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Taking your financial pulse

“With financial institutions adhering to such stringent lending criteria, it is becoming ever important for home buyers to show affordability and keep their financial affairs in order. This applies both to those looking to purchase property in future as well as those who currently own property and may want to take out additional finance for renovations or upgrades. An annual review will give consumers the opportunity to examine their financial planning action steps and measure the progress they are making towards attaining their financial goals,” says Goslett.

During the annual review, Goslett suggests revisiting the building blocks of the financial plan and reviewing resources, goals and priorities. According to Goslett, this is also an excellent time to incorporate any major life changes into the financial plan that may have occurred over the past year such as a marriage, birth of a child, a death, or a new business. These elements will have an impact on how financial needs and planning may need to be adjusted.

“A major life change will more than likely change a homebuyer’s need or short-term goals, especially if their family is growing and the property they are living in no longer meets their requirements. They may need to purchase a home sooner rather than later, which would mean that more money would need to be set aside for the 10% to 20% deposit required by the banks. A professional financial planner could recommend strategies for time-sensitive objectives,” says Goslett.

He notes that as part of their financial plan, consumers should consult with a tax professional to explore how life changes could also affect their tax status. “Homebuyers should make sure that they are prepared each year for their annual tax return by getting receipts in order. This way they will be able to document their spending on tax deductable items. Keeping things in order will also help to ensure that they are getting the most for their money on expenses such as insurance, flexible spending accounts, cell phone plans and even investment fees,” says Goslett.

An important element of any financial plan, especially when wanting to show affordability to banks to assist in getting home loan finance, is to pay off existing debt as fast as possible wherever possible. “Even R100 more a month than the required payment will make steady progress towards eliminating the debt completely. Putting money aside can also help consumers to stay out of debt and at the same time build an emergency fund. For this, a set amount can be transferred into a savings account each month,” says Goslett.

He adds that the act of monitoring and benchmarking is beneficial. “Consumers should measure the performance of their investment portfolio as part of the annual review. Typically, performance should be measured against several benchmarks, but the most important of which is the consumers own benchmark. For instance, if they had established that the portfolio should grow by a certain percentage each year, the portfolio’s performance should be measured against that yardstick,” says Goslett.

He concludes that, just like a medical checkup, taking your financial pulse is not something to put off.  “Tackle spending issues where possible and know where your money is going. If necessary, implement changes if your current financial plan is keeping you from getting to where you want to be.  Take the time to examine your financial and life goals in order to determine that the course you are on will attain these goals. Review changes that have occurred and anticipate changes that may occur in the future – because with the correct planning anything is possible.”


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