Improving your personal balance sheet is crucial for achieving financial stability and success. A strong balance sheet can help you plan for retirement, save for big purchases, and weather financial setbacks. Here are a few ways to improve your personal balance sheet:

1. Reduce debt: High levels of debt can weigh down your balance sheet and make it difficult to achieve your financial goals. Focus on paying off high-interest debt, such as credit card debt, first.
2. Increase savings: Building up your savings can improve your balance sheet by providing a cushion for unexpected expenses and helping you reach your financial goals faster. Consider setting up automatic transfers to a savings account each month to make saving easier.
3. Invest in assets: Investing in assets such as stocks, bonds, or real estate can help grow your net worth and improve your balance sheet. Be sure to diversify your investments to minimize risk.
4. Review your expenses: Reviewing your expenses regularly can help you identify areas where you may be overspending and make adjustments to your budget. This can free up money to put towards paying off debt, saving or investing.
5. Use credit wisely: Using credit can help you build a positive credit history and improve your credit score, which can make it easier to get loans and credit at favorable rates in the future. But, remember to use credit wisely and avoid taking on too much debt.
6. Seek professional advice: A financial advisor can help you create a plan to improve your personal balance sheet and achieve your financial goals. They can also help you understand the best ways to invest and manage your money.

Remember, improving your personal balance sheet is a long-term process that requires patience and discipline. By following these tips, you can take control of your finances and achieve financial stability and success.

If you’ve found yourself in debt after the festive season, don’t panic – there are steps you can take to get back on track. 

Measure your situation

One of the most effective ways to get out of debt is to create a budget and stick to it. This means looking at your income and expenses and deciding how much you can realistically afford to put towards paying off your debts each month. 

Tackle the most costly debt first

It’s also important to prioritize your debts so that you can tackle the most pressing ones first. This might mean focusing on paying off high-interest credit card debt before paying off lower-interest student loans. 

Explore the benefit of combining your debt

A debt consolidation loan can also be a good option, as it allows you to combine all of your debts into one with a lower interest rate and single monthly payment. 

Talk to you creditors sooner than later

If you’re having trouble making payments, try negotiating with creditors or considering a credit counseling service for education and support. 

Stay focussed

Remember, it’s possible to work towards a debt-free future by creating a plan and sticking to it.

Fraudsters are on the the prowl in rising numbers trying everything to get to your hard earned money. Stockvels are no exception and seem to be soft targets as members are easily drawn into the false promises of fantastic yet unrealistic benefits. Here are some ideas to help you push back on potential fraud.

1. Verify the identity of the person organizing the stokvel. It’s important to ensure that the person running the stokvel is who they say they are and that they have a good reputation. You can do this by asking for references or checking with others who have participated in the stokvel.
2. Understand how the stokvel operates. Make sure you understand how contributions are collected and how the funds are managed. This will help you identify any red flags or suspicious activity.
3. Be cautious of any offers that seem too good to be true. Fraudsters may try to lure you in with promises of high returns or easy money. Be wary of any offers that seem too good to be true and do your due diligence before committing to any stokvel.

Overall, it’s important to be cautious and do your due diligence when joining a stokvel. If you have any concerns or questions, it’s best to speak with the person organizing the stokvel or seek advice from a trusted financial advisor.

What a year…

Looking into the rear view mirror back at 2022, the disrupted global economy has left us with many financial challenges which we will have to carry through to next year. They certainly won’t be going away for a while.

The 3 big ones to contend with are:

The price of oil

The war on Ukraine created a huge supply problem on oil. This quickly played through to a 34% price increase at the pump hiking a litre of petrol to the all time high of R24.

The knock on effect of this imported commodity lead to another challenge:

Raging inflation

As fuel is a major cost component in most businesses this had to translate into higher prices. Inflation in the mid 7% is ravaging its way through our economy and is stubbornly well outside the Reserve Bank target range of below 6%.

The main component in the basket of goods making up the CPI Index if food inflation which is now double digit. This is evident as you browse the shelves of you local supermarket where prices seem to rise daily.

Curtailing inflation is difficult and the first measure of resort is to curb spending. 

