Many South Africans are currently feeling the financial pinch and, as belts tighten, it’s natural for households to review where they can cut back on expenses. It may be tempting during such times to send life cover payments to the bottom of the priority list, but this could have dire financial consequences for your loved ones.

It’s a question of weighing up what is worse – the current burden of paying your monthly premiums or the potential effect on your family if they were to lose your income entirely in the event of a disaster.

Actuarial modelling indicates that about 380 families in South Africa lose a breadwinner every day. However, Hennie de Villiers, the deputy chairman of the life and risk board committee at the Association for Savings & Investment South Africa, notes that “over two million risk policies, covering events such as death, disability and dread disease, were lapsed within their first year in 2016.”

This means that South Africans are critically underinsured, as is highlighted in this article published on Personal Finance.

The problem with cancelling your life cover isn’t just that it is a massive risk, but that it also may be impossible to replace it as you grow older.

Many people may assume that you can simply cancel your life assurance then reinstate it when it’s easier to afford. However, premiums are likely to be substantially higher when you’re older (cover is said to cost double at the age of 45 what it costs at age 25). Health conditions may also be excluded from the cover and, in the worst case, you may even be uninsurable if you are diagnosed with certain illnesses.

Even missing the payment of a few premiums can have a negative effect. Not only may you need to undergo the underwriting procedure again, but any deterioration in your health would be taken into account when considering policy reinstatement and premiums.

So what are the alternatives?

4 possible alternatives to cancelling life cover (this is not financial advice)

1. Reduce your monthly expenses
   Cut back on items that aren’t essential, such as your television subscription. Critically evaluate your budget and examine what is imperative versus what you just would like.
2. Re-negotiate your debts
   Try approaching creditors or your bank to negotiate terms of any repayments. They may be willing to accept smaller sums over a longer period.
3. Press pause on your savings
   Consider taking a ‘payment holiday’ on your contributions to an investment portfolio.
4. Negotiate your premium payment pattern
   Request to change to an escalating-premium pattern for your life cover, which means that your initial premiums will be lower and increase over time.

Please note that the above four points are suggested options, if you would like to review your plan inside of your changing situation – please arrange a meeting for us to objectively make the best decisions according to your individual needs. It is important to stay educated about life cover and informed about affordable solutions, so please discuss this if it is a concern.

Old Mutual Balanced Fund manager, Graham Tucker, explains in an article published on Fin24 how many investors suffer from something he calls ‘inflation illusion’. This essentially means that many people aren’t completely aware about the effects of inflation or how much it will impact their savings over time.

For example, the average inflation rate of vehicles since 1990 has been 5.8%. This means that a medium-sized sedan that cost ZAR260,000 in 2016 will likely cost ZAR1.05m in 2041. At the same time, the cost of sending your child to a top private school is increasing at an inflation rate of 9.2%, which means that a year’s tuition and board can be expected to cost about R1.81m by 2041.

High increases in the price of private health care and food will also occur as a result of high inflation rates. To give you an idea, a report by Old Mutual Investment Group’s MacroSolutions boutique highlights how a Spur burger that only cost 30 cents in the 1970s was priced at ZAR72.90 in 2016.

It is, therefore, important to take into account the impact of inflation on your investment returns. Tucker emphasises that “if your retirement income does not at least grow in line with inflation, you will either experience a decline in your standard of living or you will run out of money.”

If you budget for a fixed monthly retirement income of ZAR10,000 a month, this will only actually be worth about ZAR1,700 a month in 30 years’ time – taking into consideration an annual inflation rate of roughly 6%.

It is, therefore, important to be aware of the long-term compound effects of inflation. If you’re feeling uncertain about anything, arrange a meeting soon to ensure that you have planned carefully and invested to achieve inflation-beating returns that will secure your future goals.

There is no formula for instant wealth – but for some, it can become a reality overnight and, if not managed correctly, this dream can easily turn into a nightmare.

If you happen to inherit an astronomical sum, receive a massive bonus, or fortuitously sell a property for a lot more than you paid for it, then follow these useful tips that we found in an article published by Fin24 that will help you to successfully handle a financial windfall.

