Introduction to 2020

As we are all at the beginning of a new year, we instinctively hope for a better year ahead than normally the one we just come from.

Engaging with people and clients alike many ask questions like; What is going to happen this year on the markets, what is the rand going to do this year, will our economy ever recover and so forth.

As always, I reply that if I could just know what tomorrow will bring, let alone this year, I could retire in one day. But sometimes I jokingly say that there’s one thing I can tell you and that’s that we will have load shedding this year.

Jokes aside we are wired to want to know what is going to happen in future although we know and acknowledge that there’s nothing we could do to know, or change the outcome.

When I started with financial planning 34 years ago, I also wondered what’s going to happen in the future, but soon realised that it’s a futile question. What’s more important is what are the factors that I do have power over and can control, and surprisingly this has never changed over time.

Let’s look at some of these factors:

Do I live within my means?
Do I save as much as I can?
Do I make use of all the income tax breaks the Government allows me?
Do I keep my emotions in check when things are out of control on the world and local markets?
Do I stick to my financial plan even though it doesn’t “feel right” to do so?

After 34 years I realised that controlling what I can has a far more important influence on the outcome of my financial future as constantly trying to control or understand what the immediate and long-term future holds.

One case in point. I have encountered so many people that refused to even start a savings plan or not even wanting to contribute to their employer’s pension scheme, as the future “looked so dark” that they would rather enjoy and spend the money now, instead of saving when there’s no guarantee that they would even reach retirement.

I now have the privilege/ horror of meeting many of these people that did actually make it to retirement and the bliss of spending the money in their youth or the fancy trip overseas is a distant memory. The fear of not having enough in retirement is real and many are not prepared to deal with it now.

I have fortunately also seen (an increasing number) of people that did apply the factors they could control and now enjoy a well-deserved retirement where they can still do the things that excite them and give meaning to their lives without daily worrying about their financial futures.

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South Africa’s Financial Wellness – How Are We Doing?

When someone talks about saving, it is usually in the context of saving for retirement. While this is a major undertaking and deserving of a lot of attention, there needs to be more focus on the overall level of savings within our South African households.

Shocking statistics from 2019 revealed that over 80% of South African households cannot afford to suffer a financial setback of as little as R10,000; this suggests that South African households lag behind the world (the best savers being the likes of Germany and the Scandinavian countries).

The 2018 Momentum/UNISA Household Wellness Index, which was released at the end of 2019, painted a worrying picture for South African households. While our overall situation did not deteriorate from 2017, the situation has not improved either.

Setting the scene

The Index provides information specifically designed to empower us to accelerate our financial success.

It strives to paint the picture of household savings and focuses on issues like:

What are the varying states of the financial wellness of South African households, and why?
Which factors (within and beyond their control) affect the financial success of these households?
What practical tips will help accelerate financial success?

The state of financial wellness in South Africa

The Index points out that despite the tough economic environment of 2018, the state of South African households remained flat when compared to 2017. What is worrying is that the Index showed that the financial wellness of households in 2018 is only slightly higher than Index figures from four years ago.

Why are South African households finding it hard to grow financially? If they have faced a similar situation for several years now, surely they should have come up with some coping mechanisms?

According to the Index, this sluggish growth can be attributed to:

Strong international economic growth in 2018 should have assisted the domestic economy, but it didn’t – South Africa’s economic growth rate almost halved from 2017;
Electricity shortages and state capture negatively impacted growth;
The number of additionally unemployed individuals increased (on average) by 337,000 while the number of gainfully employed increased by just 225,000;
Household gross income was hit by higher income taxes while working days decreased as a result of increased labour strikes, (from 480,000 in 2017 to 1.95 million in 2018).

Small changes make a huge impact

Many of these factors are beyond the control of most us. However, there are some factors that affect households that can be addressed by sitting down with your financial advisor and coming up with a plan of action.

