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Financial Adviser | Laying the foundation for successful investing

Published:Sunday | February 12, 2017 | 12:00 AMOran Hall


QUESTION: I am very much interested in better understanding how to plan financially. I got this email address from an article I was reading online and the advice given and knowledge shared were very intriguing. I am interested in making a series of investments and allowing these funds to accumulate and bring back interesting returns. I am already performing a 9-5 job that allows me just to stay afloat until my next payday and it is not at all possible to do a

second job at this time.

- Nick

FINANCIAL ADVISER: It is clear that you recognise that there is a strong link between proper planning of your financial affairs, savings and investments. In this, you are on the right track.

For now, you have resigned yourself to earning from one source and I like your idea of allowing funds to accumulate and, of course, give you good returns.

I am not privy to the details of your financial situation and your lifestyle, which are critical to the formulation of a meaningful financial plan, but I will share some general points with you.

Even though your income seems barely adequate to carry you along, that is what you have and you will have to try and make it work. Your spending has to be tailored to match your income while at the same time leaving funds for saving and, ultimately, for investing, when to do so and with an indication of the likely cost, which will change over time and would have to be adjusted as necessary.

You would need a spending plan to create room for saving - perhaps a set dollar amount or a given percentage of your income. To do so could lead to a change in your spending


Establishing priorities becomes very important in such a scenario. Some things you enjoy now would likely have to be given up or reduced. It is important to be able to identify the various types of expenditure.

Discretionary items and variable items are the expenses over which you may be able to exercise greater control. In the former group would be entertainment and gifts, for example. The latter group would include utilities and transportation. How much these cost can depends on how you use them.

There are some expenses which are required or necessary. You must eat and use water, but you can carefully manage how much. Cutting waste can help in generating savings. You would be surprised to see, for example, how a conscious effort to reduce the use of electricity can end in a meaningful reduction in your bill.




I suggest that you make note over the next three months or so of how you live and how much money you spend to support your lifestyle even if it is modest. If you do not live alone, you need to get the rest of your household on board.

If you have periodic expenses such as insurance or loan repayments, put aside funds on a programmed basis to meet those expenses when they are due.

If you have a good spending plan and manage it well, you should be able to generate savings, which you can then invest with guidance from a competent professional. But you should note that success will take time. Being in a hurry to accumulate money exposes you to serious risks, which can derail your programme and set you back seriously.

You need not wait to accumulate a large sum of money to begin to invest. Start with the little you have and avoid leaving your money in savings instruments that give next-to-nothing returns.

Although money management, savings and investment are important elements of a financial plan, depending on your circumstances, insurance and estate planning are also important as is retirement planning.

With regard to investments, it is important to have a reasonable understanding of what it is and how the more important instruments work. Take interest in financial literature and programmes and be patient. Learning does not happen overnight. This is not to suggest that you need to become an expert, but it is important to understand what you are doing or want to do.

From the rest of your email, it seems that you are a young person. I know that these are very challenging times, but it is encouraging that you want to establish a good foundation. Making a good plan is the preferred way to begin.

- Oran A. Hall, the principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.