1. Don’t spend it all at once
The temptation for many people who come into a large sum of money is to blow lots of it in one go. While a bit of indulgence shouldn’t hurt, overspending could result in a lot of wastage and could cost you dearly in the long run. So, instead of splashing cash aimlessly, take a moment to consider carefully how the money could be better spent or invested for, and in, your future.

2. Pay off your debts
First things first, clear off any outstanding debts. Give yourself a clean slate and what Ester Ochse, the channel head for FNB Advisory, calls “the opportunity to live a debt-free life”. And once you are blessed with not having any debt hanging over your head, try to keep it that way to give yourself more freedom and options.

3. Don’t just quit
Coming into an unexpected sum may make you consider throwing in the towel at work, but if you don’t invest your money wisely and plan properly, losing your regular income and benefits could create limitations.

4. Save for a rainy day
You never know what could happen, so it’s important to always have enough money saved for emergencies.This would involve assessing your new lifestyle and ensuring that you always have at least six months of living expenses kept aside in the event of any misfortunes.

5. Seek financial advice
Ultimately, receiving a windfall will change your financial trajectory. You’ll need to review your investment objectives, consider estate planning, and re-evaluate your risk appetite. Don’t hesitate to arrange a meeting to assess any new short-term or long-term goals, and ensure that your investments are in line with your financial situation.

If you do find the pot of gold at the end of the rainbow, it’s important to take the correct measures to protect it and ensure it lasts. Careful financial decisions from the offset could save you a lot of unnecessary trouble in the future, so be sure to ask advice and discuss any change in fortune.

The school holidays are coming and it’s easy to feel overwhelmed with so many things to remember to do before you go away. But here are five quick and easy pointers that will make your holiday as carefree as possible – and even save you money in the long run – so that you can focus on enjoying time with your loved ones.

1. Service your vehicle
If you’re planning to set off on an overland adventure, it’s important to service your vehicle beforehand. This will ensure that everything is running safely and smoothly so that you can enjoy the drive and rely on your car to get you to your destination. By addressing any issues, such as under-inflated tyres and leaks, a good service will not only prevent accidents or the inconvenience of breaking down, but it will also make for a more fuel-efficient car so that you can save money on fuel.

2. Turn your geyser off
Turn your geyser off if you’re going away for a few days so that the element will not periodically kick in to reheat the water. As a result, you’ll conserve energy, use less electricity and save water, which will save you some valuable Rand to put towards your holiday.

3. Pack healthy snack options
Whether you’re going on a long road trip or just driving to the airport, it’s always best to pack some healthy snack options that will keep everyone’s energy levels stable. Nothing’s worse than feeling famished and pulling over at the service station to see that it only stocks overpriced junk food that will have a negative impact on your body and wallet. If you have kids, healthy snacks will also avoid sugar highs that will lead to them inevitably crashing after spending an hour kicking the back of your seat.

4. Pack a source of entertainment
In the same line of thought, bring a CD or upload your favourite music to your iPod to boost endorphins on any long journeys. You may also wish to pack some games or toys to keep the youngsters entertained. Otherwise, you could be in for a headache-inducing few hours, and a trip to Ouma’s house could cost you your sanity.

5. Get currency
It’s advisable to carry a mix of cash and cards with you when you go away – in case of emergency. If you’re off to far away land, arrange to buy the local currency beforehand and do some online research to find out who boasts the best rates and lowest commissions. Although you can exchange money at the airport or in your destination, you can often get better exchange rates if you do this before you leave. You may also want to compare credit cards to see which will give you the best rates and lowest fees abroad, and a pre-paid travel card is worth considering if you need a bit of help sticking to a budget.

The moral of the holiday story is to plan ahead to avoid potential disaster and to save money. Obviously you can’t be in total control of everything, but a bit of forethought and preparation could save you a lot of unnecessary drama and cost. Whatever you’re up to this July, enjoy yourselves, travel safely, and come back feeling happy and refreshed!

