Plan to succeed
Consumers who aspire to purchase a property during 2017 will need to take of their financial position into account and make adjustments where necessary to achieve their goal, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
“The majority of the population is reliant on banks to purchase a home, and it is no secret that financial institutions have stringent lending criteria when it comes to bond approval. Prospective buyers have to keep their financial affairs in order and show the required affordability levels before they can be approved for finance. The same applies to consumers who are already homeowners and might require additional finances to undertake renovation projects or upgrades to their property,” says Goslett.
He adds that taking a step back to assess their financial standing will provide consumers with the opportunity to measure the progress they are making towards attaining their financial objectives and see what needs to be changed if necessary.
“When reviewing finances, consumers should revisit the foundation of their financial plan by looking at their resources, goals and priorities. During this time they can re-evaluate their situation and include any major life changes that may have happened in the last 12 months, such as a marriage, birth of a child, death or starting a new business feature. All of these factors will play an important part in how the financial plan is adjusted to meet the end goal,” advises Goslett.
A major life change will change the perspective homebuyer’s needs and possibly their projected time frame to meet their financial goals. “A growing family who is living in a home that no longer meets their needs will want to make a change sooner rather than later. This would mean that more money would need to be set aside for the 10% -20% deposit and other costs associated with a property transaction. For time-sensitive goals, a professional financial planner would be a valuable asset who can provide strategies to meet the objective,” says Goslett.
He adds that consumers who got married over the last year should also consult with a tax professional to determine how this may have impacted their tax status. SARS requires consumers to inform them of their marital status as the disposal of assets has capital gains tax implications in the joint estate of spouses married in community of property. “Reviewing finances and having everything in order will make it easier for consumers to submit their annual tax return. It will also provide the consumer with valuable information about their spending habits. A financial review will assist consumers to determine whether they are getting value for money on expenses such as insurance, flexible spending accounts, cell phone plans and even investment fees,” says Goslett.
If the goal is to show the necessary affordability ratios to be approved for finance, then no financial review is complete without a plan to pay off existing debt as quickly as possible. “Eradicating or at least reducing debt levels are a vital part of any financial plan. Even a small additional payment of R100 a month can make a big difference in reducing debt levels and showing steady progress. Having an emergency savings fund can also help consumers to stay out of debt while preparing for a rainy day. A set amount should automatically be transferred to savings each month,” advises Goslett.
To remain motivated and stay on the right track, consumers should monitor and benchmark their financial plan and investments. There are several ways to measure an investment portfolio, but perhaps the most important is whether it is working towards the consumer’s personal goals. If the consumer requires their investment to grow by a specific percentage annually, the performance of the portfolio should be measured against this benchmark and be adjusted to meet this requirement where possible.
The sooner a consumer assesses their financial position and makes the required changes to met their goals, the better. Putting it off will just mean that it will take longer to achieve. “Aspiring homeowners need to be aware of how they spend their money as well as what changes need to be made to reach their goal. They will need to review the changes that been made and anticipate further changes that may occur in the future. With the correct planning, nothing is impossible,” Goslett concludes.
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