Avoid a financial hangover in 2018


By Brian Butchart, CFP®

Managing Director

Most of us look forward to the end of the year to wind down, relax and enjoy quality time with family and friends, especially if it’s been a particularly tough year. It’s also a particularly challenging time of the year financially.

It’s so easy to overspend during the festive season, as we get caught up in the excitement and celebrations at the end of the year.

In 2016 the National credit regulator reported that the South African consumer was collectively in debt to the tune of R1.66 trillion. This includes mortgages, vehicle finance, secured as well as unsecured credit. Of the 23.88 million active consumers 60% (14.32 million) were in good standing while 40% (9.56 million) had impaired records.

December is no different from any other time of the year. You do not necessarily have more money to spend, but if you are lucky enough to get a bonus, you should consider using this to prioritise debt, save and spend wisely over the festive season to avoid a financial hangover in the new year.

Here are a few helpful tips to plan and keep track of your spending to achieve this:

Assess each purchase – You are your own finance minister and must therefore assess all purchases on merit. The best way to do this is to ask yourself the following questions:

  • Is it necessary?
  • Is this an impulse purchase?
  • Most importantly, can I afford it?

Set a holiday budget – Consider setting a cap for general spending on your TOTAL holiday expenses. This would include travel, gifts and entertainment. But be realistic about your budget. Setting your cap too high will defeat the purpose of your budget and too low a budget will result in frustration and overspending. Allow for some flexibility, but try and stick to your budget as best you can. Some ways to save costs and stay within your budget could be:

  • Entertain at home instead of going out.
  • Travel locally instead of internationally.
  • Predetermined gift values for each person you buy for and stick to it.

Save a portion of your bonus – If you lucky enough to have a job and have earned a bonus save a portion of this into a money market fund or unit trust immediately. By saving first, before you spend automatically reduces the disposable income in your bank account and ensures accessibility to funds later for emergencies and/or the longest month of the year aka January. Preferably of course, I suggest avoiding access to these funds all together if possible. Instead I suggest creating a healthy habit of regular savings contributions via debit order and not just once off in December.

Look for sales – online shopping and annual sales such as Black Friday or new year’s sales can offer value for money. Discounted sales are good ways to reduce the cost of your Christmas shopping, but be aware of misleading marketing ploys – do your homework and shop around first before purchasing. This may require a little more of your time, but can benefit your pocket handsomely. These savings in turn can be used for other expenses such as entertainment.

Keep track of spending – It’s not necessary after every purchase to review your bank account, but its very easy to lose track of your spending and go over budget if you don’t review what you’ve spent. My suggestion is to keep tabs of what you spend daily with your TOTAL budget in mind.

Avoid incurring bad debt – where possible avoid using credit cards to pay for a holiday, or gifts for friends and family. Debt is the biggest destroyer of wealth. There is, however, good and bad debt. ‘Good’ debt is used to purchase assets which will appreciate over time or provide an income, such as property or a business. Credit card debt offers no growth and incurs high costs which is detrimental to financial well-being. Start living within your means and reduce this kind of ‘bad’ debt where possible.

Take responsibility for your financial decisions – We live in world of instant gratification. We want it all now! You know if you can afford to buy that luxury gift or new car or a trip to the Maldives. Lavish spending on credit especially if you can’t afford it should be avoided.

Be wary of criminals – the festive season is notorious for criminals trying to exploit people who are away from their businesses and homes. Make sure you are adequately insured to protect yourself and your assets.

Start the new year with a healthy attitude towards long term saving – Retiring comfortably is dependent on your saving habits and the life choices you make years before retirement. Get into the habit of regularly saving a portion of your salary every month which is a good start! The longer you do this, the more you save, the better off you will be in retirement.

Consider consulting an advisor – with the extra time available over the holidays, invest in yourself and consider consulting with a financial advisor.We all need to put into perspective where we are financially from time to time in order to ensure we are on track to reach our financial objectives.The festive season is a great time to do this and if you don’t have a financial plan or don’t know where to start, speak to a professional financial advisor who can assist you.



Investment advice from the tea boy

By Magnus Heystek, Investment Strategist and Director Brenthurst Wealth

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First waves of financial tsunami already lapping at our shores…

ABOUT six months ago I penned a rather gloomy outlook on the financial prospects for the economy as a whole and the individual consumers in particular.

