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Financial Planning Simple Not Easy by John Browett CFP® of Blue Key Financial Planning

It has taken me nearly 20yrs as a financial planner to try and get to the essence of financial planning and although I am a slow learner its simple but not easy.

Have a clear picture of your current income and expenses, get a plan to have your income greater than your expenses, invest the difference, protect yourself and your assets against risky events, review regularly and take action where you can improve.

Simple, but not easy, let me explain.

I think financial planning can be broken down into 3 simple steps.

  1. Establish your current financial position.

  2. Create a plan.

  3. Action the plan.

Establish your current financial position

The basis of your financial planning should start with a clear understanding of your current income and expenses. Why is this necessary? It’s necessary because you have to have a realistic starting point for your financial plan.

Start with your actual income and expenses for the last year and break them down into the following categories:

  1. Essential – Housing, Food, transport, debt repayment

  2. Risk protection – Medical aid, Insurance, emergency fund

  3. Future Self

    1. Long term (10yrs+) Investment – retirement fund

    2. Short term (1-3yrs) Saving – holiday


  1. Discretionary expenses – everything that doesn’t fit into the groups above.

Keep it simple.

Create a plan

Your financial plan should incorporate the following:

  1. Income > Expenses

  2. Protect against risk

  3. Invest for your future

Income > Expenses

There are two parts to this equation, income and expenses. Make sure your plan incorporates both. Increasing your income and reducing your expenses.

Increasing your income generally requires some longer-term planning like upskilling yourself, getting another job, creating additional income, having a side hustle.

Reducing your expenses is the area where most people have the most control and has the benefit if sustained of reducing your income requirement in the future.

Protect against risk

The idea here is to protect yourself and your family from the high cost of certain risky events derailing your finances.

We are experiencing one of these events to a greater or lesser degree right now with the economic and virus pandemic lockdown. The importance of an emergency fund has never been greater. We used to recommend 3 to 6 months’ worth of living expenses in a money market fund, now we think that 12 to 18 months’ worth of living expenses are more prudent.

Insurance is a waste of money until you need it. These are financially speaking, small premiums to pay for the security these products offer at the very times you need them most. Consider the following products that are designed to protect you from the high cost events that might happen to you.

  1. Emergency fund – 12 -18 months’ worth of living expenses

  2. Medical Aid – medical expenses are one of the biggest over a lifetime

  3. Risk insurance – protect earning capacity and cover debt

  4. Will – protecting and providing for loved ones

Invest for the future

One of the most important things to remember when investing the difference between income and expenses for your future self is the reason why you are investing in the first place. It matters because it helps you keep your focus on doing the right thing when it comes to your money.

Investing for the benefit of your future self or loved ones should be based on time frame.

It is important to point out here the difference between saving and investing and it comes down to timeframe. Consider savings as any expense you are likely to have in the near future (1-3yrs). Anything longer than that consider as an investment. The requirements for savings are the protection of capital and the interest you earn on that money. Investment is about growing your capital to combat the eroding power of inflation.

Review and action the plan

Let’s review what we have so far. You have a clear picture of your income and expenses and where you are currently with your finances. You are protecting yourself and your assets, you are saving for the short term and investing the difference for the long term, great!

Now you have a financial plan, but plans are meaningless unless they are put into action.

This is where a financial planner that specialises in behavioral coaching can really help with the following:

  1. Why are you doing the planning?

  2. Are you on track and where can you improve?

  3. How can you action the plan and stick to it?

Simple but not easy!

Thanks for your attention

John Browett CFP®

Some links that might help:

Carl Richards – The Behavior Gap

Simon Sinek – Finding your why?

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