Category Life Insurance

Financial choices should be determined by life goals

09 September 2020 Lloyd Buthelezi, Head of Financial Consultancy at Standard Bank

Why do we save, invest and plan from a financial perspective? Ultimately, it is to build a nest egg that will one day allow us to remain secure after retirement. But life is not only about the destination, it is a journey in which key and life-changing events happen along the way.

Planning for an overseas holiday, marriage or for the arrival of a child, settling a mortgage account, starting a philanthropic effort or leaving a legacy are some of the common short-, medium- and long-term goals that most clients set for themselves.

Once these life goals have been clearly defined, it allows the opportunity to establish what it is going to take to achieve them. This is where financial planning comes into play. Many clients have different definitions of what this means to them. Where it generally all begins, however, is with the basics of saving.

After setting a deadline for your goal, it then becomes easier to save towards it. This may involve sacrificing certain monthly spending purchases to allow for a certain portion of your income to go towards a savings vehicle. There are various vehicles available to house your savings and the selection process is dependant on time horizon and objectives.

For short- to medium-term goals such as an annual holiday or the purchase of furniture, vehicles that offer an element of flexibility such as Exchange Traded Funds, Unit Trusts, a money market fund or a simple savings account allow for easy access to your money and can be used to attain those goals.

If you are saving towards a long-term such as retirement, a Retirement Annuity or Endowment Fund are structures that could be considered as withdrawals are limited. This reduces the temptation to dip into the funds and allows for the capital to grow over time.

The Tax-Free Savings Account (TFSA) is another vehicle that could be used to support your retirement savings or another long-term goal such as that of your child’s education. The benefit of the TFSA is best realised when staying invested for the long term to allow for capital appreciation to take place but can be used to place short-term savings to reach the target of a vehicle or home purchase or to house emergency savings. To achieve these life goals, an individual would need a professional financial planner by their side who will help to determine the financial goals, the time horizon and how the money will be invested. This is an intricate process that requires proper planning and risk assessment. This planning should not focus on a single strategy, but on wide-ranging and dimensional goal attainment.

No one wishes for a rainy day filled with financial heartache; however, one accepts such days are bound to come and soon must also plan for them. The reality of looking at financial planning and its benefits would grant one an opportunity to defer to what has been put away, an assurance everyone needs.

Self-respecting clients are no longer thinking along the lines of “I will deal with tomorrow when it comes.” They have come to the realisation there has to be better planning for the unplanned, the reality of knowing what tomorrow beckons is beyond anyone’s control.

Standard Bank Financial Consultancy works planners who really care about their clients; understanding that clients want you to dig deep to understand them and what they wish to achieve.

We live in uncertain times with economic climates that are volatile, hence being entrusted with life-changing financial decisions is a priority our financial planners take very seriously.

To achieve a financial goal is a journey, and this needs patience and making well-informed decisions so that the attainment of the said goal looks feasible, with a financial planner being on hand to advise a client, whether the status quo changes or not.

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