Various studies have found that most women leave the financial planning to their partners but according to Janine Horn, Financial Planner at Momentum, “Being financially independent is a worthwhile goal for any woman, whether you are single or married, it is empowering to know that you are in control of your finances and future.” Through comprehensive planning, you can employ strategies for your savings and investments, planning for retirement, education, emergencies, major purchases, and insurance needs.
Janine shares these eight strategies to keep in mind when planning your finances:
Stick to the budget
Creating a monthly budget is the first step towards financial empowerment as it gives you control over your life. “By creating a budget you can monitor and manage your finances more effectively and create a disciplined approach by improving the dialogue between you and your money.” Says Horn.
Settle your debt
Constant rising living costs make it more difficult to break free from the debt cycle. A recent study suggests that South Africans earning above R 30 000pm household income often default on debt repayments as they find life expensive and demands high. “Through sufficient planning, you can change this trajectory and get back into control.” Says Horn “Every bit you payback makes a difference and something as simple as a linked savings pocket can help you make a dent in your debt”
Wealth creation starts by committing to saving what you can afford on a regular basis from as early as possible. Horn says, “The power of compound interest is magnificent as your money could approximately double in value every 7.2 years.”
Build a financial foundation
A strong financial foundation takes care of you and supports your financial goals. According to Horn, it should constitute four basic components, “protecting me, protecting my stuff, supporting my family and building my future (and that of my family if applicable).” By ensuring that you have access to an emergency fund, you have adequate insurance and cover you can rest assured that you are financially safe along your journey.
Protect yourself against the unforeseen
By knowing how much money you will need to take care of your family and household expenses upon the event of death, disability or critical illness can decrease the impact of a life-changing event. According to Horn, “The biggest asset any working individual has is their ability to earn an income. This income needs to be protected in some way or form that is correctly structured and comprehensive enough to aid in times of need.”
Associated specialist and doctors often charge above the medical aid tariff resulting in a potential shortfall. “A Gap cover product essentially closes the gap of such a shortfall.” Says Horn.
Leave a legacy
Everyone should have a valid executable last will and testament to ensure that their loved ones are taken care of. The stats of intestate (death without a will) deaths are alarming. The words valid and executable are key as it relates to this will being dated correctly in front of independent witnesses not mentioned in the will via inheritance or bequests or guardianship or trusteeship. Minor children under age 18, should be appointed a guardian if no second natural parent is present or make use of a testamentary trust. It is not recommended to bequeath assets to minors, however, if this is the case, nominating an adult should be considered look after the interests of the child.
Plan for retirement
Results recently released by Lancet show that women live up to 5 years longer than their male counterparts. You can maintain your current lifestyle when retired by contribution towards your retirement fund from an early age, working a year or two longer and using a life annuity to convert your retirement payout into a sustainable income stream for the rest of their life.” Horn says.
Use the tax-man
She concludes, “Tax deductibility is an under-utilised opportunity.” The allowance for retirement funding is up to 27.5% tax deductibility. This could be utilised towards paying off debt or investing in wealth creation. A professional financial planner can assist with calculations according to your unique circumstances.