It’s that time of year again in the southern hemisphere. The days are shorter, the nights are long and cold; dressing gowns and woolly jumpers have replaced sunblock and shorts. Another thing that is common in winter is the flu, so this article published on MoneyWeb seemed particularly apt for the season.

According to the article, a recent financial wellness survey carried out by Sanlam highlighted that 73% of middle-class South Africans experience financial stress.

This was described by the survey “as emotions associated with the difficulty an individual or household may have in meeting financial commitments due to a shortage and/or misuse of money.”

A quarter of those experiencing these worries expressed that they were stressed continually about their finances, and cited the most significant causes as: short-term debt, such as car and credit card payments; extended family obligations; not being able to save; not having enough for any emergencies; and school or university fees.

Viresh Maharaj, CEO of Sanlam Employees Benefits: Client Solutions, rightfully pointed out that this would be considered an epidemic if we were referring to a disease. “If this was the flu, then 70% of South Africa said they’ve got the flu at the same time, it would be headline news.”

In South Africa, the middle class is the backbone of the economy and pays a substantial part of the country’s tax. A lot depends on this sector, so these levels of stress are concerning.

Conspicuous consumerism, as well as demanding economic conditions, have been labelled as the key culprits of this financial stress. The advertising industry has created “a culture of consumption on steroids” that needs to be addressed. Maharaj also ascertains that “while the National Credit Act includes various checks and balances… it doesn’t address the fact that being able to pay for something is not the same as being able to afford something.”

The findings from the survey suggest that many middle-class South Africans may struggle to meet short-term goals, which may have a knock-on effect of limiting their capacities to ensure they have enough funds to properly provide for their retirement. Many individuals seem to be focusing on immediate financial concerns, and socio-economic constraints mean that the retirement funding issue isn’t being resolved. In the survey, over 60% of respondents “said they would work beyond retirement age, while 73% said they would reduce their current standard of living.”

However, you don’t have to be part of this statistic. Now’s the season to get your flu jabs before the holidays begin and arrange a meeting to discuss how to structure your financial portfolio so that you don’t have any unnecessary financial stress – now or in the future.

Protect yourself from any kind of flu this winter by seeking advice and taking the appropriate measures to ensure your long-term financial wellbeing.

Whatever you do, don’t forget Father’s Day, which is coming up in South Africa on Sunday, 18th June. After all that our dads have done for us, the least we can do is show them how much we care. And if your father is like many other fathers – in that he loves to save a bit of cash – here are five gifts that will give him high returns, no matter how the markets are performing.

1. Sous vide cooker
Is your dad a bit of an amateur chef at heart? Then buy him a sous vide cooker and give him the chance to cut costs by cooking for everyone more frequently. This method basically involves cooking food for a long time in a heated water bath, making it an incredibly easy technique with reliable results. The steaks will rival any in a restaurant, meaning that he’ll save money on dining out and no food will ever be wasted on his watch.

SHOP FOR IT ONLINE HERE:

2. Solar-powered anything
From a solar-powered Bluetooth speaker, to a solar backpack, you can’t go wrong with these environmentally friendly and cost-efficient gadgets. If your dad likes anything to do with the great outdoors, a solar-powered backpack will keep a USB device charged so that he can stay connected whether he’s golfing, hiking, fishing or camping. And if he’s a world-class entertainer, then a Bluetooth speaker will have the party pumping at his next braai for up to 10 hours – so he can raise the roof without raising his electricity bill.

3. Craft Beer Monthly Club subscription
Give your Dad the gift that just keeps on giving. “A curated collection of the latest craft beers and old-time favourites” will be delivered to his door by YuppieChef each month and will save him lots of Rand on beer supplies throughout the year. He can also become a bit of an aficionado thanks to the online tasting notes that come with each case.

SHOP FOR IT ONLINE HERE:

4. Gym membership
To balance out his beer or boerie intake, make sure he keeps fit and agile by buying him a year’s gym membership. Not only will you be investing in your dad’s good health – and could potentially save him on medical expenses – but the gym is also a great place for him to socialise, which will keep his mind as well as his body active. You could even throw in a few sessions with a personal trainer to get him into the swing of things.

