Rising global and local inflation rates are sending shockwaves through households as the cost of living soars. Families are finding it increasingly difficult to make ends meet, often resorting to credit cards to bridge the financial gap. In this challenging environment, there is alarming evidence of South Africans compromising on their nutrition as they struggle to cope with escalating prices on essential food items.

The confluence of high inflation and stagnant incomes has created a precarious financial landscape for many. To navigate these turbulent waters, it’s essential to adopt prudent financial strategies:

1. Shop Smart: Search for sales, discounts, and use coupons to save on groceries and essential items. Consider buying in bulk when possible to take advantage of cost savings. Look for value in loyalty programs.
2. Prioritize Needs Over Wants: It is a tough exercise having to distinguish between essential and non-essential expenses. The ‘must haves’ and the ‘nice to haves’. Focus on meeting your basic needs before indulging in discretionary spending.
3. Seek Financial Advice: If you’re struggling to manage your finances, consider consulting a financial advisor or credit counselor. They can provide guidance and strategies to improve your financial situation.
4. Avoid further debt: If you are borrowing to maintain your lifestyle you are digging a hole for youself by exposing yourself to higher costs of interest down the road.
5. Increase Income: Explore opportunities to boost your income through part-time work, freelancing, or side hustles.

The impact of inflation on household finances is undeniably challenging, but with careful planning and responsible financial decisions, it’s possible to weather these tough times and secure a more stable financial future.

The proposed amendments to the Income Tax Act put forth by the National Treasury mark a significant shift in the taxation landscape for remote workers in South Africa. Under these amendments, Foreign Companies that employ South African individuals for remote work will be required to comply with the PAYE (Pay-As-You-Earn) system, UIF (Unemployment Insurance Fund) contributions, and the Skills Development levy. This move carries notable implications for digital nomads and remote workers.

More admin issues

Digital nomads, who often choose locations for their lifestyle and work flexibility, could face substantial changes in their financial circumstances. The implementation of PAYE means that their taxes would be deducted at source, potentially leading to higher tax deductions. Additionally, complying with UIF and Skills Development levy requirements might add administrative burdens for both the workers and the employing companies.

More tax issues

From an economic perspective, these amendments could yield both positive and negative outcomes. On one hand, the government could see an increase in revenue as previously untaxed income is now subjected to taxation. This could potentially contribute to local funds and government programs. On the other hand, there’s a risk that some digital nomads might decide to leave the country in search of more tax-friendly or administratively convenient alternatives, leading to a potential loss of skilled individuals.

More legal issues

Moreover, there’s the matter of terminating employment for remote workers. The legalities surrounding employment termination can be intricate and differ from country to country. Foreign Companies might face challenges in understanding and adhering to South African labor laws when it comes to remote workers.

Revenue verses skills

In conclusion, the proposed amendments to the Income Tax Act reflect a significant attempt to adapt taxation policies to the evolving landscape of remote work. While they have the potential to increase government revenue, they also pose challenges for digital nomads and remote workers, from higher tax deductions to administrative complexities. The impact on the economy will depend on how effectively these changes are implemented and whether they strike a balance between taxation and retaining a skilled workforce.

Over the years, women have made remarkable advancements in various fields, including education, careers, and entrepreneurship. However, certain financial disparities still persist, such as the gender pay gap and a higher likelihood of interrupted careers due to caregiving responsibilities. These factors can impact women’s long-term financial security, making it crucial for women to have a strong grasp of financial concepts and strategies.

Financial Literacy among Women:

Financial literacy refers to the ability to understand and effectively manage personal finances. Studies suggest that women, on average, tend to have slightly lower financial literacy scores compared to men.

However, it’s important to note that financial literacy is not solely a gender-specific issue. It affects people of all genders and backgrounds.

Some ways to improve Financial Literacy

Education

Providing comprehensive financial education is key. Schools, community centres, and workplaces can offer workshops and courses that cover basic financial concepts, such as budgeting, saving, investing, and retirement planning.

Online Resources

The internet offers a wealth of free resources. Women can access online courses, articles, videos, and podcasts to learn about personal finance at their own pace.

Role Models and Mentors

Women can seek out successful female role models in finance and business who can share their experiences and insights. Mentoring relationships can provide valuable guidance and encouragement.

Open Conversations

Encouraging open discussions about money within families and social circles helps break down taboos surrounding finances. When people share their experiences, challenges, and lessons learned, it fosters a supportive environment for learning.