This article seemed to have got up the noses of certain of mainstream economists with one, Dr. Roelof Botha, adjunct facility member at GIBS, who penned a rather scathing and condescending reply to rebut my gloomy prognostications. You can read if for yourself here but I wish to highlight one particular paragraph in his reply which seemed- to me at least- an unwillingness by Dr Botha and the other institutional economists to honestly confront the avalanche of bad economic data heading our way.

In his reply he said the following:

“Higher economic growth is being forecast for South Africa in 2017 by both National Treasury and the World Bank, which should ease fiscal pressures and soon abolish the debt downgrade debate to the archives.” (Moneyweb, 9th November 2016 : Talk of ‘financial meltdown’ quite absurd.

Now, in the glaring headlights of what has unfolded since then ( firing of Pravin Gordhan, credit downgrades,# Guptagate, unemployment at record levels and finally this week, the news that SA is now officially in a recession) these words no doubt ring hollow. In fact, just the opposite is happening. How is that for accurate forecasting? Imagine you basing your personal financial decisions on such a confident but misplaced prediction?

Relying on Treasury for your economic forecasts has also become dangerous as virtually every forecast contained in the Budget speeches since 2009 have been over-optimistic, most of the times sounding more than a wish-list than a serious forecast of what the economy is likely to do.

I have previously also written about the herd-like thinking of our economists, with very few prepared to speak to conscience and tell it like it is. Being too negative can be career-limiting at our large financial institutions, as we saw many years when Nico Czipiyonka from the Standard Bank Group got the heave-ho when he was considered to be too negative by the suits in head office. More recently we had Andrew Canter from Futuregrowth who expressed concerns about the risks in taking up bond issues from parastatal organizations, indicating he was not prepared to invest more money in them.

Boy, did he get his gonads put through the wringer, with parent company Old Mutual jumping on him, forcing him to recant and apologize. But Canter has been right as subsequent bond-issues by Transnet and Sanral, for example, have been dismal failures and were either cancelled or attracted only a portion of the funds it was seeking.

The few economic commentators who from time to time deliver their warnings of the economic grim reaper tend to be the independents and those who work for themselves, a small grouping of which I consider myself to be one. I would count amongst them Mike Schussler, Dawie Roodt, George Glynis and Azar Jammine.


Bear in mind I don’t consider myself to be an economist. In reality there is no such profession as being an economist, in contrasts to doctors, lawyers, architects and chartered accountants. Anyone who has read The Bluffers Guide to the Economy can hang up their shingles and call themselves an economist.

Even though I studied the arts and humanities, economics was an additional course I took, mainly because a cousin of mine, prof. Geert de Wet was the economics lecturer at university (RAU) many decades ago. This lack of a more formal education in the field of economics, most probably  prompted Moneyweb commentator who calls himself Miela to compare my musings about the economy to be less trustworthy than the tea-boy in his office.

In November last year Miela writes: ”Like I said before, Magnus is not qualified or equipped to comment on such matters. He is only qualified to bring me tea to my office and not comment on economic affairs”.

Well, to Miela I say: Ou boet, sometimes the tea boy sees things you suited chaps in mahogany row don’t see or want to see. Why? Because I talk to people; lots and lots of people. Mainly about money and their personal financial lives.

And the narrative the past number of months has been one of middle-class and even upper class people finding themselves in the grips of a financial anaconda: all financial life is being squeezed out of them. The stock market is not performing (negative in real terms over 3 years now),  average residential property prices down 23% in real terms over 8 years and wage and salary increases below inflation.

The portion of your salary that is annually paid in taxes has risen constantly over the years. Tax freedom day, as calculated by the Free Market Foundation (FMF) this year was on  23rd of  March—two days later than last year and the worst ever. In 1994 tax freedom day was five weeks earlier, on 18th April.

Tax freedom day means that up to that day you have been working for government and taxes in one way or the other.

All these contributory trends have slowly been building up over time, but was suddenly accelerated by the lagging effects of a currency declines and, in February this year, the sharp increases in personal taxes as well as the increase in dividend taxation in the annual budget.

Even a tea boy could work out that this represented an additional R4bn per annum which was overnight diverted from consumers’ pockets to that of the taxman.


As Ernst Hemingway once famously said: At first you go broke slowly and then suddenly….” We have now reached the “sudden” part and it didn’t take an economist or tea boy to work this out.

