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Reviewing your Personal Financial Plan and Why it’s Important

The personal financial planning process is an ongoing activity that should form an integral part of your overall plan.

There is a common misconception that a personal financial plan is formulated and implemented once and doesn’t need much attention afterwards.

However, on the contrary, the only way your financial plan is going to work for you the way you want it to is for you to review it regularly.

personal financial plan

The Importance of Personal Financial Planning and Analysis

The only thing constant in life is change and your financial situation is not exempt from this rule. Much of your personal financial climate is dependant on external factors such as inflation.

With this in mind, it’s not hard to understand the importance of keeping your finger on the pulse when it comes to how you spend and manage your money, as what was affordable today may become an exorbitant and unnecessary expense tomorrow.

Being proactive plays a fundamental role in getting and staying ahead of the game as you anticipate your opponent’s move before he makes it, allowing you to deliver the best possible defence.

Yes, this concept can be applied to your personal financial planning process too; instead of waiting for a financial knock, assess your situation, make adjustments and be prepared for the unexpected.

Let’s elaborate and get more specific.

Reviewing your Personal Financial Plan

Monthly

There is no need to reinvent the wheel. Once you have a budget in place, all you need to do is look over your expenses to see where you can cut back on expenditure. Don’t try and create a new budget to suite your spending.

The most efficient way to stay on top of it is to review your spending each month. This may sound like a lot of effort, but this is the best way to make sure your money works for you and not the other way around.

Here are some questions you can ask yourself:

  • Am I spending more than I make?
  • Am I spending my money on unnecessary luxuries?
  • Do I have money left over every month that I could be saving?
  • Do I have monthly subscriptions that I am not using?
  • Expect the unexpected. Take the three biggest expenses; car service, holidays, school fees, registration fees etc, and work out how much you need to keep aside each month to cover these

Once you have assessed your situation, take a moment to write down a to do list which will help you action the changes you want to make and then hold yourself accountable to work through the list before the end of the next month.

Follow this process each and every month until you find a happy medium where saving is important, cutting back on reckless spending becomes easier and your long-term goals become your biggest priority.

  • Decide why this is important to you
  • Commit to new habits
Quarterly

This is where you will look at the bigger picture which includes your retirement plans and other investments or savings vehicles.

Looking at these on a quarterly basis allows you to identify any major changes in these vehicles which will influence the way you interact with them.

In other words, you may find that your monthly budget reviews have freed up some extra money that you didn’t have before, allowing you to increase your contributions. You may want to restructure your retirement plan to align with new developments or priorities in your life.

Quarterly reviews will also be a time to consider any once-off expenses that are on the horizon before making the adjustments necessary to prepare for them.

This is also the time to look at the progress you have made on your debt repayments:

  • Can you afford to pay a bit more each month to finally settle all your outstanding debt?
  • Have you settled your debt completely? If so, can you put that money into a savings vehicle?
  • What can you do to avoid getting into more (or new) debt?
Annual

Some events only happen once a year and it’s good to be prepared for them before they happen. For example, you are allowed to change your medical aid plan or option once a year.

This is an excellent opportunity to cut costs. You may find that you don’t need a comprehensive plan with all the bells and whistles. Perhaps a hospital plan with gap cover can save you a bit of money each month.

Check your credit score. By law, every South African is entitled to one free credit report about themselves, every year.

Calculate your net worth: The difference between what you have and what you owe = your net worth. Use this as a guide or goal to improve year on year.

There may be other annual events that you need to plan for – whatever they may be, you can ensure you are prepared for them if you check in once a year to see when these events will take place and what they will require from you.

Olemera – Financial Advisors in Johannesburg

All of this may seem daunting at first and you may think it’s couldn’t possibly be necessary to check in so often.

However, being proactive is absolutely key to ensuring you achieve and maintain financial security both now and in the future.

Our financial advisors in Johannesburg are committed to helping you achieve every financial goal you may have.

As part of our services, we offer our clients sound advice throughout the year and extra support and guidance during the review stages.

We believe that this will play an integral role in making the most of your personal financial planning process.

If you would like more information about our services, or for tips on how to help you budget and manage your money, please contact us.

Comments are closed for this post, but if you have spotted an error or have additional info that you think should be in this post, feel free to contact us.

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