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Twelve must-haves for a financially free 2012

Our easy-to-execute 12-step plan gives you one task a month. Execute each of these according to your circumstances and priorities, and you are well on your way to financial freedom.
Step one: Make an appointment to see a reputable financial adviser

Probably the best way to find a reputable financial planner is via word of mouth. Ask around and let colleagues, friends and family guide you. Remember that personality is an important factor and what works for them may not necessarily work for you, but it is only a starting point. Find someone who they have been dealing with for some time and, most importantly, someone that they trust.

The web can also be a valuable source of information. Contact organisations such as the FPI at to see a list of all of its affiliated financial advisers.

When you meet with the financial adviser don't be hesitant to ask questions such as:

  • How does he earn his fees? Is he commission-based only or does he charge a fee for a consultation?
  • What are his qualifications and how long has he been in the industry?
  • Is he affiliated to only one financial services provider, i.e.: a tied agent, or is he independent and what are the implications of each option? If he is independent, which companies does he support and why?

Don't feel intimidated by the process. In terms of FAIS (the law regulating the financial planning industry) he is obliged to disclose all of this information in writing anyway.

Step two: Do a comprehensive financial needs analysis

Once you feel comfortable with your financial adviser, the first step will be to conduct a thorough financial needs analysis. This will involve discussing your financial needs and goals, particularly in the event of death, disability and retirement.

You will need to give the financial adviser a good idea of where you stand currently in relation to these goals so that any gaps can be addressed. Make sure that you provide information, such as existing policy information, your group benefits provided by your employer, current Will and information relating to your income.

Step three: Understanding the legal implications of your marriage

Were you aware of the fact that your marital regime may impact on your financial plan? Make sure that you understand the basic implications of your marital status. The most common marital regimes include in community of property, or where an ante-nuptial contract has been signed, either out of community of property excluding the accrual or including the accrual system.

If you have chosen not to marry, but are living with someone as a so called "common law" spouse, make sure that you understand what this means from a financial planning perspective. For example, such a union, which is deemed to be permanent, may be regarded as a marriage. This gives you and your spouse certain rights and obligations.

Step four: Until death us do part. Make or revise your Will

No one likes to think about passing away, but fortunately having a plan for such an uncertain event does not make it happen. So take control of the process and ensure that your Will is up to date. Your Will is the only way that you will have any say in what will happen to your belongings if you pass away. It can also save costs and make sure that there is no delay in winding up your estate.

Step five: Losing a loved one. What would happen to your dependants if you were to pass away?

Life cover can play an important role in any financial plan. It is a cost-effective way to make sure that any wishes you have stated in your Will can actually be funded. Consider using life cover to provide for dependants, such as your spouse and/or children, paying off your bond or other debts and covering any estate duty or other costs arising from your death. Ultimately, it allows you to leave a legacy for those that you love.

Step six: What about me?

Being diagnosed with a critical illness can be a life-changing event, which can have enormous financial implications. By having comprehensive critical-illness cover you can make sure that you can afford the best possible care and, hopefully, recover without facing financial ruin. Bear in mind that critical-illness cover is designed to assist with the costs associated with the impact that the diagnosis has on your lifestyle. These costs may not seem like a big deal initially, but they can add up to a huge sum very quickly.

In 2010 Liberty paid a total of R281.2 million in critical-illness protection claims. Forty-one percent of those claims related to a cancer diagnosis. So the premise that it will never happen to you just doesn't hold any water. Make sure that your financial plan includes sufficient critical-illness cover to make sure that your lifestyle is not affected by such a diagnosis.

Step seven: Disability

Becoming disabled can be devastating in so many ways. It doesn't have to be devastating financially. In some ways, your ability to earn an income in the future could be regarded as your greatest asset, especially if you are young, well qualified and skilled.

Make sure that you consider what would happen financially if you were disabled either permanently or temporarily. Perhaps you would need a lump sum initially to meet expenses not covered by your medical aid and set up an environment to cater for your disability. Your long-term need may be to replace your income on a monthly basis. Having a plan to cater for these needs at least makes sure that you don't have to worry about the financial implications of any disability.

Step eight: Pay yourself first...

Retirement always seems such a long way off, but it is funny how these things creep up on you. How many pay days do you have left until retirement? Consider a client aged 40, planning to retire at age 60 and with a life expectancy of 75 years. He has 240 pay days left to save for retirement. Sounds like a long time, until you realise that these 240 pay days need to provide them with sufficient income to provide for 180 pay days in retirement!

Thanks to medical technology, we are living longer. This means that we need to realistically consider that our retirement years may last longer than we expected. Have we saved enough to last this long? Have we considered the impact of stock market crashes, higher-than-expected inflation and possible job losses along the way?

Make sure that your retirement plan is robust enough to weather the challenges that it may face.

Step nine: Pennywise. Saving for a future goal

The definition of saving is simple, it is money that is not spent. But in order really to see a sound return you need to take it further than just saving; you need to invest. Bear in mind that your investment needs to outperform inflation so that you are earning a real return. The rule of 72 says that if inflation averages at 10 percent over the period of your investment, your buying power halves every seven years!

Make sure that your investment suits your risk profile. If you are younger you may be willing to invest for a longer period, be more aggressive and willing to take on more risk. However, the older investor may be more conservative and prioritise capital preservation.

Step 10: Saving for a rainy day

A comprehensive financial plan must have some provision for everyday emergencies. You don't want to have all your spare cash tied up in long-term investments and not be able to deal with a small emergency as it happens. Part of the process of setting up your emergency fund would be to establish a monthly budget. Understand what your monthly expenses are and what, if anything, is left over at the end of the month.

Ideally aim to have three months' worth of income or expenses in a readily accessible fund.

Step 11: Consolidate all important information

Gather all of your important documents together and file them away in a safe place. It might be a good idea to have someone you trust keep a certified copy as well. This way they are readily available in case of need.

Make sure that you include:

  • Your ID and/or passport
  • Birth certificates
  • Will
  • Policy documents, share certificates and other investment information
  • Ante-nuptial contract and marriage certificate, if applicable

Step 12: An action plan for the future

Now that you have put your plan in place, it is time for action. Commit to an annual review with your financial adviser, but also remember to discuss any life-changing events with him. This could be a change of job, birth of a child, marriage, divorce etc. All of these events can have an important impact on your financial plan.


To drive the importance of financial planning and understanding savings and insurance needs, Liberty is running a competition that encourages consumers to get obligation free financial advice with a chance of winning a prize worth R1-million. All you need to be eligible to win, is an obligation free financial needs analysis (FNA) done through a Liberty Adviser or Broker, with no obligation to purchase any products.

The competition launched on 10 October and runs until the end of January, 2012. Customers have the opportunity of having free obligation advice to help them better understand their financial status.

The rules of the competition can be found on

About Michelle Human

Michelle Human is a legal marketing Specialist and senior legal adviser at Liberty Retail SA. She has over ten years experience in the financial services industry, consulting in all aspects of financial planning. Human's responsibilities include providing expert planning and legal advice to independent intermediaries. She also facilitates the development of the Liberty Life Broker Consultant force through training interventions, market analysis and industry awareness.



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