A more  careful analysis of the GDP figures released earlier this week shows that ALL sectors in the economy with the exception of agriculture and mining showed negative numbers. The turnaround in the fortunes of agriculture was mainly due to base effects and the above average rainfall the past summer. Fortunately we cannot thank the ANC for the better rainfall, much as they would like to take credit for it.

Mining fortunes too were driven by improved global commodity prices and unrelated to local conditions or policy interventions by government. In fact, government with its newly released Mining Charter seems hell-bent on further scaring away investors from our fragile mining industry.

Noticeable in the GDP figures is the collapse in spending by consumers in the first quarter of this year. Annualized growth of minus 5,9% was recorded in the retail, wholesale trade, accommodation and restaurant sector. These are sectors directly related to how confident the average consumer feels.

Even the largest sector in the economy—financial services and real estate—showed a decline of 1,2%  YoY in the first quarter.

In short: consumers have run  out of money and even if they had money, are now fearful to go out and spend it.

And remember: these numbers do not measure what the midnight firing of Pravin Gordhan on 31st March by our esteemed leader Jacob Zuma has done to consumer and business confidence. That is still to come, as well as the effects of the downgrades by S&P Global Ratings and Fitch. The decision by Moody’s whether to downgrade SA’s local and foreign currency rating was still pending at the time of writing of this article and could happen any day.

Moody’s has been the one credit rating agency more optimistic than the rest and kept our rating at two grades above investment grade. A one-notch downgrade will put us into fragile-  but still investment grade-territory but a two-notch downgrade, which is not inconceivable, will announce the arrival of one of the Horsemen of a Financial Apocalypse.

Foreign investors who have been selling SA equities EVERY MONTH for the past 19 months (R70 billion sold so far this year) but have been buying our bonds with juicy yields of above 8% will then be forced. A double downgrade by Moody’s will mean a disorderly withdrawal from our local bond and currency market with very obvious consequences for all.

Even an economically illiterate  tea boy can the see the troubles in the tea leaves by now….

*Moneyweb in conjunction with Brenthurst Wealth is holding its annual SA Quo Vadis seminars countrywide in the next two weeks. First seminar takes place on Tuesday 13th June at Rivonia Village, followed by Cape Town (20th June) and Stellenbosch (21st June) For more information go to the website ww.brenthurstwealth.co.za. For bookings http://www.quicket.co.za, search for Brenthurst.

How to Beat the Zuma Factor

By Richus Nel Certified Financial Planner and Head of Brenthurst Wealth Stellenbosch


Navigating through extreme uncertainty is now a fact of life for all South African investors. Ideally one should stick to a well-designed financial plan and long term investment strategy.

South Africans, as by their nature, adapted to “life after a junk status rating” rather quickly and continue to take the regular political scandals in their stride. Thankfully South African business try to focus on doing business, rather than to look at political leaders for inspiration.

The political / economic situation unfolding over the last 12 months remains serious and dampens investor confidence, creating extreme volatility at times. Volatility is good to capitalise on the mispricing of assets. Investors however need nerves of steel to sit tight through this rollercoaster of emotions, while the political traitorous acts of scandalized individuals take its course.

The storm (after initial junk status rating from S&P and Fitch) seems to be calming and investors are generally looking for new direction from Moody’s in particular.

The reasons for the calm are mainly:

  1. EM Markets prospects are looking better than during the “Nenegate” saga and receiving record foreign investor flows;
  2. The local currency credit rating of Standard &Poor and Moody’s are still “investment grade”;
  3. The majority (90%) of foreign bond investment in RSA is via our local currency credit rating;
  4. A marginally better economic outlook for SA, lower inflation and fuel prices [linked to the easing of the drought (in most parts)] and better resource prices than end of 2015.



What to expect from “Zuma in charge”:

  1. Lower economic growth – growth expectancy for 2017 is lower than expected “pre-Gordhan firing”. South African continues to grow sub-optimally as we continue to focus on political survival and patronage, rather than economic policy 5-10 years out;
  2. Economic growth vs. the population growth – a country’s GDP per capita decreases if the economic growth rate is lower than the population growth, which results in its citizens getting poorer. RSA population growth is +-1.65% per year (Source: Trading-economics – 2015);
  3. Wastage of state resources having to be replaced by increased government debt and taxes.