Smaller salary increases contributed to lower overall increases in households’ gross income. Saving where possible is important;
Households experienced limited asset growth. However, some gained in this department thanks to diversification and growth in non-financial assets. This needs to continue to grow;
Low levels of financial literacy (among consumers) and high levels of financial vulnerability (among lower- and middle-income groups) still place considerable constraints on household finances. This is where the value of your financial advisor comes to the fore; and
A lack of proper financial planning with specific goals and limited accessibility to financial experts had a negative impact on personal empowerment.

Steps in the right direction

There are a few discussions that you can have with your financial advisor to improve your overall financial position. Apart from the important discussion around budget, there is the discussion around improving your, and your family’s, financial literacy. The more informed you are, the better the financial decisions that you will make.

Investing in education, beyond the ambit of financial literacy, is an investment that can significantly increase the future financial wellness of your family. Recent statistics show that in order to educate a child (in a “Model C” school, and then university) from Grade R to the end of their undergraduate degree will cost most South Africans an estimated R5 million. This will obviously increase on a yearly basis and constitutes a huge investment.

This type of investment is one that may be beyond the means of many households. However, if a household can afford to make sacrifices to provide for their children’s education, it is a serious consideration. The Index shows that there is a definite correlation between education levels and employment levels.

The Index points out that over the past three years the upward trend in households’ educational attainment had a positive impact on the Index. Sitting down with an expert and planning for how to save for your child’s education is a vital component of your financial wellness and a key service offered by financial advisors.

Why You Should Treat Your Finances Like Your Health

“A good doctor treats the disease, but the great doctor treats the patient who has the disease.” (Unknown)

Most of us understand why it’s important to have regular medical check-ups. We also recognise that, as we get older, what we need from them changes too.

While it’s important for babies to have special health and development checks, older people’s needs are much different. In our later years we need to be screened for issues like cancer or heart conditions.

Our finances aren’t that different. The think tank New Financial recently proposed that the way we think of having regular physical check-ups should be a model for what it called “financial health checks”.

“These financial health checks borrow from the established practice of physical health checks, which are used in many countries to help spot or prevent illness at an early stage and encourage people to take some simple steps and develop good habits to improve their health,” New Financial wrote.

The big moments

A scheduled meeting with a financial adviser at least once a year is a good place to start. But not everyone has a long-term relationship with a financial adviser. And, secondly, sometimes something significant happens that really needs us to take stock of where we are.

There will always be a number of these important moments in our adult lives – times when we are making decisions or changes that will have a lasting impact.

One obvious example is getting married. It can seem like an easy decision to make when we are in love, but it has many practical ramifications with potentially life-altering consequences later in life.

“Every one of these big moments involves big decisions with big and often long-term financial implications for individuals and their families,” New Financial noted. “Somehow, we are expected to know how to make the right decisions at the right time about confusing and complicated issues (often full of jargon) as we go along – with no formal training and no clear source of simple and impartial information and guidance. It’s often hard to feel that we are taking control of our money rather than being controlled by it.”

You should get that checked

Each of these moments presents an opportunity for a check-up. And that will help us to make better decisions.

Not many people think of seeing a financial adviser with their spouse-to-be before they get married. But if they did, it’s possible that they would do things differently.

“Taking the right decision at the right time – with a little bit of help – can lead to far better outcomes in the long term,’ said New Financial. “Better financial well-being. More financial resilience. Less worry. Better mental and physical health. Taking the wrong decision – or more often, not taking a decision at all – can have profound consequences that might only become clear when it is too late to do anything about it.”

The same is true of starting your first job or moving to a new one, buying a house, having a child, a major emergency or getting a divorce. At each of these points, there are decisions that need to be made, but often we don’t even consider the financial consequences. If we do, we may only consider the best outcomes, and neglect to think of worst-case scenarios.

A trusted professional can however assess where we are and to help us plan for the future.

Asking the right questions

Until we visit the dentist, we don’t really know what state our teeth are in. In the same way, we probably don’t appreciate the fullness of our financial position and the potential implications of different decisions until we check in with a financial adviser.

As New Financial noted about financial health checks: “they would nudge you to think about how to ask the right questions about your money and to consider your options – and provide you with just enough information at just the right time to help you think them through.”

This will have far-reaching benefits:

“Financial health checks would lead to higher levels of financial well-being and resilience, better financial literacy, more trust in the financial services industry, and higher levels of participation in financial services. More citizens would feel more in control of their money.”

