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Getting married? Love to travel? You can have it all

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You may feel that you are on top of your finances and are managing your day-to-day money, but how robust is your financial plan? Are you on track for retirement and what protection do you have if life turns upside down? Ahead of Financial Planning Month in October, Liberty challenged four City Press readers to test their long-term financial plans by offering a financial needs analysis #RealLifeAdvice

This week we touch base with 27-year-old Mashudu, who is planning on getting married within the next year. Liberty financial advisers Palesa Thloloe and Melva Bugana undertook a financial needs analysis for Mashudu.

Like most young adults, Mashudu is struggling to meet all her desires on her current budget. Although she earns more than R30 000 a month she is struggling to pay off her credit card debt as life becomes more expensive.

Mashudu has put away R25 000 for a holiday, but has found that she is using it for unforeseen expenses.

“I would really love to travel and start my marriage on little to no debt.”

Mashudu’s first goal is to reduce her credit card debt and improve her credit record so that she will be able to apply for a mortgage. She also needs to increase her emergency savings fund and keep that separate from her travel savings fund. This is to stop her from “raiding” her holiday fund when she is cash-strapped.

Mashudu has big long-term financial dreams. She would like to retire by the age of 55 and receive a monthly income of R80 000, which will allow her to fulfil her dream of travelling.

“Currently, Mashudu only has a retirement savings of R15 000, so she really needs to start putting away a great deal of money to reach this goal,” says Thloloe who has calculated that Mashudu would need to be putting away R31 675 a month, increasing her contribution by 10% a year.

As this would be a challenge on her salary, Mashudu needs to start thinking about creating a side business that can also start to generate income.

While Mashudu will hopefully live a full and fruitful life, she does need to consider what would happen to her financial dependants should she no longer be around.

According to Bugana, currently Mashudu’s liabilities come to R97 300. If one includes executors’ fees to wind up her estate when she passes away it will come to R105 511.

Mashudu does have R1 million life cover, which would settle these debts, but it is not sufficient to provide for her beneficiaries should she pass away.

She would like to leave R10 000 for the next 20 years for her grandmother to ensure that her liabilities are paid in the event of her passing.

“For her to meet this target in the event of her death she needs to purchase an extra R2 million worth of life cover,” says Bugana.

Bugana’s concern is that Mashudu has virtually no protection if something were to happen to her and she is unable to work. She currently doesn’t have dread disease cover in place and with the high rates of cancer, especially among women, this cover would be recommended.

Although Mashudu has disability cover worth about R1 million, if she was disabled she would need about R23 000 a month until age 65 to sustain her current lifestyle.

She would need to purchase around R5.6 million, which she can either do by buying a lump sum, a monthly income or having them both.

“This was definitely a worthwhile exercise. It really opened my eyes to how grossly undercovered I am if something were to happen to me,” says Mashudu, who adds that she has also realised that while not all debt is bad, it must be managed.

“I need to be more cash flush and supplement my income with a side hustle if I am to meet my goals.”

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