Rising unemployment is expected with youth unemployment currently at an inexcusable 54%. Higher unemployment results in a reduction in South Africa’s tax revenues through lower personal income tax and VAT receipts. It also balloons the dependency on the state from a government social / unemployment grants perspective.


Government debt to GDP ratio is expected to increase in two ways:

  • GDP shrinkage due to lower economic activity
  • Increased Government budget deficits can only be financed through higher taxes (already on the brim of a tax revolt) or increased government lending. Bear in mind that the SA government debt servicing cost (BEFORE the downgrade) accounted to 13 cent of every RAND spent in the National budget… If we ever needed financial discipline in Government spending and procurement, it is now. National Treasury’s drive to save R16Bn on better procurement, is a step in the right direction.

Lower productivity per capita and higher taxes impedes economic growth and our financial well-being as a country. This effects the overall attractiveness as a global investment destination negatively.

Out of Individual investor’s control:

  1. Job losses or lower salary increases;
  2. Rising costs due to rising inflation from a weaker currency;
  3. Higher or stable interest rates to keep inflation and the RAND in check;
  4. Higher taxes;
  5. Less discretionary spending ;
  6. Lower returns in equity markets;
  7. Local bond market risk if RSA’s local currency credit is downgraded by Moody’s by two notches and Standard & Poor by one notch.

What can Investors control:

  1. Hang onto your current job, work harder and contribute more to the business. Do not quit your job unless you have something else (fail proof) lined up. Enhance your career through continuous career development;
  2. Create additional sources of income by conversion of existing assets or monetizing hobbies;
  3. Reduce private expenses and save more, where possible. Fewer holidays away (abroad), less spending on imported products or lifestyle items (it does not need to be boring, be creative with your entertainment). South Africa and its diversity is ideal for this creativity;
  4. Reduce or pay off debt. Do not expand your lifestyle or refurbish on credit;
  5. Aim to become financially independent as soon as possible, then retire / start your second career.

Be “TS” (tax smart):

Expect increased personal income taxes and pursue careful tax planning in future.

What is your plan B?:

Plan a second career with something that excites you. Identify something with limited start-up / conversion capital that could subsidize your retirement income during retirement.

Financial dependents:

Difficult economic times require additional financial support to dependents at death / disability. Make sure your insurances are adequately analysed, sufficient and well understood, to ensure financial survival for those staying behind.

Reach out:

Contributing to a worthwhile cause in South Africa, gives a taste of the fantastic people and ideas this country has to offer.   This provides an incubator for great ideas, aspirations, relationships and mutual goal-setting. Generally the thoughts and views of contributing individuals are uplifting and refreshing, which goes a long way during challenging economic times.

Gradual Improvements Go Unnoticed

By Michael Batnick


When I sat down this morning to create a “Wall of Worry” chart, the hard part wasn’t coming up with the list, but rather choosing what to leave off. Since stocks bottomed in 2009, there have been so many potential reasons to sell that it wasn’t possible to fit them all. Below are a few that didn’t make it:

  • MF Global Bankruptcy
  • All the quantitative easing programs
  • Ashton Kutcher is a venture capitalist
  • China hard landing(s)
  • Occupy Wall Street
  • Is Deutsche Bank the next Lehman?
  • Yuan devaluation
  • Celebrities buying stocks, Mila Kunis, Joe Theismann, Kenny G
  • Tony Robbins is a financial advisor
  • Peak profit margins
  • Margin debt all-time high
  • Buyback-palooza

We’ve seen a thousand versions of this chart, but we haven’t seen the opposite, one that plots all of the positive developments over the last nine years. So I decided that would be fun to create, but I quickly realized, as I stared blankly at the screen, that coming up with this list was much harder than I thought it would be. This reminded me of something Bill Gates said: “Headlines, in a way, are what mislead you, because bad news is a headline, and gradual improvement is not.”

All of the items below were headlines, but they weren’t necessarily “reasons” to buy, which is why I’ll refer to this as the opposite chart, but not really.


I really had to stretch to fill this in, you’ll notice stocks didn’t care much about House of Cards or the Cubs winning the World Series.

Over the last nine years, it’s impossible to deny that things have gotten better; Better for the economy and better for the consumer. The thing is, better doesn’t go on a chart, because gradual improvements go unnoticed.