If you need a financial health check, speak to a professional.

What Divorce Means for Your Pension

“Marriage is the chief cause of divorce.” (Groucho Marx)

Retirement savings typically account for a substantial portion of a person’s wealth. When a marriage ends, these savings can become a serious bone of contention. The good news is that, starting 1 September 2024, the definition of pension interest will be standardised across all retirement funds. This makes it easier to know what a spouse may be entitled to.

Be warned, though: the wording of the divorce order is crucial. If it’s incorrect, the retirement fund may reject the claim.

How your marital regime affects pension claims

Your marital regime determines whether pension interest can be claimed:

In community of property: All assets, including retirement savings, are shared equally. Pension interest is included.
Out of community of property with accrual: Spouses keep separate estates but share any growth during the marriage, including pension interest.
Out of community of property without accrual: Each spouse keeps their assets, meaning no pension interest can be claimed.

If no ante-nuptial or post-nuptial agreement is executed, the marriage is by default in community of property. If you prefer to be married out of community of property, an ante-nuptial contract (ANC) is much preferable, because a post-nuptial contract (PNC) requires a High Court order. This means it’s expensive and time-consuming, plus the outcome isn’t guaranteed.

What exactly is ‘pension interest’ now?

Previously, the definition of pension interest varied by fund type. Starting on 1 September 2024, the Pension Funds Act has provided a unified definition: pension interest is now simply the member’s fund value, as determined by the fund’s rules, on the date of divorce.

This applies to all fund types, including retirement annuities. Although the old definition remains in the Divorce Act, the new rule under the PFA will take precedence for all divorce orders issued on or after 1 September 2024.

Three must-haves in a valid divorce order

To ensure a divorce order is enforceable against a retirement fund, it must:

Identify the fund clearly: The order must specify the fund and include the policy number if possible. If the member has multiple policies, the pension interest may be split among all policies in that fund.
Use the words ‘pension interest’: Vague terms like “fund value” or “benefit” won’t work. The order must state the percentage or rand amount of pension interest given to the non-member spouse.
Instruct the fund to pay: The divorce order must direct the fund (not the member spouse) to make the payment.

Pro tip: Check before you sign

Before finalising your divorce order, send a draft to the retirement fund for review. If the order isn’t enforceable, it will need changes, which can cause delays. The original divorce date will still apply when calculating pension interest.

What are the payment options for the non-member spouse?

Once a valid order is in place, the non-member spouse has two options:

Take a lump sum, which is taxed in their name using SARS’ withdrawal tax tables. If you choose this option, you will receive a lower amount than specified in the order.
Transfer the benefit tax-free to their retirement fund.

You cannot choose both options.

What if the member tries to withdraw funds mid-divorce?

If the fund receives proof that divorce proceedings have commenced, the member spouse cannot withdraw from their savings without the written consent of the non-member spouse. This rule remains in effect until the divorce is finalised and applies to both secular and religious marriages. If you’re in the process of getting divorced, it might be a good idea to inform your spouse’s pension funds.

Key takeaways

The definition of pension interest is now the same across all retirement funds.
Your marital property regime determines if you can claim pension interest.
The wording of the divorce order is crucial; incorrect wording can lead to rejection.
Consider submitting draft orders to the fund before going to court.
Withdrawals during divorce are now limited to protect both parties.

These changes may seem technical, but they bring more consistency and clarity to the system. Understanding the updated rules could be the difference between retiring comfortably and not.

How your financial planner can help

No one plans for divorce. But financial planning is about preparing for life’s uncertainties. Staying informed about changes in the law, especially those that impact pension splits, can help you avoid lengthy court cases, unexpected taxes, or missed entitlements.

It may be an uncomfortable topic but discussing divorce scenarios as part of your broader financial plan can be one of the most valuable services you ever receive. Even if lawyers are involved, your financial planner’s insights and advice could be essential for protecting your long-term financial health.