Professional Financial Advice

Consulting with financial advisors can provide personalised guidance tailored to individual circumstances. Financial advisors can help women set goals, create financial plans, and navigate complex financial decisions.

Networking Groups

Joining women’s networking groups related to finance and entrepreneurship can provide a supportive community where women can share knowledge, experiences, and opportunities.

Start Early

It’s essential to start learning about financial planning early in life. Schools and parents can play a significant role in instilling healthy financial habits from a young age.

Regular Assessment and Adjustment

Financial situations change over time. Regularly assessing financial goals and adjusting plans as needed ensures that women stay on track to meet their objectives.

National Women’s Month serves as a reminder of the progress made and the challenges still faced by women in various aspects of life. Empowering women with financial literacy is a critical step toward gender equality and overall well-being. By advocating for comprehensive financial education, fostering open conversations, and providing access to resources and support, we can collectively work towards improving the financial literacy of women and ensuring they are equipped to make informed and confident financial decisions.

Research

Here are some research-based facts regarding financial literacy for women:

Gender Gap in Financial Literacy: Studies have consistently shown a gender gap in financial literacy. According to a global survey by the OECD, women tend to score lower on financial literacy assessments compared to men. This gap is observed across different age groups and countries.

Impact of Education: Research indicates that higher levels of education are positively correlated with improved financial literacy. However, despite women’s increasing educational attainment, the gender gap in financial literacy persists.

Retirement Readiness: A study by the Employee Benefit Research Institute (EBRI) found that women are generally less confident about their retirement savings than men. Only 22% of women surveyed were very confident about having enough money for a comfortable retirement, compared to 36% of men.

Investment Knowledge: Women often display lower levels of confidence and knowledge about investing. A report by Sallie Mae found that women are less likely to invest and tend to hold more of their savings in cash compared to men.

Longevity and Financial Planning: Women tend to live longer than men, and they also have a higher likelihood of being single in their later years due to factors such as widowhood or divorce. This makes financial planning for retirement and long-term care especially important for women.

Pay Gap’s Impact: The gender pay gap can have long-term consequences on women’s financial security. Lower earnings can lead to reduced retirement savings and Social Security benefits, ultimately affecting women’s overall financial well-being in retirement.

Caregiving and Career Interruptions: Women are more likely to take on caregiving responsibilities, which can lead to career interruptions. These interruptions can impact their earning potential, Social Security benefits, and retirement savings.

Lack of Confidence: A study by Financial Finesse found that women often express lower levels of confidence in their financial decision-making abilities compared to men. This lack of confidence can lead to avoidance of financial matters or reluctance to engage in investment activities.

Interest in Financial Education: Despite the challenges, women are interested in improving their financial knowledge. A report by TIAA-CREF Institute found that women express a strong desire for financial education and seek guidance on topics like investing, retirement planning, and debt management.

Financial Advice: Research suggests that women are more likely to seek financial advice and consult professionals when making financial decisions. This indicates a proactive approach to improving financial literacy and making informed choices.

These research findings highlight the importance of addressing the gender gap in financial literacy. By providing targeted financial education, promoting confidence in financial decision-making, and addressing specific challenges faced by women, we can work towards closing the gap and ensuring that women are well-equipped to manage their finances effectively.

A recession is a period of economic decline where businesses don’t do as well, leading to fewer jobs, and people struggling to make ends meet. It’s characterized by a decrease in the total goods and services produced (GDP), increased unemployment rates, and overall financial hardship for individuals and businesses alike. The high rate of inflation globally and locally is threatening us with a recesion.

Here are three problems that may affect personal finance if an economy is in a recession:

Job Loss or Less Money Coming In

During a recession, some companies may need to save money, so they might lay off workers or give them less pay. This means people can lose their jobs or earn less money, making it harder to pay bills, save for the future, or invest in things.

Trouble with Borrowing Money

In a recession, it can be tough to borrow money from banks or lenders. Some people might rely on credit cards or loans to get by, but if they can’t pay them back, their credit score can get damaged. This makes it even harder to borrow money in the future. Having too much debt can also make it tough to save money or invest.

Asset Values Going Down

During a recession, the things we own, like stocks, bonds, and real estate, might lose their value. This can make people’s overall wealth go down. It’s especially hard for those who were counting on these assets for their retirement savings or long-term financial goals. If they have to sell these things, they might have to do it at a loss, which means they won’t get as much money as they hoped.

