Characteristics of a canny investor – Part 2

Just because you don’t have an ultimate financial gambit to sell a business or inherit funds, it doesn’t mean you will never become wealthy. The important thing is to know yourself – in particular, your financial behaviour. Modeling your behaviour after successful investors is already a step in the right direction.

Let’s look at some more of the behavioural traits of an astute investor:

1. They get pleasure out of saving, not spending
Buying things releases endorphins, resulting in a ‘shopper’s high’. This can be a tough behaviour to reprogram due to the satisfaction that is hardwired into your brain, but it is possible. Using retail therapy to cheer yourself up is not healthy for your bank balance.

2. They understand the power of passive income
Smart investors weigh up the risk versus return. Dividends can be a good source of passive income, so can rental income. If you’re an employee and your company is going to put you out to pasture at 60 – what are you going to do for the next 30 or 40 years? More importantly, how much money are you going to need to fund that?

3. They build their retirement savings from day one
In your 20s and 30s retirement seems so far into the future it is quite understandable that present financial pressures take precedence over retirement. You might feel that there is always time to catch up, and that might be true – but what if it isn’t? It is in those early working years that wealth habits become entrenched. Given time, investments compound and a small nest-egg can grow massively in 40 years.

Wealth is what is left after you have consumed your income. It takes a perseverant and prudent attitude to be a successful investor.

I’m here to help. Let’s look at securing your financial future.

Characteristics of a Canny Investor – Part 1

By making the most of your income and implementing some savvy financial thinking even an ordinary salary earner can grow an impressive portfolio of assets. Investment success is primarily due to behaviour – not luck. As you will probably know, one of the mature investment perspectives reminds us that it’s not so much about timing the markets as much as it’s about time in the markets.

Let’s look at some of the behavioural traits of a shrewd investor:

They don’t worry about keeping up appearances
Wealth is what is left after you have expended your income. There is no point in seeing yourself as a smart investor if you don’t leave yourself anything to invest with at the end of every month. If you worry what people will think about the car you drive or the house you live in perhaps you need to rethink your priorities.

They clearly define their investment objectives
Investment is not a one-trick pony; investments need to be sorted according to objective and managed accordingly. We all have different goals with different time horizons, but smart investors know that different timelines mean different asset allocations and tax implications.

They know the difference between a trend and a classic
We are all driven by either fear or greed to some proportion. If you are chasing better returns on a hot tip or folding out of fearsome unknowns, and find yourself making numerous fund switches in the year, you may need to take a step back and decide which of these factors are driving your investment decisions.

Is your portfolio diverse enough to ward off your fears and focused enough to reach your investment objectives on time? If not, let’s take a look and get you on the right track.

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

Life insurance in my 20’s… seriously?

Whether it’s a student loan, vehicle financing or retail credit accounts, it’s likely you’ve incurred some form of debt in your early 20’s. It’s easy to understand why life or disability insurance may feature at the bottom of your list of priority expenses. However, there are rather compelling reasons to buy risk cover while you’re young, in your prime and insurable.

There is a common misconception that you don’t need insurance because you’re young and healthy. However, have you considered that getting insurance will be cheaper and easier while you’re young and healthy?

Insurance premiums are influenced by factors such as your age, gender, the condition of your health and your occupation. If you’re in good health your premiums will be considerably cheaper at the age of 25 than when you’re 35.

You are also able to add extra benefits to your policy such as guaranteed insurability later in life when you may want to increase your cover as well as premium waiver cover whereby your premiums will be paid by the insurer if you are no longer able to earn an income due to disability, dread disease or retrenchment.

According to Statistics SA, South Africans in their 20’s have a higher risk of becoming disabled or being killed as a result of a car crash than any other age group. If your parents, or a relative, signed surety for you then they will be exposed to your debt burden should you pass away.

The first risk cover you should buy in your twenties is disability cover because not only are you at a higher risk of becoming disabled, but you also have the most to lose in terms of potential earnings.

As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”

Having financial protection already in place will protect you and your family from financial turmoil should you fall victim to a life-changing event such as death or
disability.