Our door is always open.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

The US and You: Why What Happens in America Impacts Your Portfolio

“The markets are like weather; you may not like it, but you have to bear it.” (Rakesh Jhunjhunwala)

South African investors don’t need to follow every twist in American politics or economics, but you can’t ignore them either. The world’s biggest economy casts a long shadow, and what happens in the US can ripple across global markets, including our own.

Let’s take a look at three particularly important ways this plays out…

1. It’s not really about the rand

The rand is notoriously volatile, but most of this has nothing to do with South Africa. It stems from how investors around the world feel about the US dollar. While we may be obsessed with local headlines, the people who actually move currency markets – traders in places like London and New York – aren’t reading News24. They are making decisions based on US and global factors.

When there’s a lot of uncertainty, for example, global investors seek safety. That almost always means moving money into US dollars and out of riskier emerging market currencies, like the rand.

When we talk about the rand “weakening” or “strengthening”, that’s usually the wrong way of thinking about it. In most cases, it’s not the rand that is doing the moving — it’s the dollar. The dollar is the world’s reserve currency, and it plays an outsized role in global trade and finance. When the dollar strengthens, almost every other currency weakens in comparison.

The reality is that what happens to the rand from day to day tends to have little to do with local conditions, and much more to do with how the dollar is behaving in global markets. For example, if the US Federal Reserve signals that interest rates will stay higher for longer, investors may pull funds out of emerging markets. This weakens the rand – even if nothing has changed in the South African economy.

2. Building a bond yield

Investors everywhere treat US government bonds as the benchmark for interest rates around the world. When investors think about how much yield they need to receive to be comfortable investing in South African bonds, their starting point is to look at how much higher that yield is than US bonds to compensate them for the extra risk they are taking.

In practical terms, this makes the US bond yield a component of the South African bond yield. The additional risks of investing here such as inflation, currency volatility, and fiscal uncertainty are added on top of that. But the starting point is what the market is offering in the US.

This means that when US yields move up or down, South African bond yields will respond accordingly. This repricing has nothing to do with local fundamentals. It’s all about what is happening in the US, such as higher inflation or higher levels of perceived risk. But it still has real consequences for South African investors, as well as for the government’s debt servicing costs and interest rates across the local economy.

3. Correlation and contagion in the stock market

While the JSE will always be influenced by local economic conditions, it’s also heavily tied to what happens on Wall Street. Several large stocks listed on the JSE – such as Naspers/Prosus, Richemont, and Anglo American – are global businesses that react more to US or international sentiment than to South African news.

When US equity markets fall sharply, you’ll often see local equities drop as well, even if there’s no change in South African fundamentals. This is partly psychological (panic sells are contagious), but also practical: global asset managers may rebalance portfolios or redeem emerging market holdings to cover US losses.

On the upside, positive news in the US market can also translate into gains on the JSE. This was illustrated very recently when the cooling of the tariff war boosted sentiment in the US market, and local stocks followed suit.

The takeaways

You can’t control what happens in the US, but you can be aware of how it may affect your portfolio. A well-diversified investment strategy should already account for these global linkages. That includes understanding currency risk, maintaining appropriate exposure to bonds and equities, and having a long-term plan that can ride out the noise from abroad.

Working with a financial advisor can also help you interpret the global headlines in a way that’s relevant to your personal goals, and avoid overreacting to market movements that are more about the US than they are about you.

To discuss your portfolio, speak to us.

Scam Alert: If it Seems too Good to be True, it Probably is

“Our ability to manufacture fraud now exceeds our ability to detect it.” (Al Pacino)

If you’re anything like us, the chances are you’ve recently heard about someone in your circle who’s fallen prey to an internet scam. Enticed by glossy marketing, unbelievable returns, and what seemed to be valid endorsements, they invested their life savings – only to discover too late that it was all a fraud.

New-age scams, same old heartache

The Financial Sector Conduct Authority (FSCA) has issued several warnings this year about scammers posing as licensed financial firms. Using WhatsApp groups and doctored videos, the scammers have impersonated genuine financial practitioners, without their knowledge or consent. The FSCA has confirmed that such impersonations are fictitious and unauthorised and issued the following warning:

“Anyone offering financial services in South Africa must be licensed. Always verify a firm or adviser’s registration on the FSCA website and request their Financial Services Provider (FSP) number.”

