Saving for your goals in five simple steps

Written by Tshepo Matseba
Monday, 03 October 2011 18:12

It is never too late to start investing, writes Tshepo Matseba. Here is how you can ensure that your money works for you. By now most of our goals for 2011 have either taken hold or bitten the dust. Have you managed to stop smoking or made it to the gym every morning? Without beating yourself up too much, it is important to realise that this type of goal can fall by the wayside. However, do not wait ’till the year ends before you realise your goal.

If one of your more important goals was to get your finances in order, there is still time to get started.

After getting your debt under control, growing your money through investing is your next best move. The most important lesson is that investing is more about developing a well-thought-out strategy suited to your individual needs than guessing and trying to predict where the quickest money is to be made. Here are five simple steps to achieving your investment goals.

1. Come up with a plan


First things first – ask yourself what you would like to achieve. More money is obviously the plan, but ask what you need the money for and by when. Your starting point is drawing up what is known as a financial needs analysis (FNA). This is a formally constructed document that gives you a complete overview of your entire financial situation – what you owe and what you have to pay out each month versus what assets you have and how much money you earn. From here you can work out your route map to achieving your financial goals. In fact, FNAs are considered so important that in South Africa, it is legislated that any financial adviser must conduct one before presenting any strategy or product to you. Taking everything into account is not a simple process, and it is recommended that you seek professional advice.

Your time horizon – short-, medium- or long-term – becomes important. This will depend on what you are saving for – a deposit on a car next year or your child’s varsity education in 18 years or even a comfortable retirement in 40 years. Make sure you have the money to stick to your plan over the long term.

2. Find an excellent financial adviser who is professional and competent


Something this important you need to get right the first time around, and you are entering into a complex industry with thousands of choices and options. It really helps to have a professionally qualified and competent financial planner to get you on track. You wouldn’t go to someone claiming to be a doctor who thinks he maybe has a good idea of how to make you better, so don’t chance giving your money to someone who is not qualified and authorised from a reputable financial services provider. It is best to contact the Financial Planning Institute of Southern Africa (www.fpi.co.za) to find a registered financial planner.

3. Do some research


Even if you have found a dependable adviser, it is a good idea for you to do your homework and brush up on your own financial knowledge. The financial services industry can be complicated, and there seems to be a whole other language that applies to managing your money. The more you know, the more empowered you are to control your financial destiny. Go to www.fsb.co.za for a list of helpful websites.

4. Be realistic


It is important to match your investment to your goals. Be realistic. You are not going to be able to buy a Ferrari in five years by saving R100 per month. For that amount, you probably won’t ever be able to afford a car like that! The time you set aside for an investment to mature, and the amount of money you are able to contribute will be the two factors that most determine the outcome.

Find out what your risk comfort level is. Sometimes a more volatile or risky investment can generate a quicker return, but there is a risk that an unstable investment can also turn the other way and you lose money. Your adviser will find out what level of risk you are comfortable with and apply that to your strategy.

Beware of dubious investment schemes that promise above-average returns. If it is too good to be true, it most likely is. Check with the Financial Services Board if you are dealing with a registered financial institution and with regulated/recognised products.

5. Stick to the plan


South Africans are notorious for not being able to save and plan for a financially secure future. Don’t be swayed off your path by wasting money on instant spending gratification. Stick to your time line and hang in there. Don’t let emotions influence you away from your goals. Between you and your financial adviser re-evaluate where necessary, but constantly implement your required strategy.

The best time to start securing your financial future is now.

Tshepo Matseba is the head of marketing at Momentum’s financial planning division.