5. WiFi-enabled smart switch
Is your Dad always getting grumpy at lights being left on? Then give him the power to turn a switch off from anywhere, simply by using his smartphone. Some switches will even allow him to monitor the energy used.

In the spirit of thinking about the bigger picture in our current financial climate, hopefully one of these presents will be the perfect long-term investment for him.

Creating wealth is a long-term process that requires patience, resilience and a strong strategy that can weather the global investment storm that has been raging in recent times. As you embark, or continue, upon your journey to financial independence, it is important to wholly understand the investment landscape, or have an advisor you trust, in order to successfully navigate the ups and downs of a stormy market and exploit the nuances of profit-yielding opportunities.

What exactly, has created the stormy conditions?
According to a recent article entitled Navigating Uncertain Waters, slower demand from China last year resulted in declining commodities prices and low levels of economic growth in many emerging market economies. Combined with the political developments in the UK and the US, which caught the world by surprise and created a great deal of uncertainty, 2016 saw poor investment returns that have left a wake of general unease.

Further pressure from the weak commodity markets, slow economic growth, global political uncertainty and two credit rating downgrades in South Africa have resulted in the local equity and property markets delivering below average returns.

Against the recent backdrop, most South African investors have at best been treading water or have seen their wealth decline in real terms, as portfolios have largely been unable to beat inflation.

According to the article; “the average balanced collective investment scheme, or unit trust, achieved a return of between 1.5% and 2.5% while the average offshore balanced portfolio delivered a return of around -7.5% for the year.”

Goodbye to the Past
It is important to put things into perspective and appreciate that investment markets often go through weaker growth periods of consolidation (this is technically known as a process of reversion to the mean). The below average returns achieved in 2016 followed the above average growth that started after the financial crisis in 2009, and weaker periods in investment markets create a more realistic long-term average and allow for better investment returns to be achieved in years to come.

Given the current political climate, 2017 could well be another year of consolidation. However, if you’re looking to achieve a long-term investment goal, it is important to not be swayed by short-term ideals or emotions, as you have a higher probability of growing your wealth if you stick to your investment strategy.

The Five Steps to Long-term Investment Success and Financial Independence

1. Determine your investment objective by specifying a realistic goal you wish to achieve.
2. Set your time horizon, which is the number of years you have to achieve your goal.
3. Decide on an appropriate investment strategy by selecting a combination of asset classes in which to invest – bonds, property, cash, offshore assets, and equities.
4. Select the most appropriate investment platforms, products and asset managers through which your chosen investments can be made.
5. Monitor and review all of the above on an ongoing basis.

While a great deal of uncertainty remains for South African investors, it is important to understand that uncertainty, and even volatility, in investment markets do not only represent risk, they also represent opportunities.

The key is to remain informed and seek to improve your knowledge about your investments, then keep the various elements of your investment plan aligned to navigate uncertain waters and continue on your journey to wealth creation.

When it comes to investments, it’s important to stay focused on the bigger picture – even though the effect of recent political events in South Africa may have you itching to move your investments out of the market and into cash.

The instinct to do this arises from the fact that cash investments are readily available for use and are free of most investment risk. The low risk of a bank failing is essentially the only concern as they are investments on short-term, variable-rate deposit with reputable banks.

However, in an article published at the start of April 2017 in Personal Finance, Leigh Kohler, the head of research at Glacier by Sanlam, explained that it’s important at times like these to remember that even though a cash investment may seem like a comparably safe one, the returns don’t often beat inflation. Only once between 2001 and 2016 did cash investments outperform local equities and bonds.

Furthermore, if you had been invested only in South African equities over this period, you would have received an average return of 17.12%, compared to just 7.96% if you had only invested in local cash investments.

You are also taking two market-timing risks if you wish to move your investments into cash then back again once things have calmed down, and research shows that getting the timing wrong can be a huge blow to your portfolio.

