The pandemic we are facing is one of a kind however it is not a new scenario to the world. There have been numerous and quite severe pandemics that left challenging impacts on the world. These previous pandemics changed the world, they brought about heart aches, financial loss, infrastructure devastation and so many other challenges that may have not been seen with the naked eye. BUT, with all that being said the world is coming out so much stronger, agile and versatile. As much as this pandemic has created turmoil is has also given us the opportunity to sit back and actually reflect on different areas of our lives.
One of the hardest hit areas of our lives will be our financial wellbeing. Whilst we work tirelessly in creating a financial sustainable lifestyle for our current and future needs, it is evident that circumstances can change at a blink of an eye. Because of this, the current pandemic has challenged us to introspect on decisions that we have made, why we made those decisions and how we can change the trajectory of our financial future into a positive one. There’s two schools of that: those that try their hardest to plan everything to the T and others that “go with the flow”. I’m sure that we can all appreciate that the current phase of our lives requires us to be a little more aware of our financial landscape and how our financial decisions may impact the future.
Because we are all more aware of the volatility that our finances can experience because of a pandemic, we can definitely now discuss strategies that will assist us to be better prepared for the unknown future. I use the term better prepared because we simply do not know what is ahead of us and we can almost never be fully prepared but we can get pretty close. If you have never done a financial plan, this is your first step. Mapping out your finances in a structured financial plan will let you know where your challenges are and create a clear and decisive strategy on how you can attain your financial goals going forward. Financial plans need to be reviewed and monitored on an ongoing basis to be relevant and applicable to your current life circumstances as well and your updated financial goals.
Below we are going to discuss aspects of your financial plan that need to be part of your financial plan at all times. The sub categories will allow you to simplify your financial strategy so that you have a clear vision of your way forward:
- Emergency Fund
Whilst we have heard extensively about emergency funds, it is crucial to always have it as the foundation of your financial planning needs. There are a couple of reasons why it is really important to have one. Some of the reasons is: liquidity, rainy day fund and conservative strategy in your portfolio. Liquidity is crucial in every financial plan as money may be required and expected at unexpected times. Thus, you cannot have all your money tied up in illiquid assets that will take far too long to convert into cash. We also need money for rainy days when emergencies or rainy days crop out of nowhere. Having an emergency fund that caters for such instances will make your financial planning strategy more ideal. The last aspect refers to an emergency fund being invested in a conservative portfolio for the benefit of reducing volatility in your holistic portfolio.
2. Retirement Planning
Most of us, especially the employed, think that we have our retirement sorted because we are contributing monthly towards some sort of retirement fund. I hate to be the bearer of bad news, but in most instances the amount being contributed is simply not enough. In your financial plan, extensive retirement planning calculations need to be done to actually understand how much do you need to retire comfortably when the time comes. Society has also positioned us in thinking retirement is very far but in actual fact, depending on how much your contributing, it may be closer than what you anticipated. Make sure that you factor in retirement planning so that you still live a financially sustainable life upon retirement.
3. Goal Orientated Strategies
We don’t live life to merely plan for the future. We also want to make sure we achieve our life goals whilst we are still alive, lol. For this to be achievable, without using too much of the credit facilities readily available, you need to actually plan for the goals that you have for yourself. Whether it is travelling Europe for a year, furthering your studies or even buying the car of your dreams, planning ahead will allow you to achieve your goals and not be in the red financially because of debt.
4. Wealth Creation
Wealth creation is one of the building blocks in financial planning. However, wealth creation is one of the last phases of the bigger picture. Whilst we always want to have the end in mind, we simply cannot start with the last phase especially if we want to financially sustainable. Wealth creation is inclusive of increasing your net estate as a person and making sure that your assets are more than your liabilities. This also includes being able to leave behind an inheritance for your loved ones one day.
These are some of the aspects that are pivotal for you to be able to grow your finances in a sustainable and exponential manner. When you make the decision to create, grow and preserve wealth through financial planning a clear and decisive financial plan will get you well on your way to achieving those financial goals you set out for yourself. I hope this pandemic has opened your eyes to the crucial benefits of having a solid and sound financial plan going forward.
The New Era Financial Planner