I personally never thought I would join the words “master” and “money” besides confidently flicking out my Mastercard, up to six days after payday. If you are anything like me, you have sauntered through life with “I’d rather have a brilliant two weeks than an average month” as your motto when it comes to making lavish spending decisions.
This is a really fantastic approach to having coffee dates, exciting tickets, maybe even some new threads to showcase and also, toast for the last two weeks of the month.
I have been in the working world for over six years now and making it to the end of the month is a victory. No more! I shopped around and am grateful to have found the lady who has helped me get on top of understanding the “f-word”… “finance”.
And so, in the spirit of May’s theme of Mastering Money, I went full David on the Goliath of Finance, Anika Delicio Greyling (Bredfin Consulting)
RJ: Anika, where are most of us spending our money today where we don’t need to be?
ADG: Every person has their “vice”. Some people know what it is, but most actually don’t. Try this, take stock of your expenses for just 3 months and you will be surprised how much all the small amounts add up! The worst part is you have nothing to show for it at the end.
RJ: What is the first thing we can change which will help us to save?
ADG: Set up a monthly debit order into a savings account and don’t cancel it when times get tough. Make it small to start off with, it’s important to start saving early on (while you are young) and consistently.
Also, never cash in your pension fund when you leave an employer, always move it to a preservation fund*.
RJ: Who needs an advisor?
ADG: Everyone can benefit, and it becomes especially important if you are self-employed.
RJ: What should I look out for when finding a financial advisor?
ADG: Above all else, understand that it’s a relationship. You should like the person as well as trust them because they will advise on very personal decisions relating to your finances and your future.
It’s very important that your advisor has a qualification (preferably a Certified Financial Planner, CFP) and is preferably independent so he/she can give you the best, holistic advice, personalised for you and your current situation, without being biased to what their specific company can offer you.
There are differences between providers and there is no one size fits all. It is therefore always best to have someone who is on YOUR side and not that of their service provider.
RJ: What is the benefit of having an advisor?
ADG: Having an advisor means you have someone who can advise you in areas such as investments, tax, assurance cover (note the difference, insurance is short-term: medical, car and home. But insuring your person – your body and ability to work, this is assurance*), medical cover…helping you make the right decisions and guiding you through the complex world of finance, in a way that it will result in benefiting and rewarding you.
With the right planning, you are ensured financial freedom from earlier on in life because you are in control of your finances. Together, you and your advisor will set up your financial goals and what you need to do to achieve them. The right advisor will also hold you accountable – to keep you focused on the goals you set.
RJ: Are you able to tell me what I need and do not need to set myself up for a secure future?
ADG: This is difficult as each person has individual needs that should be addressed.
If you have no dependants, at the very least you need a retirement annuity* and income protection*, so that you are looked after, should something happen to you and you can no longer work. Life cover* is not needed unless you have debt.
If you have a family and children, you will need a lot more cover and planning to make sure they are provided for. Plus, having kids is expensive and so you need to be saving in preparation for this, so you should be getting an advisor if you plan to have a family in the future.
You should aim to have 2-3 months’ salary easily available to help you through emergencies.
RJ: And now, TAX! What must I do for tax? Save slips? Keep a car log?
ADG: Again, all personal and circumstantial. If you get a car allowance* at work, you need to keep a log book. If you have a business and want to claim business related expenses, you need to keep slips and a record of what you paid.
At this stage of our chat, I actually felt like I would be able to go overseas before retiring after all! It was Anika’s closing answer which made the most sense to me, as I cast the rod on my biggest question:
RJ: I am just a small fish, surely I don’t need an advisor? I can’t invest but am trying to save – any tips?
ADG: You may be a small fish now, but everyone starts somewhere. With a good advisor by your side, you will have a better idea and plan as to where you are going.
You just need R300 – R500 a month to start with an investment. That’s a dinner out or half your DSTV subscription. Getting into the habit of saving early and consistently will really serve you well.
Wow.
Right ladies, who is joining me for a night of home cooking and plotting to take over their debt?
*Please feel free to reach out to Anika for a greater understanding of each financial term.