, writer of the famous Rich Dad, Poor Dad series, suggests that you should change your negative statement from “I cannot afford it” to the question “How can I afford it?” This changes your frame of mind from limitations to possibilities.
You should also move beyond how much and on what you're currently spending your money. You need to get to the point of asking: What do I actually want to spend my money on? Change the fear of not having enough to a vision of what you do want from your money.
That brings us to the concept of Saving. Everyone knows that they need to save, but nothing much will happen until you sit down and decide what your short-, medium- and long-term dreams are for you and your family. Putting money away just for the sake of saving may lead to disappointment.
Just think about how much time you put aside to plan your holiday or that special wedding day. Even buying a pair of shoes can take hours! Yet so many of us do not spend an hour thinking about our long term goals and dreams – finding out how much you need to invest to make turn those dreams into realities.
Break it down into obtainable goals over different periods. Choose which investment vehicle will best suit each of your goals. Understand the different investment options available to you and don't ever invest in something you don't understand. Know what risks you are taking to realize your dreams to avoid disappointment at the time you want to make use of your money. Learn how you can create more money through the concept of earning interest on interest. Every day counts. Every cent counts.
Find yourself a good Certified Financial Planner (CFP). Be a partner in that relationship and not merely trusting your hard-earned money to a stranger. The more educated you are on these matters, the better investment advice you will receive - more wise words from Rich Dad.
Over the years the word Insurance has become an infamous one. However, it plays an important role in managing the risks you are exposed to. Only you decide what risks you are willing to live with and what risks you want to protect yourself against. That's what insurance is all about.
Most importantly, learn what you can now about Estate Planning. It's about putting things in order for when you're not there anymore. Simple things like knowing where your spouse's original Last Will and Testament is kept or finding out how much your dependants will need immediately the day after you died can provide real peace of mind to your family.
This holiday period, set time aside to think about your goals for the future. And you'll discover ways to spend your money on the things you really want.
Susan Vermaak founded Full Circle after 11 years involvement in various aspects of the financial markets. She conducts workshops to help mostly women to understand and manage their personal finances. Full Circle does not sell financial products and its only aim is to help you make informed financial decisions. For more information call Susan on 082 495 5687 or go to www.thefullcircle.co.za
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