Don’t go crackers

For most of us, November started off with a bang! But unfortunately remembering the redemption from explosive chaos does little to help us manage our time, stress, skills and finances over November and December. It’s like we just go from one event to the next, our limited weekends disappearing under the demands of a myriad of social events – all costing us ‘a little here and a little there’.

Before we know it, we look at our bank balance and somehow our budget figures seem to be quite different to the reality – this can drive us crackers!

Here are some financial planning tips for the next 54 days…

Make a calendar with budgets: It’s easy to assume you’ll have enough money when you’re only spending a few hundred here, and a few hundred there. But when they all add up, you’ll find that what you thought would be a couple of hundred bucks, turns into a grand or two.
Itemise all the events you have to attend and put in an estimate cost for each one. It’s okay if you go over, this is simply to help you understand where your money will be going in the next 7 weeks so that you don’t have an unhappy surprise!
Keep & capture your slips: Keeping your slips will help you check how accurate your budget calendar has been and will enable you to make decisions about the next event as to how much you should or shouldn’t curtail your spending. Knowing where your money is going empowers you to not spin into a panic when it’s suddenly less than you thought. Also – if you have extra left over, you’re able to enjoy some more guilt-free luxuries over this festive period!
Use cash instead of cards: If you budget R300 to spend at an event, and you have it in your pocket in cash, you’re far less likely to overspend. But if you simply swipe your card… it’s way easier to add on and extra R50 without even ‘feeling’ it.

Part of having me as your financial advisor, is that I’m here to help you plan and manage how you earn, save and spend your financial resources. If you feel like you’re going crackers… just drop me an email and let’s hook up!

When it comes to the rand – local is lekker

Have you ever wondered what causes the rise and drop in commodity prices? While there are several factors at play, the most significant cause is the fluctuating value of a country’s currency.

We’ve seen this happen with our own rand in the past few months as our currency has tumbled and gained momentary reprieves, so has the price of certain commodities.

As things currently stand our currency is doing better than it was in January of this year, but with the ominous threat of ‘junk status’ around the corner we can’t be sure what the future holds – and the recent political instability poses some unknowns. However… if the political decisions move in a constructive democratic direction, our Rand will strengthen.

So what causes a currency’s value to fluctuate?

There are quite a few factors at play. These are just a few of them:

Trade balance is one of the main factors. The trade balance helps to understand the strength of a country’s economy in relation to other countries. This is based on the calculation of a country’s exports minus its imports. When a country’s imports exceed its exports, the subsequent negative number is called a trade deficit. When the opposite happens, a country has a trade surplus.
Another factor is the political climate of a country. Political stability, especially in emerging economies is very important. But not just in emerging economies – look at what happened in the UK in the wake of Brexit. A political decision to leave the EU ended up having huge ramifications on the pound.
Inflation also plays a part. If your inflation rate is very high, then the value of your currency is going to be eroded. South Africa’s inflation rate is relatively high compared to the US.

Countries like South Africa operate a flexible exchange rate system, which means the value of the rand is determined by the market forces of supply and demand. In some other countries, like the United Arab Emirates, they have fixed exchange rates. Such countries, mainly oil-producing countries and ones with small populations, have very stable and predictable economies.

The strength or weakness of a currency always reflects on the prices of goods.

If commodities are imported for manufacturing processes, then the cost of finished products will be significantly higher in a country with a weaker currency. However, if the country is producing more raw materials and goods locally, there’s a better chance of keeping prices stable and inflation low.

The moral of the story from this blog…? Local is lekker!

What are you paying for?

With the recent announcement of some higher-than-expected increases to medical cover products for 2017, many people are reconsidering their medical cover for the immediate future and re-assessing their financial plans to ensure that they are still working with the best portfolio for their lifestyles, their families and their businesses.

Whilst the year-ahead increases will cause some to question what they are paying for in medical cover, the larger question – one that is much older than the passed few weeks – receives new vitality. That is: What are you paying for?

The financial planning industry (our industry) is currently undergoing some strategically significant changes to bring clarity to that exact question. This change is called the Retail Distribution Review (RDR).

The first phase of RDR is set to arrive on 1 January 2017.

The reason for introducing RDR in South Africa is because the old models for giving advice and selling financial products have created a number of areas that need to be addressed.

RDR is an attempt to focus on the advice rather than the products. One of the key objectives of RDR is to create sustainable business models for financial advice, similar to those of medical and legal advice.

Financial advisors have something far more valuable than just policies or fund wrappers to offer, that is, a financial planning model in which the client is treated more holistically.

“RDR is not about regulation,” said Brian Foster, the co-founder of Beyond RDR. “It’s about business models. We have been running a business model that’s been broken for a long time. Now is the time to change it.”

