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When Things Don’t Go According To (The Financial) Plan

Posted On: Saturday, April 2, 2022

When Things Don’t Go According To (The Financial) Plan

It’s all about priorities

When we talk about disorder, we don’t necessarily mean calamitous events like divorce or family feuds (although these are both excellent examples). Disorder can simply be the realisation that you don’t actually enjoy living in the dream house you’ve ploughed your life savings into. Or coming to terms with the fact that the son or daughter you’ve groomed to take over the family business would prefer to be a pastry chef.

While moments like these shatter the spreadsheeted calm of the financial plan, they also open your eyes to the things that really matter. After all, what’s the point of a financial plan if it doesn’t bring you and your family happiness?

Don’t feel embarrassed

As financial advisors, we are granted privileged access to the families we serve – and there’s not much we haven’t seen. Rest assured that we treat all client matters with utmost confidentiality.

Over the years, we have come to value the moments of tension that transpire in our offices (real and virtual). This is why we encourage both spouses to attend all meetings. And we also welcome you to bring the (older) kids along if you’ll be discussing things that will affect their future. In the short-term, disagreements can be awkward and embarrassing. But it’s impossible to put a price on the immense value that comes from knowing where everyone stands. Once everyone has put their cards on the table, we can craft a plan that will help every member of your family achieve what they really want. (Until their plans change again, of course!)

Be prepared

While we’re convinced of the long-term value of disorder, we’re also aware that it can leave you in the short-term financial lurch. That’s why we spend so much time stressing the importance of having practical contingency plans in place. These include:

  • Maintaining an emergency fund. On any given day, you should have enough cash on hand to cover six months of living expenses. Keep your emergency fund topped up using monthly debit orders. And store it in a money market unit trust, which earns decent interest but is also easy to access.  
  • Sticking to a monthly investment plan. Keep contributing towards a retirement plan, month in and month out, regardless of the prevailing market conditions. By spreading your investment over a longer period, you’ll benefit from rand cost averaging. Always being in the market has other significant advantages: A five-year study of the JSE assumed that four people invested R1 million in a basket of shares in October 2013. By October 2018, these were the results:  
    • The investor who stayed invested throughout was worth R 5.4 million.
    • The investor who missed the 10 best days by trying to time the market was worth R 3.1 million.
    • The investor who missed the 20 best days was worth R 2.1 million.
    • The investor who missed the 50 best days was worth R875 000 – a loss of R125 000.  
  • Not skimping on medical aid. Many people are tempted to cut corners when it comes to medical aid. While this is easy to understand – medical aid can seem a waste of money when everyone is healthy – it is definitely not to be encouraged. You’d be amazed at how quickly hospital bills can add up, even for relatively minor medical issues.  
  • Taking out sufficient life cover. Life cover is another significant monthly expense that gnaws at the budget. But not having sufficient life cover can prove far more irksome. You should have sufficient life policies to cover all debt and also to provide enough capital to earn the surviving spouse an income. Be sure to take out an income protector policy that will pay you a salary if you’re unable to work due to illness.

The bottom line

If Plan A doesn’t work, remember that the alphabet has 25 other letters! Also remember that a plan based on hard home truths is far more resilient than pretending everything’s perfect. Successful financial planning is all about trusting the process and being honest – with yourself, your loved ones and your financial advisor.

The good news is that you don’t have to make any difficult decisions on your own. As your financial advisors, we’ve seen it all before, and we’ll walk by your side every step of the way. No matter how many times we need to go back to the drawing board. Contact us!

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