A financial product is not a plan, and for a plan you need an adviser

South Africans with a “do-it-yourself” approach to their finances are in danger of experiencing financial difficulties later in life when they can least afford it. Many assume that contributing to a retirement fund, having life cover, and investments in place are enough for a secure financial future.

Such products, while essential, may limit long-term financial security if they are not aligned with a clear financial plan. That comfort can be a bit of a trap. Having a few things in place doesn’t mean that you're moving forward financially.

Without an overarching strategy, financial products can quickly become disconnected. Many people operate on autopilot, saving here, insuring there. If your products aren't aligned to clear goals, then you don't have a financial plan; you just have financial products.

Why planning and products should align, I will make an example of a customer who had been retrenched from his long-time employer: From his point of view, things looked financially solid; he had received a generous retrenchment package. He preserved his retirement savings, settled his debts, and enjoyed a healthy cash cushion.

But as the months went by and he struggled to find new employment, he started dipping into his reserves to maintain his lifestyle. Eventually, he had to cash in his retirement savings to stay afloat. It’s a classic case of how short-term comfort can mask long-term vulnerability and why sound, objective financial advice at critical moments is so important.

Another problem with the DIY approach is the limited knowledge most consumers have about the full range of products available to cover specific needs. A customer had basic death and disability cover, but no severe illness provision. She was reluctant to take out this cover because there was no family history of severe illnesses, but she agreed to do so based on her affordability.

A couple of years later, she contracted breast cancer and was able to claim nearly a million rand, allowing her to undergo reconstructive surgery, access additional treatment, and even take a much-needed holiday. This is a powerful reminder that planning for the unexpected is never a waste, especially when it comes to your health.

Here are tips to cement their path to financial security:

1. Draw up a financial plan with an adviser and review it annually to ensure it is aligned to life’s changes. Regular check-ins ensure your financial products stay aligned with your goals, income, and personal circumstances.

2. Build an emergency fund. Aim for an amount equalling three to six months of expenses using a flexible, low-risk investment. In addition, consider product life retrenchment cover and GAP cover as part of your emergency provisions in the case of job loss or illness.

3. Consider growth investments. Holding large amounts in a bank account erodes value over time due to inflation. To grow your money meaningfully, speak to your adviser about higher-growth investments with real return potential.

4 . Match your risk insurance to your lifestyle and life stage. In consultation with your financial adviser, consider life, income protection, disability, and severe illness cover that reflects your changing needs

5. Set clear savings goals. Know what you’re saving for, how much you need, and how long you’ll need to save. Having a goal transforms saving from a vague intention into a structured, motivating financial habit.

Financial planning is about being honest about where you are, being clear about where you want to go, and then building something to get there. If your plan reflects your life, not a generic checklist, then you’re already in a better position than most.

* Louw is the general practice principal at Old Mutual Personal Finance.

PERSONAL FINANCE