What is a Financial Needs Analysis www.ecsponentlimited.com

‘Would you tell me, please, which way I ought to go from here?’

‘That depends a good deal on where you want to get to,’ said the Cat.

‘I don’t much care where – ’ said Alice.

‘Then it doesn’t matter which way you go,’ said the Cat.

‘- so long as I get somewhere,’ Alice added as an explanation.

‘Oh, you’re sure to do that,’ said the Cat, ‘if you only walk long enough.’

Alice in Wonderland

Like Alice and the Cheshire Cat in Lewis Carroll’s tale of Alice in Wonderland, we are on a journey through life. Building and preserving wealth is another of life’s journeys and require a long-term view with a clear destination in mind.

Perhaps you want to retire early, or you’re dreaming of owning your own business, or to leave a financial legacy to your children and grandchildren. The way to ensure that you meet your goals is to quantify these targets, understand your starting point and then to develop a roadmap to achieving your financial goals. The best place to start is by conducting a thorough financial needs analysis (FNA).

Speak to a qualified financial advisor to learn more

Understand your goals

The first objective is to understand your short-, medium and long-term goals depending on your life stage. For example, your marital status and whether you have children or other dependants or not. Make sure your advisor understands your priorities and objectives.

See the big picture

Your advisor will need to have a full picture of your current financial circumstances. This includes:

  • Your budget – income (salary, investment and rental or other income) and expenses
  • Details of your assets (property, investments, other assets) and liabilities
  • Information about any employee or medical aid benefits, financial products you own such as life insurance policies, funeral policies and investments.
  • The provisions of your will
  • Business interests

This information will form the foundation of your financial plan that will seek to balance a variety of risks. Instead of guessing, you will know what assets and liabilities you have to start on your journey, a detailed description of your end destination and the roadmap you need to follow to get there.

Financially, the greatest risk for everyone is not having enough money to meet your needs when they arise. There are some risks you can navigate alone, like earning enough to pay for your children’s education. However, some risks you need to share with others, like the risk of you dying before you have saved enough their education. You need life insurance to cover your dependants in the event of the unexpected, such as your death or disability.

In mitigating for this risk, you also need to know much you can afford to pay towards life insurance, investments and other elements of your financial plan. It is unlikely that you will have enough money to meet all your needs and desires. With a financial plan, you will be able to prioritise and find balance between your needs and wants.

Upon conducting your financial needs analysis, an accredited financial advisor will make recommendations on your investments and long-term insurance needs including:

A Financial Needs Analysis should be a journey, not a race.

An FNA is not something you do once and find all the solutions to your problems. Like on any journey, you need to check that you remain on track to end up in the right destination. The process must be done regularly, particularly when your circumstances change. These are prime occasions for you to complete a thorough FNA:

  • If you have not had one done in the past five years
  • When you get married or have children
  • When you get divorced or lose a spouse
  • When you are nearing retirement; or
  • When you have started your own business.

While conducting an FNA may seem like a lot of work, the process will protect you from spending money on products you don’t need or that will not move you towards achieving your financial goals. It also ensures that your family is financially provided for when you are unable to provide for them.