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Taking stock of where you are financially

With 2013 almost behind us and the New Year knocking at the door, it might be time for consumers to take a step back and reflect on their current financial situation to see whether they are on track to meet their home-buying goals for next year, says Adrian Goslett, CEO of RE/MAX of Southern Africa. 
 
“While we saw financial institutions slightly relax their lending criteria and show an increased appetite for risk throughout 2013, the fact remains that those who are loan-dependent and want to purchase property will still need to show affordability and have their financial affairs in order before applying for finance. This applies to both consumers who aspire to own property in the future as well as those who currently own a home and would perhaps like to upgrade to a larger home or obtain additional finance for renovations to their existing property,” says Goslett. “Reviewing their current financial situation on a yearly basis will allow consumers to take stock of where they are now and what adjustments they may need to make to achieve their financial goals for the coming year.”
 
Goslett notes that performing an annual review will give consumers a clear indication and measurement of their financial progress over the last 12 month period. “An annual review will help consumers to assess what worked and what didn’t, what needs to change and what is on track,” he adds. “When performing the review it is advisable to revisit the foundation of the yearly financial plan and evaluate resources, goals and priorities. This is a great time to incorporate any major life-changing events and how they will impact on the plan moving forward into the next year. These could include the start of a business venture, marriage or birth of a new baby, all of which could shift goals or requirements in the future,” says Goslett.
 
He notes that life altering events could change the time frame in which certain financial changes, such as purchasing a larger home, need to happen. “In the case of a growing family where the current home no longer meets the needs of the homeowner, buying another home will become a priority that needs to be addressed sooner rather than later. This is where the services of a professional financial planner could really assist the consumer in making the best decision on how best to proceed. They will be able to recommend the correct financial approach to obtaining time-sensitive goals,” advices Goslett.
 
He adds that consulting a tax professional is also a key element to consider if any life changing events occur as certain changes could have tax implications. “During the annual review a consumer can prepare for their next tax return by ensuring they have all their documentation and receipts in order. This is also an excellent way to assess what they are spending their money on and what can be changed or relooked at such as insurance or investment accounts,” says Goslett. 
 
He notes that a vital element to any financial review, particularly for those wanting to show higher affordability levels, is looking at debt and seeing what can be paid off as soon as possible. “Outstanding debt will decrease a consumer’s chances of obtaining finance and more importantly, will impact their back pocket each month. Those fortunate enough to get bonuses during this time of year could put part of that money to towards putting themselves in a better financial position by getting rid of debt where possible. Alternatively, paying an extra amount towards debt each month could help make steady progress towards eliminating the debt completely,” says Goslett.  “Tackle spending issues where possible and most importantly, know where your money is going.”

It is vital that consumers have benchmarks that they can use to monitor and measure their financial position each year. “If there is no benchmark or gauge by which progress can be measured, it is very difficult to determine whether consumers are on the right path financially. For example, if the consumer requires or expects a certain percentage of return on their investment portfolio and this is not being met, they know to relook at the areas which are not performing and make adjustments to put them back on track,” says Goslett.

He adds that small changes can make a big difference; provided they are the right changes and consumers stick to them. If a consumer’s current financial plan is keeping them from getting to where they want to be, it is best to act now rather than wait.  “Assess the changes that have occurred and anticipate any changes that may happen in future. With the right changes and financial plan, anything is possible,” Goslett concludes.


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