Six steps to start off a financially free 2012
The festive season is upon us, people need to carefully analyse their spending habits in order to enter into the New Year without financial constraints.
Over the years, consumers have become victims of festive overspending. For many consumers the beginning of the year starts off gloomy due to financial constraints which results in sourcing alternatives such as loan options. Organisations such as the South African Savings Institute (SASI) have introduced annual Festive Season Savings Campaigns (FSSC) with the aim of reminding consumers that there is still a life after the festive season and as such, individuals need to take note of that fact in celebrations over the November – December period.
Issues that have become a grievance to institutions such as statistics provided by SASI, illustrating that household savings-to-disposable income is roughly zero (0.2%) while household debt-to-disposable income is approximately 80%. A worrying factor totalling onto South Africans positioning towards saving can be bundled together with how various individuals have different views towards the need to save.
Establishing and defining a professional relationship
The financial planner should clearly explain or document the services to be provided to you and define both his/her and your responsibilities. The planner should explain clearly how he/she will be paid and by whom. You and the planner should agree on how long the professional relationship should last and on how decisions will be made.
Gathering data, including goals
The financial planner should ask for information about your financial situation. You and the planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary documents before giving you the advice you need.
Analysing and evaluating your financial status
The financial planner should analyse your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analysing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies
Developing and presenting financial planning recommendations and/or alternatives
The financial planner should offer financial planning recommendations that address your goals, based on the information you provide. The planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.
Implementing the financial planning recommendations
You and the planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your “coach,” co-ordinating the whole process with you and other professionals such as attorneys or stockbrokers.
Monitoring the financial planning recommendations
You and the planner should agree on who will monitor your progress towards your goals. If the planner is in charge of the process, he/she should report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes.
The recent consumer forum held in November at Gallagher convention, Minister in the Presidency, Trevor Manuel spoke about South Africa being a nation of highly indebted families. They are 18.84 million credit active people in South Africa. About 8.8 million of the 18.84 million were described as having impaired credit. This is all as a result of spending money we have not earned yet and spent it on goods that we don’t need. South Africa has a low savings rate and so people borrow money at emergency rates.
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