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The Four Pillars of Financial Planning: A WFA Online Guide

Jun 14, 2024 | Business Insights

Basic Introduction to Financial Planning at WFA Online High School

WFA Online High School aims to provide valuable financial and business knowledge, not only to our students but to the parents and general public too. This post explores some valuable insights from WFA Consult (Pty) Ltd, the investment side of the WFA Holding Group. Here are some questions, ideas and guidelines to follow when it comes to planning your finances:

1. What is my risk?

(a) Which liabilities must be paid upon my decease?

(b) What must be paid upon my incapacity to work?

(c) Do I have an emergency fund to meet unexpected expenses?

(d) Will my medical aid plan take care of any hospitalisation visits?

2. What process do I follow when investing?

(a) Assets that replace your income can, among others, be property, a share portfolio, a business or cash. Each of these asset classes have their benefits and pitfalls. It’s important to remember that the higher the risk, the higher the return.

(b) Put together an excel spreadsheet, list all the assets and their corresponding liabilities, if there are any, and determine the income you can generate from them.

(c) Once you have calculated the potential income figure, compare it to your current income or to the income you would want to be earning.

(d) Next, determine the shortfall or surplus. If you have a shortfall, convert the figure to an asset value. The asset value represents the amount by which your balance must grow to replace the monthly shortfall.

(e) Then determine how many years you have left before you reach the age of 65. Divide the shortfall by the number of years left to age 65. The figure you get equals the value by which your balance sheet must grow over the next 12 months.

(f) The wealthy get to their objectives by applying the principle of duplication. They understand that they need other people to help them accumulate wealth. For example, buying a flat and renting it out will give you access to the money of other people.

3. Financial structuring:

(a) When you buy an asset, the question you should ask yourself is whether you should own it in your personal capacity, a trust or company?

(b) Keep in mind that owning an asset within a trust structure will not form part of your estate.

(c) Financially successful people own their personal assets separate from their risk assets.

(d) Whenever you have to make the above decision, keep in mind any long term and possible estate planning objectives you would want to achieve.

4. Legal documentation:

(a) Are the required documents, your will, trust deed, buy and sell agreements, shareholders agreement, Memorandum of Incorporation in place? Do you revise them at least every 3 years?

(b) All legal documents will refer to asset values. Remember to review them annually.

 

If you would like to explore your financial planning further by means of questions or assistance, Wayne Langridge will be your go-to investment consultant, the founder of the WFA Holding Group. You can reach him at wayne@wfaconsult.com.

Ready to start your educational journey at WFA Online High School?