Need cover? Let’s get in touch.

Choosing your medical plan for cancer

Cancer is one of the leading causes of death in South Africa and may become even more prevalent – medical journal, Lancet, predicts a 78 percent spike in cancer cases by 2030.

Despite the prevalence of the disease and the high price tag associated with cancer treatment, medical aid schemes in South Africa do not automatically cover all treatment costs.

Comprehensive medical aid options that provide cover both in and out of hospital usually have unlimited oncology benefits or limited but with a good overall amount. However, this doesn’t necessarily mean that all expenses will be paid for in full.

Instead, medical aid schemes pay providers at scheme rate, or in some cases 200 or 300 percent of the scheme rate. This rate may be a lot lower than the one healthcare providers actually charge, in which case members have to cover the remaining costs when designated providers are not used.

More affordable medical aid options offer limited oncology cover. Once the limit has been reached, any additional payments have to be taken upon by the member (in most cases). Furthermore, schemes have the right not to cover the costs resulting from non-PMB cancers where it has been stated.

If a cancer is considered a PMB condition (Prescribed Minimum Benefits – defined conditions and treatments which must be provided, by law, to all medical aid scheme members and beneficiaries in full and without co-payment, regardless of the benefit option selected), a medical aid scheme is legally obliged to continue paying for treatment at cost, even if the oncology benefit limit has been reached.

In order to limit PMB expenditure, medical aid schemes can insist that beneficiaries consult specialists and use hospitals in their networks. Low-cost medical aid options may limit members to treatment at state facilities only. In addition, each medical aid scheme covers only medicines listed on a scheme formulary (an official list giving details of prescribable medicines). Entry-level plans typically cover the cost only of generic alternatives, rather than of more expensive branded medicines.

When is cancer considered treatable?

According to the Medical Schemes Act, cancer is considered treatable when:

only the organ of origin is affected and there is no spread of the disease to contiguous organs, or
the organ of origin and other life supporting organs and systems have not been irreparably damaged by the cancer

Before you subscribe to a particular medical aid scheme or plan, it’s a good idea to investigate the cover it offers for cancer treatment. Among the issues you should consider are:

the monetary value of the oncology benefit per beneficiary per year
what specialised treatments or biologics, if any, are covered by the benefit structure
whether cover for oncologist and specialist consultations is limited
the scheme’s cancer treatment protocols
whether the scheme permits plan upgrades at any time during the year.

Need to review your cover? Let’s meet up!

Teach your children about financial goals

Preparing your children for their financial future is one of the greatest gifts you can give them. For many parents, talking about money can be an uncomfortable subject and discussing finances with your children can feel both personal and scary, but they need to learn if they are to make wise decisions concerning their own finances.

It’s best to start teaching these lessons early on in life, if you think about teaching manners or language, it would be near impossible to start teaching these fundamentals in their teens.

SET SAVINGS GOALS
A good way to start is with goal-based savings – liquid cash doesn’t mean as much to a child as, say, a new Barbie or Hot Wheels. It is also important because later in life they will understand that it is easier to save and invest if you have a goal to work towards.

VALUE OF EARNING
You have to teach them the value of work. Earning money doesn’t just happen, you have to make it happen. Whether you are granting them a gold star on a chart for doing their chores or putting R5 into their piggy bank for washing your car – the same concept of gratification applies.

SET REWARD TIERS
Reward tiers also help, so that they can decide if they want to cash-in now or save up for a bigger reward – it’s this kind of reasoning that will help them later on.

If you can convince your child, once they hit their teens and are wanting the latest gadgets, that it’s better to invest R10 000 rather than having the new iPhone then you know they are on the right track. The value of that phone will have diminished significantly over a couple of years, but that sort of investment over a decade or two can make a big difference.

It also comes down to values. By having a goal that they are working towards you are teaching them that it isn’t the money that they are working for, it’s the end-goal. It’s not about being rich, it’s about the lifestyle that we’d like to have.

Need to review your financial goals? Let’s get in touch.

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!