Here are some of the great things that didn’t necessarily make headlines, but are reflected in the 260% rise in the stock market.

  • Advances in medicine
  • Transparency increasing for financial consumers
  • The explosion in quality podcasts
  • Professional content curation, like Abnormal Returns
  • The experience of travel, specifically airplanes
  • Costs going down for financial products
  • Technology costs coming down, like televisions, for example.
  • Google maps is free and incredible
  • High-speed wifi, everywhere
  • Fuel economy of an automobile. Average miles per gallon improves every year
  • Solar energy is a viable option.

The fact that bad news is disseminated ten times as fast as positive news is one of the biggest reasons why it’s so difficult to just capture market returns. You would think it’s as simple as buying the total market index fund and leaving it alone. And it is that simple, but it certainly isn’t that easy, because bad news smashes your face against an amplifier, while good news just plays quietly in the background.

Doing nothing should be the default setting for most investors, but as the charts above show, that’s easier said than done.

SOURCE: http://theirrelevantinvestor.com/

Tax free investments and retirement annuities, time to act is now

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By Gavin Butchart, Tax Practitioner

As the 2017 tax year draws to a close on the 28 February 2017, there is still time to take advantage of the Tax Free Investments and Retirement annuity contributions.

Tax Free Investments

No income tax, dividends tax or capital gains tax is payable on the returns from these investments.

The tax free investment was introduced from 1 March 2015 to encourage taxpayers and households to save.

A maximum investment of R30 000 per tax year (annual limit) is allowed, with any unused annual limit being forfeited (not carried forward to the new tax year), for example should you only contribute R 25 000 per year the remaining R5 000 does not carry over to the next tax year and are therefore only allowed R 30 000 contribution in the following tax year again.

Each individual has a limit of R500 000 per person, per life time.

It is important not to exceed the above limits, as SARS will levy a hefty penalty of 40% on the excess amount. The penalty is added to the normal tax payable on assessment.

Should the returns on the investment be added to the capital contributed, the balance may exceed both the annual and/or lifetime limit.  The capitalisation of these returns within the account does not affect the annual or lifetime limit. Therefore in the following year, you will still be able to invest your full R30 000.

However, where a person withdraws the returns and reinvests the same amount, that amount is regarded as a new contribution and impacts on both the annual and lifetime limits. Note that any withdrawals made cannot be replaced, be it returns or capital.

No transfers are allowed in the first year of investing (1 March 2015 to 29 Feb 2016).  This includes both transfers within a service provider or to another service provider. However, in the 2016 Budget, the Minister announced that the transfers will only be allowed from 1 March 2017. The Regulation will be amended accordingly.

Parents can invest on behalf of their minor child (donations are allowed up to R 100 000 per year per individual tax free).  The minor child will use his/her own annual or lifetime limits.

Tax free investment accounts cannot be used as transactional accounts.

Debit or stop orders and ATM transactions will not be possible from these accounts.

Service providers will provide SARS, twice a year, with the following info:

  • Total contributions per tax year;
  • Total amounts withdrawn per tax year;
  • Total amounts transferred per tax year;
  • Total returns on investment for example: interest, dividends, capital losses and capital gains.

The service providers will provide these taxpayers with this information by issuing an IT3(s) Tax Free Investment certificate annually.

Retirement Annuity contributions

As from 01 March 2016, The Taxation Laws Amendment Act No 31 of 2013 made several changes to the income tax legislation impacting retirement funds.

Contributions to pension, provident and retirement annuity funds are tax deductible, limited to 27.5% per annum of your income or remuneration (which includes gross retirement income and non-gross retirement income).

Employer contributions are seen as employment expense for the employer and a taxable fringe benefit in the hands of the employee, who shall in turn be eligible for a tax deduction for such contributions to approved funds, in addition to any contributions made by themselves to any of the three fund types. Thereby neutralising the fringe benefits tax up to a prescribed cap of R 350 000 per annum.

Any disallowed contributions can be carried forward for deduction in a subsequent year of assessment (subject to the same limits). Contributions which are never deducted will reduce the taxable proceeds on withdrawal/retirement.

Please feel free to contact a Brenthurst Wealth financial planner for advice and to invest in the Tax Free Investment or Retirement Annuity fund before the deadline ending 28 February 2017.



Sharp shooting in financial planning

By Richus Nel, Certified Financial Planner


You need the skills of a marksman to achieve financial independence or manage personal finances successfully.

