The Wealth Room

PLANNING: THE KEY TO WEALTH

Advice you were never given at school

By Rudi Bouwer, The Wealth Room

There’s a simple principle at play when it comes to saving and investing: the more you plan your finances, the greater your chances of being wealthy are.

Now basic financial planning is not as complicated as it seems. If you start with a simple budget and stick to it, you will eventually get to the point where you are building up savings. You can then use these savings to build your cash safety net (usually 3-6 month’s salary) and once that is established, start your investment planning.

Like your budget, your investment plan can be very simple, such as a monthly investment into an ETF (Exchange-Traded Fund), shares or money market. However, once you have some money to invest, deciding on an investment can be a bit intimidating. After all, there are so many opportunities to lose money or get ripped off, as well as a wide array of good choices. So how do you pick one? The good news is that there are some easy-to-understand investment options that are low cost and will generate good growth. You just need a basic understanding of finances and some patience.

Before choosing an investment, you should clearly set out your investment goals. These are usually time-linked in months (e.g. saving for a holiday) or years (e.g. saving for a house). The length of time will determine what type of investment you should take. To get started a good first step is to find a financial planner that is willing to go through the financial planning process with you; someone who will help you establish your short term and long-term goals and show you how to achieve them. Avoid financial planners that just try and sell you products based on what you can afford at the time. Also, make sure that there are no upfront commissions charged to your investment as this will dilute into your growth and will be purely beneficial to the planner.

Lastly, it is important to understand what investment risk is and how to decide how much risk you are willing to take, as it can affect your portfolio.

In conclusion, when looking to find an investment that suites you, you don’t have to be troubled by trying to figure out all the intricate details by yourself. Instead, you can partner with a planner that has your best interests at heart and let them help you with these details. Use your gut to find such a person; the same way you would when choosing a partner. After all, the birth place of opportunity stems from relationship and therefore, a person that has a vested interest in your well being will go the extra mile to find you the best solutions according to your unique story.