Build in some flexibility

Any good financial plan will build in some flexibility to cope with changed circumstances, whether they be personal or job-related. With gearing, it is particularly important to avoid being forced into a position where you have to sell investments at a time which is not of your choosing. That can happen if you need cash at short notice or if you suffer a loss of income and cannot service your borrowings.

It makes sense to prepare for the unexpected. Some of the steps you can take are:

•  Keep enough cash to cover any emergency spending
•  Protect your income, by taking out insurance to cover a protracted illness or injury
•  Make sure that termination payments will be adequate to cover a loss of salary
   in the event of retrenchment
•  Borrow well within your theoretical limit
•  Lock in at least some of your loan at a fixed interest rate
•  Pre-pay interest when you can
•  Ensure you have a stable, regular income from other sources to meet your
   interest expenses
•  Use dividend income to repay borrowings or reinvest
•  Don't just rely on dividend income to pay your interest costs