“You come into the industry by learning to sell policies,” Foster said. “The industry has trained us with this industrial mindset. They build these factories, and send us out to distribute their products. That’s industrial age thinking.”

“I don’t think people buy a financial planner,” Foster said. “But if you ask someone whether they would like you to help them to have the lifestyle you want without running out of money, they will buy that.”

I’m here to help you live the lifestyle that you want – comfortably. Let’s get in touch.

Quotes from MoneyWeb

A woman’s will

Happy Women’s Day for tomorrow!

In celebration of Women’s Month I wanted to share an article that focuses specifically on a financial planning aspect that is often overlooked for women. Recently, the Fiduciary Institute of Southern Africa (Fisa) discussed some important financial planning considerations for women that highlighted the need for an up-to-date will.

It is estimated that at least half of the estates reported at the Master’s Office each year are of people who died intestate (without a will). This is largely due to the fact that South Africans often don’t see the need to draft a will, especially when they are relatively young or don’t have a significant asset base.

It is important to note that men and women living together are not automatically treated as ‘married’ under the law in case of intestacy. Couples who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

The bottom line? You need your own will and have to understand the implications of your partner’s estate planning.

Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected. Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future.

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

In terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

The law allows parties to have a joint will, but Fisa usually advises against it. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

It is crucial for partners in a relationship to ensure that they draft wills to protect one another.

If you would like some advice on how to go about setting up your will, I’d be happy to advise you on this.

* This content was sponsored by the Fiduciary Institute of Southern Africa.

Source: moneyweb

The power of positivity and a good plan

Have you ever told yourself, “When I have more money, I’ll be happier”? How about, “I’ll never be able to pay off this debt”? These sort of toxic money thoughts are holding you back from financial success – and happiness! A good financial plan needs to be attainable and measurable, those expressions are neither.

The first step to a financial plan is both the hardest and the easiest – it’s the starting point. The point where you measure how deep you are so that you can calculate what you need to do to get where you want to be. Measuring your budget is usually a huge relief for most people, your finances are no longer a mystical figure floating in the ether, you have defined an attainable and measurable goal.

You need to rescript your brain into thinking positive and actionable thoughts. Here are some tips to help you along your way:

Get good advice
Getting good advice and being reminded that what we want to achieve IS attainable does wonders for an attitude of success. However, you will also need to keep your end-goal in mind.

A good way to do this is to pick out a positive phrase that acts as a sort of rule-of-thumb. For example, “Is this [potential purchase] better than a family vacation / new car / bigger apartment?”

Don’t Rush
One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. Consistency is key.

Use numbers and dates to measure WHEN you want to achieve your goals by. And work out some smaller, short-term goals along the way that will reap quicker results. Paying off debts or saving a certain amount, for example, can leave you with a great feeling of pride and accomplishment. This increases the likelihood of you keeping up your good financial habits.

Dig in your heels
Not next week. Not when you get a raise. Not next year. Get started today – and don’t let up!

Need some good advice? That’s why I’m here. Let’s get in touch!

Cancer claims reveal risk trends

Recent statistics made available by Liberty Life reveal that cancer is the leading cause of claims paid by the assurer in 2015. One in four claims paid by Liberty were for cancer, and the proportion of claims for cancer is increasing, even at younger ages.

Motor vehicle accidents are typically cited as the reason that young people need disability or income protection cover, but cancer was a greater cause accounting for 12.3% of claims (motor vehicles accounted for 11.9%). Even more worrying is the fact that in young parents, cancer was the cause for claim for 22.5%.

These statistics are for claims on policies that provide cover for death, disability or dread disease (illnesses such as cancer, strokes and heart attacks). The fact that many people now survive cancer means that most of the claims were paid as a result of severe illness and not as a result of the life assured dying.

Liberty’s claims-payments for severe illness cover increased by 50% from 2014 to 2015. This was not only due to the fact that more people are taking out this cover, but also because of the growth of awareness and early detection of cancer.

Liberty was not alone in their findings. Sanlam’s claims-statistics for 2015 show that 60% of its dread-disease claims were for cancer. At Momentum, 34% of its dread-disease claims were for cancer. At Discovery they were 38%. And at Old Mutual, 57%

An interesting statistic put out by Old Mutual with its claims figures is that 60% of all claims were for people under 45.

You may ask yourself why, if you already have medical scheme cover and loss-of-income cover, do you also need severe illness cover for cancer?

A medical scheme offers crucial cover that you shouldn’t be without. The problem is that cancer treatments are expensive and schemes have rules about what they do and do not pay for. Sometimes a doctor will recommend the best treatment available but a scheme only pays for a more modest treatment or there is a diagnosis of a rare form of cancer that requires specialised treatment.

