How many times have you heard that ‘hindsight is 20/20’, or thought ‘If only I could do it all again …’. Indeed, most of us would like to start over, especially with our personal finances. As South Africans start to sink their teeth into the job of rebuilding their personal wealth after a tough few years many will be grabbing the opportunity to do things differently
Failing to plan = planning to fail (some say)
Experience can give you a leg-up, but it can also work against you if, for example, a bad experience makes you too cautious in situations where you would be better off being a little brave.
A great way to start again is with a proper financial plan that consolidates the lessons you have learnt along the way. Your plan will be your guide and help you to stay focused when you risk getting distracted by what looks like better performance.
The basics of a good plan should be evergreen but remember that your life changes, the world changes and markets can be extremely volatile. You should revisit your plan regularly and check that it is still fit for purpose.
Set out your goals, choose specific investment products to achieve them, and design a plan that ties it all together. Remember that different products are suited to different goals. This is especially relevant for long-term investments, such as retirement planning, and there are many tools online to simplify the planning process. Build your retirement savings plan using 10X’s free online retirement savings calculator. If you are not confident about making investment decisions on your own, there are many qualified financial advisers who can help.
Your specific goals
Various products and funds serve different needs and have different benefits, including tax incentives, easy access and lumpsum options. Retirement funds, for example, are designed to pay you an income in retirement, which is why accessing your savings before retirement comes at a cost (and is possible only in certain circumstances).
Having different policies suited to different goals and timelines will allow you to maximise the various benefits. For example, having a rainy-day fund means that in a time of crisis, such as losing your job, you can use your emergency fund savings, rather than having to access your retirement savings and using up precious lifetime tax allowances.
Because there is a chance you will need to access your rainy-day fund immediately and as a lump sum a money market fund or unit trust account are good choices for this.
Be brave
If you have had a bad experience, you may need to be braver than you feel. Remember that riskier investments, ie those that present more volatile returns in the short-term, tend to perform better over the longer term. This makes them more suitable for long-term savings goals, such as retirement.
It is YOUR money after all
Investors should not take it for granted that their adviser has everything under control. It is your money; nobody cares about it as much as you.
Whether you have an adviser or not, it is important to keep tabs on your investments. How about putting a recurring calendar date in your diary right now to check in with your financial plan, or to remind your adviser to do so.
Tech at your fingertips
Technology in financial services has moved on dramatically in the last few decades. Gone are the days when you had to rely on experts to select products and keep you informed.
Investors can now do most things for themselves with certain service providers, such as 10X Investments. Products are not complex and processes are not mysterious when you read up a bit and use the free digital tools that are available.
If you are not confident to select an investment product for yourself, get a qualified adviser to assist. But, even if you use the services of an adviser, you should be able to understand how your investments are tracking towards your goals. If you don’t, ask your adviser, or a representative at your fund, or even a chatbot on your service provider's website.
Move with the times
Retirement planning used to be quite complicated but that has changed. Up-to-date retirement savings products, like many other investment options, simplify choices, and modern asset management companies put value on the empowerment of their clients.
It should be a simple process to work out how much you will need to retire in comfort and to design a plan to achieve that goal. There are many online tools to help, for example the 10X retirement saving calculator, which will crunch your numbers and custom-build a retirement savings plan for you.
Another outdated idea is that financial planning should be left to a partner, most often a husband. This concept has caused untold problems when a divorcee is left at the mercy of their ex. Fortunately, this practice is out of favour in the modern world, where individuals are taking responsibility for their own personal finance journey.
Having your own financial plan will protect you against a double blow in the worst-case scenario (death or divorce come to mind). Taking some responsibility for your own future also empowers you within a relationship. Even if there is just one breadwinner in a couple, both have a stake in a financially secure future. Whether it is a joint project or something you pursue independently of each other, careful long-term financial planning will pay dividends beyond being able to afford a comfortable retirement together.
Be the expert
Go online and do some research or ask a financial adviser to talk you through your options. It may seem like there are millions of choices but – once you narrow it to funds that are appropriate for your goal and investment timeline, and tick the boxes in terms of great performance and a fair price – you will find there really isn’t that much to choose from.
Don’t give away your profits
Make sure you aren’t losing too much of your earnings to costs. Ask questions and try to understand what an investment is costing you. Costs are normally presented as a percentage: 1, 2 or 3% of some unknown figure, which doesn’t really mean a lot to most of us.
Ask how much you are paying in rands a month or a year or, better still, how fees will reduce your final outcome. An additional 2% extra in fees every year could decrease your final retirement savings by 40%!
Get a free fee analysis and comparison on your current retirement savings product
The fees you pay on your investment products is one of the key elements within your control. Make sure you take the lion’s share of growth on your investments rather than sharing the ‘profits’ with various others because you didn’t do your homework.
The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250). 10X Index Fund Managers (RF) (Pty) Ltd is a Manager registered under the Collective Investment Schemes Control Act, 2002