Gold is often considered a better investment in times of high inflation due to several key reasons:

Inflation Hedge

Gold has historically acted as a reliable hedge against inflation and the Rand. When the general price level of goods and services rises, the value of fiat currencies decreases, leading to a loss in purchasing power. Unlike paper currencies, gold’s intrinsic value is not directly linked to any government or central bank, making it less susceptible to depreciation during inflationary periods. As a tangible asset, gold tends to maintain its value or even appreciate in real terms, offering investors a way to preserve their wealth.

Safe Haven Status

During economic uncertainty and rising inflation, investors often seek safe-haven assets to protect their portfolios from market volatility. Gold is widely regarded as a safe-haven asset due to its long-standing history of being a store of value. Inflation erodes the value of other investments, such as stocks and bonds, making gold an attractive alternative as it exhibits less price volatility during turbulent economic conditions.

Limited Supply

Gold’s scarcity contributes to its allure as an inflation hedge. The supply of gold is relatively finite, and its extraction is costly and time-consuming. Unlike fiat currencies that can be printed in unlimited quantities by central banks, gold cannot be manufactured at will. This scarcity factor helps maintain its value and drastically prevents excessive inflation from impacting gold prices.

Where to invest

You can invest directly in gold mining shares. You can buy and hold gold coins such as Kruger Rands through an exchange. You can also invest directly in an exchange-traded fund which tracks the performance of gold at a very low cost.

Some basic principles apply to successful investments.

Study your investments

 Before making any investment, conduct thorough research and analysis. Study the market trends, historical performance, and financial health of the companies or assets you’re considering. Utilise tools like fundamental analysis to assess the intrinsic value of stocks or assets. Additionally, keep yourself informed about economic and geopolitical events that might impact your investments. Making well-informed decisions based on data and insights is crucial for long-term success.

Spread your investments

One key strategy for making wise investment choices is to diversify your portfolio. Instead of putting all your money into a single investment, spread it across various asset classes, industries, and geographic regions. This helps mitigate risks as different investments may perform differently under various economic conditions. By diversifying, you’re less likely to experience significant losses from the underperformance of one investment, while other assets may still yield positive returns.

Stay with your investments

Patience is a virtue when it comes to investing. Rather than chasing short-term gains, focus on long-term goals and hold onto your investments for extended periods. This approach allows you to ride out market fluctuations and benefit from compounding returns. Long-term investments have historically been shown to outperform short-term trades, and they provide more stability and reduced transaction costs. Remember, successful investing requires discipline, a clear strategy, and the willingness to stay committed to your chosen path.

In the universe of financial planning, there are so many aspects to consider which often leads to oversights or missed opportunities which affects the effectiveness of the plan.

Here are some common areas which tend to be overlooked.

Not nominating a beneficiary on your pension fund benefits

The pension fund is regulated in such as way that the beneficiaries are decided upon by the trustees of the fund. They have the responsibility of ensuring that any dependents left behind at your death after considered as beneficiaries. You should ensure that the beneficiaries you wish to benefit from your fund are at least recorded on your fund to include them.

Not Including your RA contributions in your PAYE deductions

Retirement annuity contributions are deductible against your taxable earnings to certain limits. Instead of claiming at the end of the year on your tax return, you could have the contributions deducted monthly thereby improving your take-home pay every month instead of waiting for the refund at the end of the tax year.

Nominating a child as a beneficiary

Children under the age of 18 years are minors and do not have the legal capacity to enter into a contract or sign up for bank accounts, investments or other financial instruments. Nominating a child as a beneficiary therefore can create problems with the proceeds you wish them to benefit from. Policies with children as minors are generally taken over by their legal guardians. If there is no will which directs the proceeds to a trust the proceeds could end up in the Guardian Fund until the child reaches 18 years old. 

Not signing your will correctly

A will needs to be signed absolutely correctly to be valid. Two witnesses who are not beneficiaries, guardians, or executors in the will are required to sign having actually seen you sign the will. They have to be of sound mind and capable of testifying in court being at least 14 years old. The will is also not valid if a witness has a spouse who is a beneficiary in the will. These and many other oversights impact the effectiveness of your financial plan.

Be very aware and seek advice if you are not sure. 

There are some distinct benefits to reaching financial independence.

It’s the stage where your financial provisions can maintain your lifestyle without relying on a payroll. 

Financial Independence has some distance benefits:

Freedom and Flexibility: 

Financial independence grants you the freedom to make choices without being constrained by financial obligations. You can pursue your passions, take risks, and explore opportunities without worrying about monetary limitations. This flexibility allows you to design a life that aligns with your values and aspirations.

