As a rather difficult investment year has come to an end, many investors may simply want to forget the many events that affected market performance and consequently portfolio values – locally and globally – and not think about money until a new year dawns.

However, there is no better time to take a hard look at your financial situation than ahead of a new year. Especially in view of the many troubles that have beset the SA market in 2017 and the widely held expectation that 2018 may be worse for the local economy. Not to mention the tax hikes expected come Budget 2018.

Consider this list to make sure you are prepared:

  • Budget

Your income may cover your expenses comfortably, but be sure to make the most of what you earn by making your money work for you. Cutting down on luxuries like a satellite subscription or regular dinners at a restaurant and then adding the savings to investments is a much smarter approach. Consider this – life expectancy is going up all the time and even wealthy individuals will be well served by contributing more to investing for retirement. Review all regular payments like short term insurance or life/disability cover and get rid of short term debt (widely referred to as ‘bad debt’) like store or credit cards as soon as possible.

  • Reassess your current financial situation

In the uncertain times we are in, it is crucial to have a diversified portfolio. Then also dig a bit deeper into your equity exposure, do an in-depth analysis of the asset class and country exposure in your overall  portfolio. In view of the state of the SA economy South Africans cannot afford not to have sufficient offshore exposure. Most economists agree that we are entering a possibly prolonged period of currency weakness. It is imperative to make  sure your portfolio is correctly aligned for this situation.

In the last two to three  years, investment markets have undergone fundamental structural changes. Are your investments in sync with these changes? For example, China and India have booming economies, do you have exposure to these countries in your portfolio? Did you perhaps fall into the trap of moving some of your assets to safer asset classes, during the instability we are currently experiencing, and now you are unsure about when to enter the market again. Make sure that you always follow a diversified approach.  Be careful of going with ‘flavour of the day’ stocks or fashionable investment options like Bitcoin. If you do not understand the underlying investment vehicle do not invest in it.

Are you investing in the most tax efficient investment products? There are brilliant investment structures that can be utilised, in order to make your investment more tax smart. It is clear that South Africans are facing possible tax increases going forward, and now more than ever you should invest your funds for optimal tax efficiency. 

  • Acquire healthy financial habits

Get into the habit of saving. Humans are creatures of habit, if you keep with your healthy financial habits you will be rewarded. Sign that debit order, if you wait until end of the month to save what’s left you will never reach your goal. Be realistic on what you have to save to have a comfortable retirement. Yes, these days you must save a sizable chunk of your gross income for retirement. At least 15% or more, should go to retirement savings pool. Know that if you only started to save later in life that you will have to save substantially more. Acquiring healthy financial habits will enable you to enjoy your hard-earned money more. Plan and save for larger expenses like international holidays or children’s education. Do not get into debt for this.

  • Plan for the future of your loved ones

However, you live your life, it should be a goal to make sure that your loved ones are left a little bit better off as a result of your life. That means not only making adequate provision for those who are dependent upon your financial resources, but also making sure that you don’t leave them with a financial mess to clean up. Review your last will and testament at least every three to five years and change it immediately if your circumstances change through say a divorce. Did you consider the fact that your offshore assets might not be covered in your South African will?

  • Pay it forward

Commit to making 2018 the year where we teach our younger generation the true value of money, teach them how to acquire good money habits. Teach them the value of money, they do not have to get all the latest gadgets or toys. Assist the people around you in getting a plan together to get their debt in order. Give them a nudge in right direction to review their policies, and short-term insurance. And always remember to focus on making provision for savings and investment.

  • Engage a professional

There is an unjustified perception that a financial adviser will only cost you money. A good financial adviser can however assist you in growing your wealth exponentially. From advising you not to make certain bad investment choices to pushing you to save a realistic amount for retirement. An advisor will show you the value of having a long term plan and guide you to understand market behaviour. Going the low-cost route might end up costing you greatly in future growth.

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