These statistics show that cancer is still a widespread affliction, even at younger ages. While cancer claims are obviously higher among older age groups, even 20- and 30- somethings should be prudent when it comes to taking out risk policies.

If you have any questions or want to review your policies then give me a call and let’s meet up.

Source: iol

What happens after a market downgrade?

There has been much murmuring in the financial field as of late regarding queries with respect to investing locally, or shifting all portfolios offshore, specifically in the light of the widespread media coverage and speculation regarding South Africa’s credit rating and the likelihood of a downgrade to “junk status” – which could happen as soon as the third quarter.

While there is some speculation about when it might happen the general consensus seems to be that it is no longer a question of “if”, but “when”. It is thought that South Africa’s sovereign debt rating will be cut below investment grade in either June or December.

Why is this happening and what does it mean?

As I have been following, South Africa is facing a downgrade for two reasons:

Slow growth – along with the rest of the world, SA faces lower levels of growth than forecast (and these forecasts continue to fall). There are a multitude of reasons for the slowdown including depressed commodity prices and reduced global demand for commodities, but also a lack of willingness to invest with all the current uncertainty around government policy.
Fiscal outlook – effectively this relates to the ability of the country to control spending given the tax base so that excess spending does not need to be covered by issuing more debt. With low growth and high unemployment, tax revenue is under pressure and spending on benefits is rising. The government’s target to limit gross debt to 50% of GDP is going to be very difficult to achieve.

Many experts have suggested that the immediate impact of a credit downgrade would be a flight of capital, a spike in bond yields, rapid currency depreciation and a fall in equity markets. However, looking at a historical analysis of emerging markets who suffered a similar downgrade returns a somewhat unexpected trend (based on a group of emerging markets that had all been downgraded from investment to sub-investment grade and their performance in the 12 months before and after the move).

Markets are very good at anticipating what is going to happen, in the period preceding the downgrade they tend to perform poorly, but after the fact they gradually perform better – generally speaking.

The trend is clearly that yields expand leading up to a downgrade, but generally recover afterwards. The average currency on a real effective exchange rate basis tells a similar story, increasing relative to where it was at the time of the downgrade.

Countries that are downgraded to sub-investment grade go into recession, almost without exception. It takes years to earn back their credit rating. This is the real challenge that South Africa faces, the policy response will be critical.

Investors should not be overly influenced by the short-term commotion, but rather set their sights further on their investment horizons. There is a tough road ahead, but it is a difficult year for local and international economies alike.

I realize that this blog contains a large amount of technical terms and concepts – if you’re concerned about your investments or would like to discuss off-shore options – then let’s get in touch!

Source: moneyweb

Investing in your fifties

Many young people neglect to plan for their retirement during their early working lives, arguing that they will take care of it later in life when they are earning a bigger salary. However, on the flip side of the coin, as people get older they assume that they must rebalance their portfolios into more conservative investments.

Luckily, most people are choosing to retire later in life.

If you have left investing in your retirement until later in life, there may be a risk in investing too conservatively (not enough exposure to growth assets like shares and listed property) as your investments need to continue to outperform inflation in retirement. Alternatively, you may be tempted to invest in very risky investment schemes. It is really important to construct portfolios which have clearly set out objectives that will be able to meet the targeted return before and after retirement.

How much income do you need per month? Will you need to buy a new car or fund a holiday? You need to know exactly what your retirement goals and dreams are. This will give you an accurate indication of how your assets have to be invested to cover these expenses. You need to be comfortable and knowledgeable about your retirement. You should know exactly how much money you can safely draw to enjoy your retirement without eroding your capital base.

One of the most important things to try and achieve by the time you retire is to be free of debt. You don’t want to be in the position where you have to settle a mortgage or other debt with retirement capital.

Just because you are retired it doesn’t mean you should stop working. Instead, you should re-focus your sights on a pursuit of happiness. People often still make money during retirement. With a lifetime of experience behind you it wouldn’t make sense to not stay busy. View this as the time you have been waiting for to do something you have always wanted to do, but felt like you never had the time to do. Who know, it may turn out to be a successful business venture.

If you need some help working out a retirement plan or would like to revise your current plan give me a call and we can work something out.

Financial Fortifications for Forty Somethings

It’s often said that the best years are the forties – and for so many reasons! Whilst everyone is different, it’s good to state at the start of this article that this perspective is becoming even more prevalent.

Some forty year-olds are in their first marriage with kids, others are in their second or third… with kids. Some have never been married and have no inclination of doing so. These situations place people in very different landscapes, but they all have one thing in common – over forty years of life behind them.

It poses a unique opportunity to view the ‘hike up the mountain’ from a higher perspective than before, and with the goal of retiring even closer in sight than it was in your twenties and early thirties. It’s healthy to pause and reflect, but it’s crucial to then keep on moving forward!

