Long-term financial planning as key to life as surviving each day

ZANELE KUNENE: Set a new money tradition for the next generation

Long-term financial planning as key to life as surviving each day

Are your lifestyle and family needs far too demanding to consider long-term financial planning? Zanele Kunene discusses.

By creating a long-term financial plan, you will be able to share the responsibility and have better control to adjust for life transitions.
By creating a long-term financial plan, you will be able to share the responsibility and have better control to adjust for life transitions.
Image: 123RF/DMYTRO

So many people hold doubts about the future, which makes focusing on short-term financial needs more doable. But long-term financial planning is the foundation of a healthy financial life for all of us.

As a breadwinner you usually find yourself responding to day-to-day household expenses and emergencies, as there is no time to prepare for the future. However, by reacting to financial matters and not being proactive, you will find yourself without options.

Believe me, I know, it is hectic as there’s always an urgent need and someone has to be a 24/7-problem-solver and hustler.

This is a draining multi-tasking circus, which is unsustainable and unhealthy for your mental and financial wellbeing. In reality, living pay-cheque to pay-cheque is the norm in many South African households, and it is a cycle that is passed on to the next generation.

The uncertainty of the future and the pressing needs of today may make long-term financial planning impossible but it is a great need. A long-term financial plan does not overstress the future but sets out the vision so that today’s activities create the life we desire.

By creating this financial plan, you will be able to share the responsibility and have better control to adjust for life transitions and emergencies. Here are a few tips to get started:

Set out your vision 

Setting out your vision is not about stretching your short-term goals but about creating a new standard of life when dealing with money matters. A collaborative approach should be taken so that everyone is included in the vision and has a role to play.

The aim is to create a document that outlines what, who and why achieving this vision is important. You are creating a team and setting boundaries to build a stronger financial future. From this exercise, you will outline your SMART goals, which are Specific, Measurable, Achievable, Results-driven, and Time-bound.

Past experiences may hinder your perspective negatively, so don’t focus on the heartache but the lessons you learnt. All of your experiences will not be the same.

Identify the problem areas 

We know that as breadwinners we are problem-solvers but we need to know the origin of the problems. It could be that the income is not sufficient or that the spending patterns are chaotic. The only way to know for certain is to thoroughly look at your cash flows. Print out your bank statements and grab a calendar to review where your hard-earned money went. Could you have planned certain needs better and were certain wants necessary?

In many households the biggest issue is transparency and the fear of being humiliated. For those of you who had to step into the breadwinner role due to Covid-19 or those who have always carried that title, remember that your wellbeing is just as important as the wellbeing of your family – be honest and open as you let your family in on your financial situation.

Living above your means is a huge contributor to losing wealth-creation opportunities with your income. Downsizing your lifestyle and selling the items you no longer need and use can free up some cash for immediate use or saving and investing.

Formulate the strategy 

A long-term financial plan is all about strategy, as it will guide you when addressing money and lifestyle matters. What will your debt strategy be? How will you tackle next year’s school fees? What about managing day-to-day expenses and emergency savings?

As you put together your strategy make sure that the essentials are taken care of such as shelter, food, utilities, transport, and security in terms of life cover, disability cover and medical aid.

Of utmost importance is starting a savings plan because relying on credit for emergencies can be detrimental. Try the following:

  • Get in touch with creditors to find the best payment plan for you;
  • Find out if your child’s school offers a discount for early payment;
  • Consider buying your groceries in bulk;
  • Cut out unnecessary spending – no more takeout weekends;
  • Pause certain subscriptions;
  • Automate your savings debit order; and
  • Review your budget regularly.

Long-term financial planning goes beyond retirement planning – it sets a new tradition for the next generation. Start the conversation and put together your plan, there is no time like the present.

 * Kunene is an associate financial planner professional at BDO South Africa

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