YOUR QUESTIONS ANSWERED

Festive season budgeting

WHEN it comes to the festive season, I somehow cannot manage to make my money last throughout. What do I need to prioritise in order to make it through until the end of January?

Name withheld

Tanya Joubert, wealth adviser at PSG Wealth Pretoria East, replies: The festive season tends to be exceptionally challenging and overwhelming from a financial perspective, and a lack of proper financial planning and conduct during this time can easily result in you having to start the new year on the back foot by having to dip into savings or incurring debt.

With the dire South African unemployment figures and the tough economic climate, many individuals might find that a speedy financial recovery is not on the cards due to the snowball effect of this financial setback.

It is easy to get swept up by the festive hype and to give in to the temptation of overspending. With added expenses relating to gifts, entertainment and travel, it is imperative to rethink your priorities and to create a financial plan that will carry you into the new year.

Setting realistic and personalised spending boundaries and exercising discipline can go a long way. Here are a few tips to help you with your festive financial planning:

¡ Determine how much you can afford to spend and allocate funds to the various spending priorities.

¡ Avoid spending money impulsively – make lists and stick to them.

¡ Try stocking up on certain

required items in advance.

¡ Limit gift buying or agree to a monetary limit upfront.

Opt for the more affordable options when selecting the items you plan to purchase.

Using one or more of the above strategies can go a long way in making your money last longer through the silly season and into the new year.

Investment plan for 2022

I’m busy planning my financial investments for 2022. What are the most important market aspects to consider when planning the year ahead?

Name withheld

Pierre Puren, financial planner at PSG Wealth Jeffreys Bay, replies: Start by identifying your individual goals. Furthermore, attempt to identify the time it would take to reach each goal.

From there it gets easier. Imagine three empty buckets in front of you.

The first bucket is “Safety” – all your short-term (less than two years) needs and planned capital expenses will be addressed from this bucket and invested in a cash or fixed income type fund.

It provides certainty and is easily accessible with no or little volatility.

The second bucket is called “Preservation” – here the goal is to preserve the purchasing power of your money against inflation.

With your short-term needs addressed, you can take on some market risk in the form of volatility over the medium term (three to six years) as you have time to overcome any negative market fluctuations.

Look to include an equal mix of growth assets such as equities and property, cash and bonds into this bucket.

The third bucket is labelled “Growth” – here the goal is to amass capital over the long term (more than seven years) with the knowledge that all your other needs are taken care of. Look to allocate at least 90% to growth assets such as equities, property and business interests in this bucket as you have time to ride out any severe negative market effects on your portfolio.

A certified financial planner can assist with the above and recommend appropriate investment opportunities in each of the buckets.

Finally, keep in mind that diversification is the only “free lunch” you’ll ever receive. Once your financial plan has been structured in such a manner to withstand the worst of storms, you’ll never have to concern yourself with any factors influencing the markets again.

Insurance as you age

I’m turning 60 next year and approaching retirement. I’m thinking of downscaling to save costs on my monthly living expenses, but I’m worried that if I cut down my insurance, I won’t be covered for all my risks if something should go wrong. How can I reduce my insurance costs, but still make sure I have the right cover?

Name withheld

Joelinda Dimond, PSG Insure adviser, personal and commercial, replies: It’s important for older people to revisit their insurance portfolio and adjust their cover as they downscale their lives. If you are moving to a smaller property or to a retirement village your risk profile will change and your asset base should also be smaller, therefore you should pay a smaller monthly premium. Similarly with vehicle insurance, if you drive less because you are no longer driving to work every day, you become less of a risk and your premium should come down.

You can even opt for a higher excess to reduce your premium as your risk of accidental damage decreases by driving less.

Some insurers waive the excess entirely for people over the age of 55 and many insurers now provide the option to pay only for the mileage you drive – this is a good option for older people who tend to drive less.

Value-added services such as 24-hour emergency assistance, road cover including licence renewal services (which can be very beneficial to older people), free assessments, tyre and excess solutions can come in handy.

It’s best to talk to an adviser who can help structure an insurance portfolio to match your changing needs.

Resolutions that will endure

I had the best intentions at the start of 2021 to make things end up differently, and yet I find myself in a similar financial position at the end of the year. How do I make a real change to the financial outcomes I achieve?

Name withheld

Jac de Wet, wealth manager at PSG Wealth Somerset West, replies: The past year has been a difficult year for most of us. Not only emotionally, but also financially. Most people have New Year’s resolutions that they want to achieve. It varies from “This year I will change the way I spend money” to “I want to save more to be in a better financial situation at the end of the year”. The old adage rings true: if you fail to plan, you plan to fail. Key to achieving any investment or financial goals is to set specific, yet realistic and achievable goals.

One needs to adequately plan how to achieve these goals, and then to religiously stick to the plan by executing on it step by step, and by constantly evaluating and monitoring the plan.

Ambitious goals are often reached by making small incremental changes and gains. This can only result from proper planning and execution of the plan. An investment or financial plan itself is valuable, but partnering with qualified advisers that can guide you through the planning process with good advice, expertise, and experience to construct a robust, achievable goal-based plan, is priceless.

An experienced and qualified adviser also helps to manage investor behaviour, emotions, and expectations in order to achieve the goals that were set out in the plan. Goalbased financial planning is key to achieving financial goals. When partnering with a quality adviser, constructing a proper financial plan and meticulously chipping away to achieve the set goals makes all the difference. By doing this, your New Years’ resolution may just become an achieved goal when the clock strikes 12 a year later.