Forty-year olds need to prioritise staying on top of their finances as this is often a time of higher rising costs – regardless of your life choices.

Here are four quick things to consider!

Managing money and investments in your forties

There are often various significant demands on your time during your forties from building your career and family, which means that many investors in this age demographic don’t set up a proper financial plan or neglect to review the plans they already have in place.

If your employer is not contributing to a pension or provident fund for you, it is critical to save for your own retirement and to utilise the tax deductions allowed by SARS in full to build up tax-efficient, inflation-beating long-term investment savings over your working life.

Risk cover should be a priority

In your forties your biggest risk is that you will lose your ability to continue to generate an income. If you don’t belong to a group life scheme through your employer’s retirement fund, it is really important to ensure that you own a personal risk income protection policy to provide adequate cover for your needs.

If you cannot generate an income it also means that you can’t save and invest. If you are unable to work and earn regular income due to an accident, illness or disability event it could turn out much more expensive than to untimely pass away. It is therefore important to ensure that you have adequate cover, including disability and dread disease cover, and to review it as you earn a bigger salary over time as your lifestyle expenses will also increase.

You should also ensure that appropriate medical (health care) and short-term insurance cover is in place and is sufficient for your specific needs.

Tertiary Education Saving

One of the most popular options for this savings goal is the National Treasury’s “new” tax-free savings account (TFSA). Individuals (including minors) are allowed to invest up to R30 000 a year (up to a lifetime limit of R500 000 per person) in a TFSA that can grow tax-free.

It is also more flexible than approved retirement funds as it is fully accessible before 55 and not limited to the Pension Funds Act’s Regulation 28 asset-allocation rules. However, this TFSA is not a replacement for a good investment-linked retirement fund vehicle.

These TFSAs are excellent long-term savings vehicles and investors have access to the money prior to retirement. The longer the investment time frame, the better. It will take roughly 16 years to reach the lifetime capital contribution limit in these accounts.

Play catch up with your RA

Some forty-year olds may only be beginning to save for their retirement. There are strategies to accelerate your savings plan – but you need to meet with a qualified financial planner.

An appointment with a qualified financial advisor for a wealth planning diagnosis is similar to visiting your medical doctor for a regular health check-up.

If your health state has never been checked to see if you are at risk for cancer or other serious diseases, you would never know if you have a reason to intervene and adapt your behaviour. This is also the case with financial planning. If you haven’t done any retirement planning needs analysis and if you do not have an appropriate strategy in place it is important to see a professional financial advisor to assist you in drafting an integrated lifestage plan and to assist you to implement it according to your priorities and goals.

In performing the financial needs analysis to identify shortfalls concerning specific areas of importance an independent financial advisor worth his/her salt can add considerable value with sound guidance and by offering appropriate alternative solutions.

Are you in your forties? Do you have friends who would benefit from this article? Please feel free to share it with them – or get in touch through my contact page!

Several points for this article were taken from: source

Common financial mistakes in your thirties

Saving in your thirties becomes increasingly difficult as your financial responsibilities increase. However, sound financial decisions during this phase of life can have profound benefits at a later stage.

Here are some common financial mistakes to avoid:

The first is failing to draw up a budget. A proper budget is the starting point of all financial discipline and should be physically written down for later reference. Include your partner in this process as it is important to ensure that you are both on the same page.

The second mistake is do too much too soon. Before investing you need to have accumulated enough savings. It is vital to have an emergency fund, which must have sufficient reserves to cover at least a couple months worth of expenses. This should protect you from a debt spiral in the case of an emergency.

The third mistake is accruing bad debt. A loan to buy a house is considered “good” debt. Bad debt is using credit to finance furniture, electronics, appliances, vehicles and other items that devalue over time.

At the age of 30 retirement may seem like it is still a long way off, but it is important to start contributing to your employer’s pension fund or a retirement annuity. You should try to contribute at least 15% of your gross monthly salary, there are significant tax benefits to such a strategy.

It can be easy to fall under the illusion that bad things only happen to other people. Make sure you have adequate life insurance, dread disease, disability and medical cover.

Another common blunder is to contend that wills are only for the elderly. Draft a will, review it regularly and don’t forget to tell your loved ones where to find it.

Life insurance is important if you have dependents. It is imperative to ensure your dependents will be in a position to maintain their current standard of living if you pass away. Determine the exact amount of life insurance you need and review your cover regularly as your financial needs change

Finally, at this stage of your life, you still have a long way to go to retirement and are in a position to take on more equity exposure. It is essential to get proper advice with regards to your investment decisions.

Need some assistance? Let’s get in touch!

Source: www.moneyweb.co.za