“A few wrong decisions on seemingly minor choices can actually have a significant impact on your overall financial health.”
In the fast-paced world of professionals, financial planning can often fall to the bottom of the priority list while they are trying to strike the right balance between work and life. However, it is critical that professionals start planning their finances as soon as possible and even for those who do so from a young age, a few wrong decisions on seemingly minor choices can actually have a significant impact on their overall financial health.
This article is the first in a series that will appear over the next six issues of Accountancy SA and which will explore six common mistakes that can negatively impact one’s personal financial situation. These include listening to the wrong financial advice; not saving enough or saving too late; failing to take out insurance; not realising the importance of disability cover; ignoring medical cover; and failing to take out income protection. By educating yourself about these common errors when planning your finances, it is possible to make the correct decisions to ensure a more comfortable financial standing.
MISTAKE NUMBER ONE: LISTENING TO THE WRONG FINANCIAL ADVICE
The problem is that while graduates are highly educated in their chosen profession, they may not necessarily be fully informed when it comes to managing their personal finances effectively. This is where the value of advice comes in – and having the right financial advice can make the world of difference.
When it comes to identifying the most appropriate adviser, it is important to source references rather than choosing the first person you encounter. If you are in doubt as to whether someone is a registered financial adviser, you can visit the Financial Services Board (FSB) website (www.fsb.co.za) and enter their Financial Services Provider (FSP) ID number to check they are authentic.
Once appointed, a financial adviser’s first course of action should be to conduct a financial needs analysis to determine what your specific financial needs and goals are and then come back to you with a variety of options to choose from. Insurance and investment policies may contain technical language and jargon, but a good adviser will fully explain how the investment product works so that you know exactly what you are paying for. Once you have received the options, it is a good idea to conduct your own research, which can easily be done online as most financial services providers have online websites.
Before deciding on products, it is important to discuss the fees involved with your adviser as they can sometimes be difficult to understand and compare. Make sure you ask your financial adviser to explain how the fees work and how they will impact on your finances in the long run.
Join Tiffany for the next article on financial mistake number two: not saving enough or saving too late. ❐
Author: Tiffany Boesch CA(SA) is group financial director of PPS