THE 8 COMPONENTS OF A HOLISTIC FINANCIAL PLAN

Your financial plan should incorporate all areas of household and personal finance. Here are the eight components you need to have in place to fully provide for you and your family’s current and future financial needs.

1. BUDGET

This is a record of your income and expenses that enables you to monitor what money is coming in and where it is going. It should guide you on how much to allocate to your various household expenses and to savings and investments.

2. MEDICAL AID

While unlikely to cover all your health expenses, medical scheme membership is essential for you and your family. Even the most basic options importantly cover expensive private-hospital procedures for lifethreatening illnesses and injuries.

3. SHORT-TERM INSURANCE

This is insurance cover for your possessions – from your house to your car to your personal belongings. But it can also cover you for liability for damage to other people’s possessions or for compensation if, say, someone is injured on your property.

4. LONG-TERM INSURANCE

This is life and disability cover primarily for the breadwinner/s in the family, without whom your dependants would be left without an income. Some financial planners believe disability cover in the form of income protection is more essential than life cover.

5. SHORT-TERM INVESTMENTS

These are your savings towards short-term goals such as an overseas holiday or the deposit on a property. They should include an emergency fund, which is savings to cover your living expenses for at least three months, in case your income suddenly dries up.

6. LONG-TERM INVESTMENTS (RETIREMENT PLANNING)

These are investments for future events, of which the most important is when you cease working for a living and have to depend on an income from those investments. They should ideally be in inflationbeating growth assets.

7. TAX PLANNING

This involves planning your investments and expenses in such a way that you legitimately reduce what you pay in tax, be it income tax, taxes on investments, or estate duty. Various financial products are designed to take advantage of tax breaks.

8. ESTATE PLANNING

This involves having a plan in place for when you pass away, whether that be sooner or later – the essential element is a will. Depending on the size or complexity of your estate, you may look at options such as establishing a trust.