Plan your Money



What’s involved in a Financial Plan for You?
Well let’s look at a brief summary of what each plan really involves:

Firstly lets look at the 3 main plans that make up a financial plan:

  1. Cash Plan
  2. Investment Plan
  3. Insurance Plan


1. Cash Budget Plan
This is made up of 2 parts:

  1. A plan to ensure that you meet payments for living expenses and bills.

    These are generally made up of:
    • Regular expenses e.g. food, power, phone, water, fuel.
    • Fixed expenses e.g. rent, mortgage, debts, car registration, rates, insurances.
    • Irregular expenses e.g. hairdresser, dry cleaning, entertainment, holidays, emergencies.

    Have you ever found that you’ve been short on cash to pay bills, or fallen behind in paying bills on time? Has your credit rating been threatened or marred? Everyone knows they need to budget, but have you actually organised a written easy-to-follow plan of your budget? Now is the time.

  2. A debt reduction plan to reduce debt (especially your mortgage) and become debt-free as quickly as possible. Debt is the biggest curse to a financial plan. Unless it is under strict control, it can mean a retarded financial lifestyle, living with a constant ‘burden’ and pressure. Get debt under control, eliminate it as quickly as possible and become debt-free. You can do this with a well-structured plan.


2. Investment Plan
For those on a reasonably good income this could be the ‘guts’ of their financial plan. Income for now may not be a major concern. However, they want to plan for future financial needs, so an investment plan is essential to ensure their surplus monies are not wasted.

The plan is made up essentially of the following 5 sub-plans:

  1. Income Plan
    This involves investments that provide interest or dividend income to supplement the income from wages and salary in order to meet the requirements of the cash budget plan.
    E.g. term deposits, government stock, low cost fixed interest funds.

  2. Capital Growth Plan
    This involves investments that are primarily for capital growth (tax free) to meet financial objectives in the future (e.g. buying property, car, funeral costs, long term emergencies etc.).
    E.g. term deposits, shares, managed funds, stocks, property.

  3. Retirement Plan
    This involves investments that are also primarily for capital growth in order to provide enough capital in retirement to provide an adequate annual income from interest when reinvested, or to purchase an annuity (i.e. an investment that guarantees regular income for many years to come).
    E.g. mixture of deposits, managed funds, shares, stocks, etc.

  4. Tax Plan
    This involves investments to meet tax bills of the future.
    E.g. short term deposits

  5. Estate Plan
    This involves investments (incorporating trusts and wills) to ensure your estate (all your assets) attracts minimal tax and on your death passes to exactly who you wish to be the beneficiaries.


3. Insurance Plan
Another good term used here is risk management.

The fundamental philosophy is ‘protection”. Protect you, your loved ones and your assets. Most people hate paying insurance premiums because they can’t see a tangible regular return like a normal investment. Imagine for a moment what would happen in the ‘worst scenario’ -  imagine the grief, the emotional stress, the financial pressure, if there are insufficient funds should one crisis occur - imagine if they all occur one after the other - generate nightmares around this, and you’ll find the premiums won’t feel so bad afterwards.

There are essentially 5 plans to consider:

  1. Life Cover Plan,
  2. Income Protection Plan,
  3. Critical Illness Plan ,
  4. Medical,
  5. Asset Protection Plan