The frugal life the safest road to wealth

By Mags Heystek, CFP®

MagnusLHeystek2July2017

Temptation can be expensive, especially if you go into debt to satisfy your immediate desires. But it will cost you a lot more if instant gratification distracts your long-term savings goals.

Delaying gratification in the short term can lead to a much bigger payoff in the future. It will take discipline, but resisting the urge now, will be rewarded later, and ultimately brings more peace of mind.

A World Economic Forum (WEF) report released in June found that people around the world will long outlive their retirement savings.

The WEF Report, found that strained government and employee retirement plans have left individuals increasingly responsible for their own retirement, while many find their personal savings to be inadequate.

South Africa’s household savings rate is technically non-existent. According the SA Reserve Bank it was -0.10% in the first quarter of 2019.

To close the savings gap, the WEF report states that individuals and policymakers must take the appropriate steps to ensure investment returns outlive individuals themselves.
Unfortunately, tax policy, for example, is structured in such a way that it punishes investments and income generation.

The more wealth you create, the more taxes you must pay. Wealth taxes as well as regulatory and intermediary levies eat into performance over the long run. Investments are by subject it to a range of taxes, intermediary costs and regulatory charges.
If you want to become financially independent, you will need to save yourself. But you don’t have to go about it alone. An experienced and qualified financial adviser will assist you every step of the way.

One can probably argue that the younger generation is in greater need of financial advice than those before them. They are the most educated generation ever, but when it comes to saving and investing, they remain ill-informed. Growing up in the digital economy has also made them impatient. But they are not alone.

This impatience has also extended to the way a few investors approach investing: they want great returns and they are wanted instantly. This has made investors susceptible to fraudulent get-rich-quick schemes, all at the promise and allure of incredulous gains. Again, an advisor will be available to advise against it, and help investors understand how the supposed ‘greatest investment’ of all time really works, and if it is legitimate or not. Speaking of legitimacy, it is always important to ensure that any advisor, platform, and investment product is fully licensed. Investors have the right to ask all the necessary questions, and at the end of the day, it is their money.

There are no shortcuts to building long-term wealth. Successful investing requires consistency, patience and time. Delaying gratification may be one of the biggest factors to overcome to build wealth.

Studies have shown that those who accumulate wealth tend to be more frugal and live less opulent lifestyles than their peers, even though they can afford it.

While it is never too late to get started, the one advantage of starting at an earlier age is time; millennials could enjoy the added benefit the power of compounding over a longer period, and so build lasting wealth.

The world economy is extremely fragile, and digital options are popping up all over the place. So, chasing yields, making emotional decisions on short term market events and the allure of risky assets like cryptocurrency, will make the independent unbiased guidance from an advisor even more valuable.

But you cannot properly plan for the future without knowing where you stand today. An advisor will assist you in clearly articulating your goals. Objectives goals could be very short term (saving for a holiday), medium term (saving up enough money to buy a property), and long term (saving for retirement).

But what about some of the goals people aren’t even aware of yet? But what happens when things go wrong? Are your expectations realistic? Investors need to understand the good, the bad and the ugly.

The plan put together by a planner will have these outcomes in mind and take personal circumstances into consideration to advise on the most apt options for an investor. There are hundreds of products and services available. Choosing the right one can be a minefield. The advisor will navigate and investor through this complicated environment.

A financial advisor has the expertise and experience to help navigate this complex environment and to instill the principles to achieve your financial dreams and help make sound investment decisions.

He/she will provide realistic expectations on the types of returns one can expect from properly licensed investments. And keep your hard-earned cash out the hands of scam-artists, and your long-term plan intact. So, what are you waiting for?

To speak to a Brenthurst Wealth advisor, view our offering and details about our team here: Brenthurst Wealth

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