No one knows exactly what the future holds for the markets, but since former finance minister Nhlanhla Nene was fired in 2015, there has been heightened volatility and you can be sure to count on more. Riding this volatility and being invested for the long-term in listed property and equity is how Kohler believes you will earn inflation-beating returns.

What should you do in lieu of making an emotional decision?

• Invest in a combination of asset classes in line with your needs, time horizon, and risk tolerance;
• Invest in a suitable multi-asset fund;
• Ensure you have sufficient exposure to offshore assets;
• Understand and believe in your long-term investment strategy, then stick to it.

If you would like to chat in person about this, don’t hesitate to arrange a meeting to review your portfolio so that we can revise and reinforce the stability, flexibility and durability of your financial plan.

It’s never too early to start planning for your retirement, and help is at hand if saving for the future ever feels confusing or overwhelming. The key is to think like a wilderness explorer and always be prepared!

Be open to what could happen in your autumn years. For example, if you live to the impressive age of 95, you may very well want to buy two new cars and move home at least once during your retirement, so you’ll need to plan accordingly to cater for potential scenarios.

As people are living longer, so will they require more capital after retirement, it’s a good idea to start planning as early as possible to secure your future. And a diversified portfolio is the way forward in order to ensure that you have enough to enjoy a long and happy retirement after years of hard work.

Don’t think of your savings as a one-trick pony, as sadly it isn’t enough to rely on just your pension or provident fund and retirement annuities. Life is often what happens when you’re making other plans so you don’t want to put all of your eggs in one basket. If anything ever goes pear-shaped, you’re going to need liquidity, so it’s important to ensure that you’ve got different options to fall back on.

To start with, both you and your partner should open a tax free savings account (or similar vehicle – we can chat about this in person) as soon as you can. This might also be the time for you to start considering building a property portfolio. Bear in mind that owning many small properties in one location that you know well and that you can look after yourself is arguably more profitable than having just one big property.

These are just two ideas that you can consider towards planning for your retirement. Simply arrange a meeting to chat about all your options and design a retirement portfolio that will cover your bases.

In the aftermath of South Africa’s downgrade to junk status by two major ratings agencies, it is feared that the country will begin a self-reinforcing downward spiral. Until the end of 2016, Azar Jammine, the director and chief economist of Econometrix, felt that the nation was experiencing a “slow erosion, not a huge slump.”

However, in an article published in October last year by the Mail & Guardian, Stanlib’s chief economist, Kevin Lings, warned that the country would be vulnerable if “the economy continues to deteriorate and confidence dissipates.”

He also emphasised that circumstances were ripe for businesses to need to do some real cost cutting in the form of retrenchments.

The widespread retrenchments that many feared would take place over the last couple of years never really happened. Although the trend has been towards the downside, the expected acceleration in retrenchments in the manufacturing, mining and construction sectors didn’t happen last year.

This is believed by Lings to be because the companies that made huge job cuts during the 2008-2009 financial crisis didn’t really add those jobs back. He explains that many companies in the formal sector “have been incredibly reticent in adding more jobs. So now, when you get a downturn, businesses don’t have the excesses they had in the past. There’s little to trim.”

So although the last decade has witnessed “the beginning of a new normal” in which there have been some preliminary indicators of financial distress, Lings explained at the end of 2016 that “when we look at South Africa, what we see so far is that the environment is rich for distress but it is yet to show up.”

Statistics show that there most certainly was a decline in the sale of household goods and vehicles, but the “tightening of regulations and the implementation of affordability testing and debt counselling are thought to have had a positive effect” on deterring unsecured lending, which is a key indicator of when people are under stress.

Now, however, as a result of the combined factors of the drought, the corrupt political situation, and the downgraded economy, South Africans wait with baited breath for what will happen next. The Rand, at around 12.90 to the dollar towards the end of April 2017, remains weak.

It is important at a time like this to understand the implications of recent events. Don’t be distressed, refrain from making impulsive decisions – let’s arrange a chat to find out what the future may hold for your personal investment portfolio.