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VIEWPOINT: CONSTRUCTING A FINANCIAL PLAN

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The main purpose of a financial plan is to provide you and your dependants with a strategy to achieve a financial position in which you can maintain or improve your current lifestyle. It is important that your financial plan aligns with your current financial situation and life goals.

A financial plan should consist of a variety of products that fit your specific needs while providing the correct amount of cover in the event of an unforeseen incident that leads to financial loss.

How to select appropriate financial products

As part of the planning process, a financial adviser should provide you with sufficient product advice. As soon as it has been determined what type of cover you need, the adviser will assist you to find the most appropriate products to implement into your overall financial plan.

What type of insurance should be a priority?

You will go through various stages in your life and your financial plan will have to adapt according to changes in your health, possessions, wealth and legacy requirements. It is advisable for most financial planners to first take care of health insurance because it is important that you have some sort of medical insurance in place should you contract a minor or terminal illness, be involved in a car accident, or sustain an injury.

Short-term insurance provides cover for any assets that you own, such as a house and its contents and motor vehicles. In the unfortunate event of theft or damage to your valuable possessions, sufficient short-term insurance will cover the cost to repair or replace the item without you having to pay the total loss out of your own pocket.

Why is life insurance important?

When it comes to long-term insurance, products such as life cover play an important role in estate planning to ensure that you have liquidity in your estate so that there is something left behind for your dependants – especially if you are the main breadwinner.

By having proper life insurance in place, your beneficiaries will not have to sell any of your assets in order to pay outstanding debt, taxes or cover expenses following your death.

Protecting your income

Essentially, you are your biggest asset. Most people do not realise how much it would cost them overall to replace their monthly income for their entire lifetime should they fall sick, become disabled or be permanently incapacitated. Income protection is vital as it will replace your salary should an unfortunate event such as disability or terminal illness impact your ability to perform your profession and will enable you and your loved ones to maintain your current standard of living.

You should not evaluate your financial plan based purely on financial services products – it should be evaluated on the attainment of specific financial goals in the event of a future incident. A good financial planner will listen to you, ask appropriate questions and then provide a comprehensive financial plan. A strong adviser will guide you through the complexities of the products to ensure these achieve your desired financial outcomes. Since every person has different life circumstances, goals and family structures, it is imperative that you have your own tailored financial plan. There is no one-size-fits-all solution when it comes to financial affairs.

Author: Tiffany Boesch CA(SA) is group financial director of PPS

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