Sharp shooting is an art, clinically executed and the marksman is punished for the smallest mistakes. Especially if one compares the “shooting results” from a professional marksman vs. those of an average person. Once the trigger is pulled on personal finance decisions, as with shooting, the results are mostly irreversible – similar to those of the bullet flying from the marksman’s rifle.

The majority financial planning relationships between a financial planner and a client typically starts about 10-15 years into the person’s working career, sometimes later. This is problematic to the well accepted “general guideline” within financial planning [saving a minimum 15% of your gross income for 40 years, to provide you with a retirement income equal to 75% of your final salary (increasing annually by inflation), referring to a “replacement ratio” of 75%]. This means that in the majority of instances that the “40 years retirement provision” only starts at the age of 35, 40 or 45 (and some instances only in their 50’s). It is exactly at this age when individuals are most challenged financially (perhaps with a bond, children, single income, medical for the whole family, long-term risk provisions) and inflation demands reflected in price increases, just to “keep the lights on”.

Metaphorically “sharp shooting” can help you to prepare and reshape “a late retirement provision” scenario.

1. Settle down

Setup a monthly routine to plan and review your finances. During this time you can budget and plan ahead. Depending on how desperate you are in turning your financial situation around, here you would have the opportunity to spend time thinking about your current job, extra income and other constructive financial thinking.

One benefit (probably the only one of starting late with financial planning), is that by now (individuals in their late 30’s or 40’s) probably have a good idea of the living standard they would like to pursue in life. This at least make any projection more accurate.

Hopefully the individual has made financial progress on the property ladder and bought a reliable car that they are willing to, and can drive for 5-10 years. In many instances none of the latter has taken place, so individuals “starting from scratch” need radical turn around.

2. Taking aim at the target

Draw up a budget from the last 3-6 months of expenditure and track where your money is going. Once your spending patterns are determined, start with a “blank canvas” and reclassify your expenses in the following order:

a). Absolute necessities. This involves all “physiological” and “safety” expenses including medical, life and disability risk cover. Retirement planning can also fit in here, as this is a necessity in some shape or form. Others can feel they can reach self-actualisation without retiring one day, but be realistic, as you cannot work forever.

b). Modern day demands to earn a living. This includes spending on issues like transport (whatever node e.g. car / UBER / taxi / train / bicycle), communication (mobile or other), education, socialising and clothes. Holidays also fit in here, just decide on the appropriate format.

c). Nice to haves. The fun expenses like cappuccinos, more appliances, lifestyle expenses like decorative items.

Once the items have been categorised, start reviewing each item in each category and identify at least two to three alternatives in different price ranges. Items should not be considered on price only but on the value they contribute to your life.

3. Pull the trigger

Once the budget is finalised, implement and start tracking spending behaviour monthly / weekly / daily; whatever works best for you. Remember that there is no perfect way, as long as the bullet hits the target where intended, nothing needs changing.

4. Reflection – review the target and improving your shooting

As with all things at first, it will be a “hit and miss” or “trial and error” result. Gary Player has taught us “the more you practice, the luckier your get”. As you continue to practice, the results will start improving. It is advisable to include a “trained coach”, helping you refine your shooting.

Remember as you are starting late:

  1. Don’t make any more unnecessary mistakes, as the time for recovery is getting shorter. Make sure you are properly insured against further financial setback (health, accident, etc.) which could ruin your gained ground
  2. Fight impulsiveness – don’t pull the trigger if you hesitate, first get more information
  3. Learn from historic mistakes, like credit, for instance.

5. Get a coach 

Make sure you are doing your homework before getting a financial advisor coach. Best is to find someone with a formal education background and the industry standard qualifications for providing financial advice – Certified Financial Planner, with experience:

  • Seek independence to instil trust in your advisor’s guidance.
  • Co-manage emotions – this will be a lot easier with a financial planner.
  • Preserve investment capital (retirement -or general savings) –       Do not gamble with investment decisions and do not use saved capital, to finance living costs under any circumstances.
  • Save often by putting away surpluses – wage increases, bonuses, inheritances, capital gains from property sales.
  • Upskill yourself so you can partner with your financial advisor on financial decisions – regularly read financial articles and listen to high quality financial radio or television programmes.

