Many people experience different financial reality checks throughout their lifetimes.
A Sanlam Individual Life survey showed that major milestones or reality checks can often lead to financial reassessments.
Some of the reality checks that have been the wake-up call for people to get their finances in order include losing a job, becoming a parent or a death in the family.
“At every life stage, there is a need to relook one’s financial plans and risk cover. Insurance is a key aspect of any financial plan, and so is the right advice,” Petrie Marx, product actuary at Sanlam Individual Life, said.
“Having a professional in your corner will help ensure your needs are holistically addressed in every phase you move through.”
Here are three financial reality checks and how you can handle them:
Career
Getting your first job is a major milestone, but there is also the worry of job loss or retrenchment.
“When you start your first job, you have roughly 40 earning years – or 480 pay-cheques – ahead of you, so the risk of potentially losing your ability to earn an income would come with a devastating impact. Income protection or disability cover is therefore of utmost importance,” Marx said.
Zanele Ntulini, Chief Marketing Officer at life insurer Bidvest Life, said that income protection was not exclusive to people that receive salaries but was available for business owners, self-employed and freelancers, commission earners, and even high-risk occupations such as musicians as well as non-income earners like students and home-makers.
“Few South Africans have taken steps to protect their incomes. Part of the reason for this is that there’s just not enough awareness of income protection as an insurance category in South Africa,” Ntulini said.
A serious relationship
Starting a serious relationship can have various implications for your finances, especially when couples decide to combine their finances, buy a house together, get married or have children.
“When you get married or buy a home together, it is important to cover your debt with credit life insurance and some additional death cover,” Marx said.
Along with a marriage and a serious relationship, another factor is becoming a parent. People should consider certain covers such as death cover or disability cover to ensure that their children are provided for.
Taking care of estate planning or having a will is an important aspect that couples need to take care of when they are in serious relationships.
“A will is a detailed plan of how you will leave your accumulated assets and belongings, big or small, to your loved ones once you pass on,” Aneesa Razack, CEO of FNB Fiduciary, said.
Moremadi Mabule, head of Wills Operations at Sanlam Trust, said: “For couples - whether you are living together or married - there are various factors that need to be taken into consideration when drafting a will.
“This includes one’s marriage regime. Being married in community of property (COP) or having a joint will have major implications on how your estate is dissolved.”
Illness and disability
Marx said that illness could happen at any stage of a person’s life, and ill health can have an impact on their finances.
“Living confidently starts with something as simple as drawing up a monthly budget, assessing the risks one faces and then seeking advice on how to manage these in the most cost-effective way possible,” Marx said.
It is important for people to speak to a qualified financial adviser when considering these covers and protections to ensure that they understand what they are doing and not confused by the financial jargon.
Paula Walker, a director and advisory partner at the Consolidated Wealth Group said that people should think of a financial advisor as a personal trainer, someone to guide you and keep you going when you might feel overwhelmed.
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