Reduced Stress and Peace of Mind: Achieving financial independence brings a sense of security and peace of mind. You can focus on personal growth, health, and relationships without the constant worry of meeting financial obligations. The absence of financial stress can improve mental and emotional well-being, contributing to a happier and healthier life.

Early Retirement or Career Shift: 

Financial independence enables you to retire early or transition to a career you genuinely enjoy, rather than staying in a job solely for financial reasons. This provides the opportunity to spend more time with loved ones, travel, engage in hobbies, or even give back to the community through volunteering or philanthropy.

The way forward:

Live within your means:

As a rule, income needs to cover your cost of living and include savings for your future financial independence. Unless you win the lotto or inherit and large amount you will never be financially independent without saving. A key measurement in your financial planning is the percentage of your income spent on debt compared to your allocation to savings. A healthy balance is 30% debt and 30% savings, leaving you with 40% for living expenses. You basically are living above your means if you are borrowing more and saving less. Yes, the house and the car are above your pay grade if you are spending more on them than your savings. 

Increase your income:

You can fast-track your future financial independence by finding ways to increase your income. Side hustling with the determination to save the extra cash and not use it to improve your lifestyle needs. 

Save first then spend the rest:

Committing to your savings at the beginning of the month is a far more successful strategy than trying to save what might be left over at the end of the month. You effectively build a realistic cost of living with the peace of mind that you are on the road to financial independence. 

In today’s interconnected world, the risk of falling victim to scams is rising. Scammers have become increasingly sophisticated, making it crucial to be vigilant and well-informed. 

The golden rule in the financial universe is:

If it is too good to be true then it probably is…...

The reality around investing is that it takes time to grow your well-earned money. There are no reliable get-rich-quick schemes. Creating wealth is a function of compounding returns over time. Understanding what realistic returns to expect from various investments is key.

So what should you do?

Here are three essential considerations to avoid being scammed:

Awareness and Education:

Awareness of common scams and understanding how they work reduces the likelihood of becoming a victim. Stay informed about prevalent scams like phishing emails, identity theft, romance scams, and investment frauds. Regularly educate yourself on new tactics scammers employ and learn to recognise red flags and warning signs.

Vigilance and Skepticism:

Maintain a healthy dose of scepticism, especially when approached with unexpected offers or requests for personal information. Verify the legitimacy of any communication or transaction. Scrutinise the source, grammar, and spelling errors. Contact organisations or individuals directly through official channels to confirm authenticity.

Secure Online Practices:

Adopt secure habits to minimise the risk of scams. Use strong, unique passwords and enable two-factor authentication. Update devices and applications regularly. Be cautious with public Wi-Fi networks. Exercise caution when making online payments and ensure you’re on a secure website.

Scamming is here to stay

By staying informed, being sceptical, and adopting secure practices, individuals can greatly reduce their vulnerability to scams. Remember to continuously educate yourself, remain vigilant, and implement secure online habits. These considerations are crucial in protecting personal and financial information, creating a safer digital environment now and in the future.

So if you were offered R3 million on the 1st of this month or 1 cent which doubled every day for the whole of the month which option would you take? Well, if you could delay your gratification for 31 days you will end up with a staggering R10,7 million!

Extraordinary power

When it comes to investing, one of the most powerful forces at play is the concept of compounding. Albert Einstein famously called it the “eighth wonder of the world,” and for good reason. Compounding allows your investment returns to generate even more returns over time, resulting in exponential growth. Let’s explore the power of compounding with a simple example.

Imagine you have R1000 to invest and you decide to start investing at two different times, five years apart. In the first scenario, you invest R1000 today, and in the second scenario, you invest R1000 five years from now. Let’s see how the power of compounding works over time.

Assuming an annual interest rate of 8%, after 10 years, the investment made today would grow to approximately R2159 due to the compounding effect. On the other hand, the investment made five years later would only grow to around R1470 over the same period. The difference between the two investments is quite significant.

Start as soon as you can

Starting earlier allowed the first investment to benefit from ten years of compounding, resulting in a larger return. This showcases the power of time in the world of investing.

The outcome vastly improves if the returns are higher over a longer period.

This example highlights the importance of starting to invest as early as possible. Even small amounts invested early can have a substantial impact on your future wealth. By harnessing the power of compounding, you can potentially build a significant nest egg over time.

In conclusion, compounding is a remarkable phenomenon that can significantly enhance the growth of your investments. It demonstrates the value of starting early and being patient. By harnessing the power of compounding, you can set yourself on a path to long-term financial success. So, start investing today and let the power of compounding work its magic for you.