A financial planning priority list … and why you need one


By Richus Nel, Certified Financial Planner®

If you think having investments, saving money, drawing up a budget (and sticking to it) and some sort of strategy for your retirement is the full story for a financial plan, think again.

Every individual needs a financial planning priority list that covers every aspect of their financial life, beyond the four most obvious aspects. This list will guide you through what is needed.


Anyone with assets or dependents, should have a will. In the absence of a will assets are bequeathed based on the RSA Law of Intestate, which is slow and frustrating to any surviving dependents. For a will to be valid it must adhere to this:

It must be in writing.

  1. Drafted / executed correctly.
  2. In the document the intention must be evident that this document serves as the deceased’s will.

Some lesser known aspects are:

Guardians of children cannot sign a will as a witness.

  1. A foreign will is required for direct foreign assets.
  2. Following a divorce, a will must be amended within three months, otherwise the divorced spouse will benefit as normal from the estate in accordance to the existing will. Within the three months’ time frame, the surviving spouse will be regarded as predeceasing the deceased and will not benefit. (Section 2B Wills act)


Many people think risk cover only refers to life cover and is only necessary for people with dependents or perhaps a business that will require proceeds from an estate. However, that is not all it refers to. Risk cover also denotes income protection cover in case of illness or an accident and cover for disability or dread disease. Cover for disability or dread disease is maybe not that critical but should be considered against the individual’s family’s health and medical history.

Other issues to note regarding risk over:

Consider “later” affordability of cover, based on the chosen premium pattern (normal age rated, aggressive or level).

  • Stand-alone benefits vs. accelerators – remember that it is always more difficult to obtain risk cover when you are older, due to an accumulation of medical history.
  • Cover growth vs. inflation (again considering with regards to above).
  • Group life cover at employer – ensure the portability of that cover when changing jobs. If not transferable, obtain own risk cover.
  • If one has an extreme medical condition, “group life cover” could be a more affordable and in some cases the only route due to the fact that this typically does not require a medical examination.
  • If a beneficiary is nominated on life cover, the pay-out is free from executor’s fees. If no beneficiary is nominated, the policy pay-out goes to the deceased estate (forms part of the residue) and hence carries executor’s fees. If no beneficiary was nominated, the respective cover amount needs adjustment for the executor’s fee and estate duty portions.


The other two key components are medical cover (also gap cover for medical expenses not covered by the scheme) and short term insurance. It is important to look at the fine print and not only focus on the perceived affordability of the premiums with short term insurance.


Any sound financial plan should be cognisant of taxes payable and effort should be made to create tax efficiency. Governments the world over are under pressure and are constantly seeking new ways to tax citizens. Make sure of the rules regarding tax deductions, issues like transfer duties, donations tax and the tax regime relevant to trusts and businesses. Capital gains tax has particular rules that investors should be aware of. As the rules change regularly, the assistance of a tax advisor or financial planner can make a significant difference to make tax affairs efficient.


Probably the most talked about aspect of a financial plan is budgeting. Many individuals still think budgeting only refers to making sure you live within your means. You should always seek to curb spending but don’t forget also to look at ways to earn a second income. Save as much as possible for retirement, for a “rainy day” and for unforeseen expenses.


Possibly the biggest issue to include in a financial planning flowchart is retirement planning and general saving. It has been widely reported that people are living much longer that when the practice of retirement came into effect. Against this background of “longevity”, the conventional thinking around saving for retirement is outdated.

Individuals should consider different investment options around retirement. They for instance have to choose between, for instance, “passive investment” (listed financial instruments) vs. “actively managed investment” (e.g. investment property or business activity). The different vehicle options that are available for passive “market-linked” investments include retirement vehicles, discretionary investment and now also the new “tax free savings account”. The best suited vehicles should be considered based on your own unique circumstances, driven by your taxability and liquidity requirements.

When investing, do not be blinded by economic forecasts (as we have seen in recent examples e.g. Brexit) reliable forecasts, can be very wrong. Rather invest in the highest quality advice, asset management choices and instruments to achieve your long term investment objectives.


The last aspect to include is estate / succession planning. Think about liquidity at death and things like capital gains and taxes payable, executor’s fees, accrual claims, how a spouse’s massive accrual are settled if he/ she is not the heir of your estate. Preferably appoint a professional or joint professional executor. No surviving spouse or child is really emotionally charged for the administration of your estate