5 Questions you should be able to answer about your finances.

  1. Where are you?

The starting point in any journey is to know exactly where you are. In this instance you need to know the state of your finances. In simple terms- what are you worth?

Assets – Liabilities = Net worth

  1. Where are you going?

A successful journey has a clear end. What does this exactly mean? This means that you should be setting clear financial goals. It can be anything from short- to long term goals. Examples include:

  • Short term – Paying of credit card, save for emergencies (3 months to a year)
  • Medium term – Invest for new car or deposit on home (2 – 5 years)
  • Long term – Pay off your home loan, retire comfortably (10+ years)
  1. Do you follow a budget?

For many individuals their budgets are out of sight, out of mind. But a person should actually see themselves as a small business. It would not be possible for any business to be successful without sticking to their financial means.

A budget can easily be broken down into smaller digestible pieces:

  • 50% of your income should go towards “need to haves” like accommodation, transport, groceries, insurance etc.
  • 20% of your income should go towards savings and investments that grow your net worth and takes you forward.
  • 30% of your income can then go towards “nice to haves” like eating out and shopping, without feeling guilty.
  1. Are you protected?

Every individual who seeks to growth their net worth should first protect what they have. You must protect yourself from financial ruin such as becoming disabled or getting your car stolen. This is done by:

  • Medical aid to cover medical costs.
  • Life insurance to protect yourself against the financial risks of becoming disabled or severely ill.
  • Death cover to provide liquidity for debt, estate duty and executor fees when you pass away.
  • Short-term insurance to cover your assets against loss, damage or theft.
  1. Are you moving forward?

The final question is if you are actually moving forward on an annual basis. Meaning- are you increasing your net worth? This is done by saving and investing and may also include paying off debt.

  • Unit Trust Investments
  • Share Portfolios
  • Retirement Funds
  • Business Ventures
  • Real Estate
  • Paying off debt

Following these basic principles while consulting with a professional will most definitely lead to a successful financial journey.

Ruvan Grobler RFP™

Photo by Morgan Housel on Unsplash

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