The importance of financial planning: Avoiding common pitfalls

WHILE many South Africans are doing their best to save, too few understand the difference between budgeting, saving, and financial planning. As a result, they often end up using their savings to cover everyday expenses, leading to frustration, shortfalls, and savings that vanish by month-end. This confusion is one of the biggest barriers to long-term financial well-being in the country.

- LULAMA MRARA

The problem is that many people believe saving alone is enough, but without a financial plan that shapes their daily habits and future goals, those savings are not sustainable. They disappear, and then there is no structure to rebuild them.

That is where people get stuck, reacting instead of planning.

Recent data from the FSCA’s Retail Financial Customer Behaviour and Sentiment Report supports this. The report shows that most people reengage with their financial products only after a major life event. Budgeting means planning how you will spend your income to cover everyday costs and unexpected expenses, or emergency repairs.

But financial planning is broader. It is about identifying both immediate and long-term goals and making sure you have the money when you need it. Many families confuse budgeting with a financial plan.

This confusion has real-world consequences. In the absence of proper planning, families either overcommit to long-term savings vehicles they cannot access when needed, or they save in investment vehicles so liquid that the funds are quickly depleted without direction.