The sharp rise in interest rates

The Reserve Bank did what it had too and increased interest rates sharply to put the brake on inflation. This hurt the consumer even more with the consequential cost of debt. 

2022 is leaving us with many other huge problems such as load shedding and a looming water crisis amongst many other delivery problems.

Your financial planning will have to be on point to get through these challenges. 2023 calls for super extra attention to detail on your income and expenses. Capitulation to debt is not an option. Hold on tightly as the end of the storm is no where in sight as yet.

With the rapid rise in inflation and the consequential rise in interest rates, we are all feeling the pressure of the cost of living and are struggling to get through the month. 

If you are on a payroll, it becomes very difficult because income is limited and expenses are rising rapidly. It’s much like trying to fill up a bath with the tap on and the plug out. A way to improve the water level is to open another tap increasing your income – enter the side hustle. 

Some pointers…..

The purpose of your side hustle should aim to help solve problems? 

The objective is to make a profit.

People pay for value. So what value do you add?

Can you use your skills?  

So if you are a teacher there is an opportunity to provide extra lessons to children who are not coping at school. They need your help to solve their problem (your purpose) and you will make a profit as result (your objective). Whilst this is an obvious start there are many other opportunities found on the web:

15 Best Side Hustles in South Africa

• Laundry Services. If you’ve got the space and equipment, starting a laundry business can be pretty simple. …
• Car Wash. Washing cars has always been a popular way to make some extra cash. …
• Babysitting. …
• House Sitting. …
• Hair and Beauty. …
• Airbnb. …
• Personal Trainer. …
• Catering and Baking.

Then there are numerous web based opportunities found on Google.

Keep to the plan

Your way out of any financial trap is to limit expenses and increase income.Your side hustle should put you in a position where you can payoff your debt, firstly, and then start to save the extra you are making as well as the cost savings. It will be a lengthy process depending on how deep you are in debt. However, if you stick to the plan it is only a matter of time before you are on the road to financial freedom.

With inflation, running at these stressful levels, and not seeming to come back soon we need to be very aware of how this impacts on our financial future.

Quite simply, the higher the inflation rate, the less the value of your money in the future.

Thankfully, the governor of our Reserve Bank has assured us that he is determined to target inflation between 6 and 3% with the ideal being 4.5%. In order to do this, he will continue to raise interest rates until the current inflation rate at 7.5% pulls back into the range.

To help us understand the impact of high inflation on our money into the future, let’s use the magical rule of 72.

If we divide the current inflation rate of 7.5 into 72 the Rand will halve in value 9,6 years.

Should we divide the Reserve Bank target rate of 4.5 into 72, the Rand will halve in value in 16 years, which is a far better outcome. 

So there’s a trade-off between taking the pain now with rising interest rates versus dealing with diminishing value of our money in the long term. 

Spare a thought for the first world countries Europe’s double digit inflation rate is the highest in history. America is battling to pull back on 10%. South Africans have dealt with high inflation in the past so its not new to us. Double digit inflation in the first world countries is certainly unfathomable!

So we need to brace ourselves for the foreseeable future tolerating the high interest levels until we tame inflation. 

South Africans need to target debt as an obvious rising cost in the household budget whilst we face of rising interest rate cycle. 

Added to our woes is load-shedding and a water crisis which certainly won’t make things easier. South Africans are notoriously resilient. We will need to stretch this side of us a while to get out of this storm. 

When planning for retirement, we tend to underestimate the cost of medical aid which historically has increased faster than inflation eating more and more into your future pension.

It is said that you spend more on medical expenses in the last two years of your life, than the whole of your life. If this is in anyway true then having an appropriate medical aid is essential. 

Appropriate not Best

It is important to  goose an appropriate  plan to be on on at any point in your retirement years. During the year you can downgrade your plan but you cannot upgrade. So you need to be very aware of the benefits your plan provides.

The higher you anticipate your need for medical care the more comprehensive the plan should be. Conversely if you are a low user you don’t need a fully comprehensive option.

Cover the big bills

Unlimited hospital cover is a must have. If cost is an issue rather scale down on the out of hospital benefits which are more affordable than in hospital costs. 

Core and saver plans are less comprehensive for day to day meds but still provide unlimited cover in hospital. 

