OPINION: Give your finances a spring clean
As we live longer, we will need to provide for our financial security for an extended period of time.
With spring here, it is an excellent time to take a look at your financial situation and make any adjustments now to ensure that you will have a long and sustainable retirement.
Note that you do not need to be well-heeled or to have great assets to start on the path to building and growing your wealth. By following these suggestions, from whatever your base, you will be making a positive difference in your life and that of your family.
- Spend only after you save.Rather than trying to save what you haven’t spent at the end of the month (let’s face it, who has much left over?), do your budget and decide how much you want to save each month. Then put that aside at the start of the month and live off the rest. Before long, you will have built up a significant capital base.
- Start saving for your children.Invest a few hundred rand each month into a unit trust, exchange traded fund or something similar in the name of each of your children. You should ideally do this from the day they are born, but if you haven’t done so, at least start now. You will be amazed at how the savings add up.
- Add property to your portfolio.Property is the unsung hero of long-term savings. You could buy an investment property and manage it yourself, although this requires time and energy. If you do not have the capacity to do this, you could put money into a real estate investment trust every month. This will add both capital growth and income to your portfolio.
- Avoid the fancy car. If you are driving an expensive car, think about downgrading it. If you haven’t fallen for this, don’t! Don’t upgrade your car - rather keep you old car for longer. Cars are expensive to buy and they are depreciating assets. The less capital you have tied up in one, the better. Look to drive the smallest car that you can get away with.
- Consider a Section 12J investment if you need tax relief. If you are looking for a mechanism to reduce your tax liability, you could speak to your financial adviser about a Section 12J investment. Currently yielding about 12percent, an investment in an accredited 12J company can be 100percent written off against taxable income in the year in which you invest. But don’t wait too long as the window for this will close in a few years’ time.
- Look at transformational investing. Speak to your financial adviser about transformational investing so that you can also help to build South Africa. Consider a small allocation to transformational investing - a new category of investments that aims to invest capital that earns a competitive return but which also targets economic transformation in South Africa.
By paying a small amount of attention now and taking this opportunity to review your finances you will be able to make a significant difference to the growth of your wealth and to your financial security in your later years.
- Article by GEOFF BLOUNT Geoff Blount is an advisory partner at BayHill Capital.