What is Financial Planning

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If you have been following my posts (and read the Disclaimers) you would realise that all my disclaimers tell you I am not giving advice. I am sharing from my experience, from my knowledge, from my insights. What I share is information, perspective or educational, knowledge that I believe could help you understand money and finances better.

Every disclaimer advises you to see a financial advisor, financial planner or investment advisor. Every disclaimer warns you not to make haphazard changes to your investments or financial portfolio.


I am not just doing that because there must be a disclaimer! I do not just do it because I must protect me against liability if somebody does something stupid and blames me!

I do it for a particularly good reason. Financial Planning is a process and requires knowledge and experience. It is best done with the help of a professional. If I can compare it to medicine, you may read and know a lot about medicine, but in the end, it is best to have a surgeon do the operation!

The purpose of Financial Planning is to take you from where you are to where you want to go. It should be a holistic process. That means it takes into account all relevant factors of your current situation.

Relevant factors, to name a few, in this planning process is your age, your current income, expected increase in income, disposable income, how much you are prepared to save from your income. What time in your life you would like to be financially independent (retire) and the time to reach that age. In other words, how long do you have to prepare, then we can calculate what you must do. Planning must lead to action.


Your financial plan will be influenced by marital status, whether you have children, their ages, your ideals for their future.

Financial Planning process must look at your appetite for risk. Do you prefer low, medium, or high-risk investments? That is not whether you prefer low or high returns, everybody prefers high returns. Risk appetite means can you live comfortably with a loss. Too many people get excited about potential high returns but fall into depression because of a small loss. To do financial planning, you need to establish your risk profile.

Financial Planning would also take into consideration family development, we already mentioned that.  Do you need to provide funds for tertiary education? When will it be needed, because that will have a big influence on the type of investment you can make?


Let’s define financial independence. Financial Independence means that the income that you get from investments can provide you with the lifestyle that you desire. This is the thing you will not be able to retire until such a time as have enough passive, portfolio, income to cover at least your basic expenses. That is why it is important to know where you are, where you want to go and know how you will get there!

That is why I keep repeating myself in the disclaimers.

It is very tempting to follow every new idea. It may sound as if every new idea that you read is better than what you are doing and will bring you to financial freedom quicker. That is dangerous thoughts! A straight line is the shortest distance between any two points. Also between where you are now, financially and where you want to be.

That is why it is important to work with the financial planner or investment advisor.

Let me use a silly, male oriented, example. From my house to the nearest mall is 5.5km. Straight line. I get to the stop street and I see this pink Porsche. I follow it to get a closer look. Oops, it turns into a Cul ‘d Sac. I must turn back. At the same stop, there is this beautiful woman, I have to take a closer look. I follow her around. She drives in the opposite direction. When she gets out at the other Mall, I am 15 km away from where I want to go, but I have already driven 10 km’s.

Please note, I never got a Porsche and I did not even speak to the pretty woman. I have wasted a lot of time, fuel and drive a lot further to get where I want to go.

That is what I am encouraging to do. You must stick to your goals. The person who knows your goals and circumstances is the financial advisor. He or she knows your circumstances and will be able to advise you whether this “opportunity” will shorten the line, or just lead to detours.

  • The best thing you can do, is when you read something about an investment or anything related to money, is to study it, so that you understand it thoroughly. Then you go to your financial advisor and tell her you have read about this investment. It seems as if it can work. You think it might fit into your financial plan at this point. What do he or she think? Then you can discuss it. You have enough knowledge and insight to bring valuable ideas, instead of just blindly following. You have enough knowledge to evaluate the advice that you receive.


My message is simple: I want you to have knowledge and understanding, because I believe a client with knowledge is a good client. I believe clients who can ask “Why and how” with insight are good clients.

A good client contributes to the financial planning process, but also trusts and follows the process. A good client buys into the process and the financial plan and takes ownership, because he or she understands.

My sole purpose is to help you understand. Never, ever, will I ever try to advise without a long and thorough interview to determine your needs and desires.

A financial plan can never be one-size-fits all.

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