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Top tips on how to make a personal finance plan

Everything you need to know about making a personal finance plan.

Financial planning. istockphoto.com
Financial planning. istockphoto.com

1. The big picture

Once a financial adviser has analysed your situation, you will receive a detailed plan to act on. It usually includes firm recommendations for these major areas: how much cash you will need at various times in your life, paying for your children's education, the investment portfolio you should create, managing the unexpected, the insurance policies you should have, minimising your tax liabilities, preparing for your retirement, organising your estate and, if it is relevant to you, planning how you should pass on your business.

2. Costs

Your planner should first tell you how and when they will be paid. This is important because many people are quite rightly suspicious of being recommended policies, plans and investments that may benefit professional advisers more than their clients.

3. Setting goals

Do you want to retire at 55? Do you have dreams of a second home? What about private education for your children? It is important to consider everything you want to achieve financially.

4. The details

Your adviser will want to know your salary, prospects, investments, pension arrangements, property ownership, family commitments - and also your plans and ambitions. Your adviser will then analyse the information. Does your current financial situation square with your aspirations?

5. The plan

Once you have agreed on what you want in the future and your current financial status, the planner will draw up a programme to make your goals possible. You will then agree on how to carry out the recommendations in the plan. The planner may set everything up with the appropriate companies and professionals, or act as your coach and coordinate the process.

6. Monitoring and review

You will need to agree on a way to check your progress towards your goals. Usually, the planner will meet you regularly to review your financial situation and adjust your plan accordingly.

7. Invest regularly

A disciplined savings approach leads to optimal benefits. Take, for example, an endowment policy for the purpose of repaying a loan or a property purchase upon maturity. You keep up your monthly contributions for the full term of your policy to maximise your chances of achieving this goal. What you shouldn't do is discontinue the policy with the risk of possibly severe exit penalties. Similarly, an offshore investment plan can create the incentive to maintain the payments and, therefore, achieve the original objective. In addition, saving regularly can significantly boost your returns. This is due to what is known as "dollar-cost averaging".

8. Know what you can afford

In financial planning terms, it's important to cover short, medium and long-term objectives. Here, much is based on what you can afford. If you know you're going to need some of your money in the shorter term, then don't commit to investing large amounts over the longer term or the penalty may outweigh any benefits.

9. Don't lock in for too long

Offshore contractual investment plans can be a good option for those who can view long-term savings with a degree of certainty. This type of product, with its locked-in commitment to long-term savings, is incentive in itself to build wealth for the future. However, in many cases, a five, 10 or 15-year term is long enough to commit to.

10. Seek sound advice

It's best to be aware of all the risk factors when taking out a contractual plan and understand the commitment. Always ask to see your adviser's qualifications and how long they have been qualified for within the offshore market. Find out the reputation of the company they work for and make sure that it has all the correct licences in place to be providing financial advice.


Rupert Connor is an independent financial adviser at Acuma Independent Financial Advice