Consider “Gap Cover”

The savings on these options can be used to fund a gap cover policy. 

This provides cover for the excess costs which are often charged by the surgeon and the anesthetist. 

There are tax deductions on medical expenses after 65 which will compensate for the costs. 

Johannesburg: Financial Planning Week 3 – 7 October.

The Financial Planning Institute of Southern Africa (FPI) is proud to announce Financial Planning Week (FPW) 2022, an ongoing annual consumer initiative organised by the FPI to make financial planning the basis of every South African’s life.

The objective is to promote Financial Planning for All

The activities for the week will include a Facebook live session covering the following topics:

• Children and money
• Managing risk in your life
• Managing your finances in tough times
• Investment planning – Global vs Local and everything in-between
• Benefits of working with a financial professional

Contact FPIMyMoney123™ on mymoney123@fpi.co.za to make a booking for a free financial planning session. 

Apply to be a participant during the week on the following link: https://fpimymoney123.co.za/wp-content/uploads/2022/08/FPW_form_final-version.pdf

Download My Money 123 Tool Kit 

https://fpimymoney123.co.za/wp-content/uploads/2022/09/Financial-Planning-Toolkit-5.pdf

Download 10 Essential Money Conversations for Couples

https://fpimymoney123.co.za/wp-content/uploads/2022/09/10-ESSENTIAL-MONEY-CONVERSATIONS-FOR-COUPLES64.pdf

Make sure your will is valid

You need to be at least 16 years and capable to draft a will.

The will needs to be signed in your presence by two witnesses at least 14 years old who have no benefit in the will.

“If you die without a valid will, your assets will be distributed according to the Intestate Succession Act. This may result in your assets ending up with relatives whom you did not really want to inherit. The winding up of your estate could also take longer at a bigger cost.

Nominate Beneficiaries where you can

Living annuities, endowments, tax-free savings accounts and life assurance policies need the appointment of beneficiaries. If you appoint minors the proceeds will be passed onto the legal guardian.These policies will be treated outside the estate and avoid executor fees.

Retirement annuities, pension and provident funds and preservation funds are dealt with by the trustees of these funds. Whilst you should nominate beneficiaries the trustees will consider all dependents before determining who is entitled to the proceeds. 

Carefully consider a testamentary trust

If you leave assets to minor children who do not have a legal guardian, they may end up in the Guardians Fund until the children reach the age of 18. So it is important to nominate a legal guardian.

You cannot nominate beneficiaries for unit trusts and cash in bank accounts. So these investments will need to be dealt with in the will. If you want your minor children to inherit these and other assets you can bequest a testamentary trust to be set up for their maintenance and future possession of the residue at a specified age. 

Consider this age carefully as inheriting a large sum of money at an earlier age questions how responsible the child will be with the proceeds.

The nominated guardian will claim from the trust on behalf of the children for their lifestyle needs up to the nominated age when they will be paid the residue.

Trusts come with costs which should be carefully considered against the value of the assets you allocate to them.

We have just entered National Wills Week and hopefully will  achieve a much needed awareness of the importance of having a will in place. Even more importantly, to ensure that your will is valid……

An invalid will can lead to unnecessary delays and costs when it comes to winding up your estate.The problem worsens as frustrated beneficiaries and angry members of the family have to deal with the lengthy process of dying “Intestate.” That is without a valid will. Executing an estate is so much easier if the will is prepared properly.

Here are some important points to ensure that your will is valid.

1. You must be 16 years or older and mentally capable to make a valid will.
2. You must sign your will at the end of the document. If it consists of more than one page then it should be signed at the end of each page.
3. You should sign your will in the presence of two witnesses over the age of 14 who are competent to give evidence in a court of law.
4. The witnesses must not be benefit in terms of the will. So they may not be beneficiaries, executors or trustees.
5. The witnesses must sign the will in your presence after you have signed.
6. The will must be dated to ensure that the executor of your estate has a clear understanding of the latest will.

The time that it takes to ensure that you have a valid will is minuscule compared to the time and effort it takes to wind up an estate without a valid will.

Make sure that your will is valid. Your beneficiaries depend on it….