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Reviewing your financial plan for 2012

Published

2012

Wed

22

Feb

For many consumers, creating or reviewing a financial plan seems like a daunting prospect and something that may not warrant the effort due to the thought of trawling through hundreds of policies to decide which one is the best financial fit.

 

This is according to Jason Garner, Financial Planning Coach at acsis, who says that the problem with this kind of thinking is that if not regularly reviewed, financial plans can potentially become irrelevant, which in turn could result in financial failure.

 

He says that according to recent research conducted by acsis, the financial security of pre-retired individuals with a financial planner and an updated financial plan in place is significantly higher than those without a financial planner. “This is a clear finding that a living financial plan and the use of an expert in these matters significantly empowers people and contributes to their financial well-being.”

 

Garner explains that a financial plan should be a clear and concise document that reflects the essence of where an individual is along the path to financial freedom, as well as where the individual intends to be in future.

 

“Not reviewing financial goals can be compared to taking a long road trip to an unfamiliar place without taking a look at a map. Chances are if this kind of road trip is taken, the destination may never be found. To avoid this happening financially, consumers need to start looking at a map in order to get to where they want to go. A financial plan is in essence the road map of an individual’s financial affairs and life in general.”

 

He advises that while reviewing a financial plan is crucial to evaluating goals and whether these are being achieved, there is also a danger of reviewing your financial plan too regularly. “While it is essential to review a financial plan, it is important not to review it too often, as making adjustments too regularly can actually result in failure to achieve financial goals.”

 

Garner says that in order to review a financial plan, the individual firstly needs to determine his or her current financial situation. “This will include understanding what type of lifestyle is currently led, how money is being spent and what savings contributions are being made. After this has been evaluated, short and long-term goals need to be determined. This can include retirement plans, children’s education and purchasing a home. Once these goals have been identified, the actions that will assist in achieving these goals can be determined.”

 

He says a financial plan should cover all aspects of an individual’s life, but as every individual is different, there is no ‘one size fits all’ option and as a result, each financial plan will differ according to an individual’s specific needs. “General areas in most financial plans will include risk planning, investment planning, retirement planning, wills, estate planning, tax planning and trusts. 

 

“Once an individual has identified their goals, it is important to document the financial plan in order to remember the goals set and also to measure the progress over the years. The simple act of reducing something to writing and then placing a signature to it makes the plan more concrete than having them floating around in our heads, where it is easy to ignore, forget or simply adjust to suit our everyday lives.

 

“Another reason to document a financial plan is for the review process. A documented plan will provide the necessary tools to measure the progression and help understand what worked, what has changed and what needs to be changed.

 

“Choosing a good course to follow and sticking to it, even when things may be tough, will give us a better chance at reaching the desired destination, rather than constantly trying to navigate around areas. With the exception of something drastic happening, having a review on an annual basis should be sufficient to check on the goals and actions laid out,” concludes Garner.

 
Source: Epic Communications (Pty) Ltd
 
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