8 essential financial planning steps

It’s alarming to consider the implications of South Africa’s insurance gap, and even more concerning that so many consumers have little to no insurance protection in place. This leaves them dependent on the government, family, or credit (which often leads to debt) when the unforeseen occurs, creating far-reaching consequences for generational wealth.

While economic pressures are felt worldwide, the lack of financial protection in South Africa is largely tied to limited awareness of the importance of financial planning and of how the absence of proper planning hinders the ability to protect and grow wealth. It’s often said that most people are only three salaries away from financial distress. Given South Africa’s weak savings culture, many live paycheque-to-paycheque with very little disposable income, making affordability a significant barrier to financial planning.

Further, financial decisions are tough, and consumers are met with so much information about what they should be doing. Often this leads to procrastination. My advice is:

Don’t follow uninformed advice. Speak to a trained financial advisor to understand where you are financially, and to create a realistic roadmap to close any gaps affordably. With the guidance of a financial advisor, you can gain valuable education and insight into better money management, including a personalised analysis of what cover you need and why.

Many people don’t fully understand their own financial shortfalls. Unless you’ve had a full needs analysis done annually, there will always be unknown elements that could lead to financial distress. Many still see financial planning as something only for the wealthy, but at Vouch, for example, a financial planning analysis is offered as a free service, helping uncover opportunities to save and strengthen your overall plan. 

Ensure your income is protected. For most South Africans, their ability to earn an income is their greatest asset, and it should be protected. Yet, income protection has one of the lowest uptake rates, despite being one of the most important forms of cover for maintaining your lifestyle when faced with illness or injury.

Buy insurance when you’re younger and healthier. Starting early allows you to lock in potential long-term savings. Begin with what you can afford and build from there, reviewing your plan regularly as life happens and your circumstances change. Your plan should be both agile and sustainable.

Reduce debt with a structured plan. Create a debt reduction plan and stick to it, adjusting as your needs evolve. Start with your smallest debt first; clearing an account motivates you to continue and frees up money to make a bigger impact on your next account.

Review your plan at least once a year with a trusted, accredited financial advisor. We prioritise many things in life, and your financial well-being should be one of them. Financial planning is not a DIY exercise; there are countless products, complex Ts and Cs, and a lot of misinformation out there. Just like “Dr Google” in the medical world, online financial advice can be misleading. The financial services industry is heavily regulated for a reason: to protect consumers and ensure that advisors operate with the right qualifications, experience, and ethical standards.

Automate your financial planning. Pay your future self first. Setting up a debit order or payroll deduction can help you avoid procrastination and ensure that your savings stay consistent.

Increase your savings through smart choices. Use investment options that reduce costs, lower taxes, and maximise your returns. That way, more of your money goes towards actual investment growth. For example, a tax-free savings account can be an excellent entry-level product to start building long-term savings.

Avoid dipping into your investments. Try not to access your long-term investments, such as your two-pot retirement fund. Real growth happens over time, thanks to the power of compound interest and staying invested through market cycles.

Please note, this is not financial advice, and consumers should consult with a financial advisor to establish the best plan for themselves and their circumstances. 

*Chetty is the head of advice at Vouch. 

PERSONAL FINANCE