Deepfakes: The new frontier of fraud

Deepfake technology, which utilises artificial intelligence to create realistic yet fake images, videos, or audio, is now a powerful tool in scammers’ arsenals. Earlier this year, bogus videos circulated of Patrice Motsepe endorsing two scam websites, both of which are being investigated by the FSCA.

Red flags

The FSCA urges investors to be careful and look out for the following red flags:

Guaranteed high returns. If it seems too good to be true, it likely is.
Advertising solely on social media. Scammers are likely to be on WhatsApp, Facebook, and Telegram.
Urgent pressure to invest. Urgency is a control tactic—don’t rush.
No information about the product. Genuine advisors are open and forthcoming.
Upfront “unlock” fees. You shouldn’t pay to get into an investment.
Training fees or qualification hurdles. Avoid any scheme that requires you to pay to qualify for returns.

How to stay safe

Before you part with your money, take these five simple steps:

Check FSCA registration. Go to www.fsca.co.za to verify the firm’s license and FSP number.
Ask searching questions. A regulated adviser will inform you exactly how returns are made and the risks associated with an investment.
Be wary of social media adverts. Serious financial professionals don’t do business on WhatsApp.
Speak to a Certified Financial Planner (CFP®). They are legally bound to act in your best interest.
Report suspicious activity. Alert the FSCA or the police if something doesn’t feel right.

Final word

Now that even people you know well can be convincingly impersonated, vigilance is more crucial than ever. Investment scams aren’t just a possibility – they’re an expanding reality. The best defence is to stay informed, challenge everything, and never be hurried into a decision.

Before you invest in anything, especially if it sounds too good to be true, please call us. Getting a second opinion could save you from a very costly mistake.

What is a Power of Attorney and is it Forever?

“The number of cases of dementia is estimated to almost triple by 2050.” (World Health Organisation)

Although the actual prevalence per capita of dementia is reportedly on the decline, aging populations ensure that it is becoming more and more of a problem in society – for older people, their families and caregivers.

If you or someone close to you (normally an aging parent or relative) needs, or may end up needing, assistance with their financial affairs, your first thought will probably be a power of attorney by which the “principal” appoints an “agent” to act for him/her, either for a particular purpose (a ‘special power of attorney’) or generally (a ‘general power of attorney’).

A power of attorney is certainly a quick, cheap and easy solution but be careful – it’s only a temporary one. It is not “forever”!

The major downside

Of course a principal can cancel his/her own power of attorney at any time, but what is not so well known is that it terminates automatically if and when the principal:

Dies (an executor is then appointed)
Becomes insolvent and his/her estate is sequestrated (a trustee is then appointed)
Becomes mentally incapacitated in the sense of being no longer able to make his/her own decisions for whatever reason. Reasons could include a stroke, a coma following an accident, mental illness, dementia, Alzheimer’s, general age-related diminishing capacity etc.

It’s this last scenario that catches most people unawares, because it seems so illogical for the power of attorney to lapse just when it’s needed most.

But that, unfortunately, is the law. An agent can only do what the principal can do, so if a principal loses legal capacity, the power of attorney immediately fails. Or as a Department of Justice document neatly puts it: “In South Africa the power of attorney remains valid only for as long as the principal is still capable of appreciating the concept and consequences of granting another person his or her power of attorney”.

In practice there are probably many cases of powers of attorney continuing to be used to everyone’s benefit long after the principal has lost formal capacity, but an agent in that situation acts without authority and risks personal liability for doing so if the validity of anything done under the failed power of attorney is challenged.

So what are the alternatives?

The High Court can appoint a curator when a person becomes unable to manage his/her own affairs. A curator bonis handles all the person’s financial affairs, and a curator ad personam their personal affairs (such as giving consent for medical treatment, where to live etc). Unfortunately, curatorships are costly, prone to bureaucratic red tape and delay, paternalistic and, being public, demeaning to the principal.

Similar to curatorship but less complex, less expensive, and quicker, is an application to the Master of the High Court for the appointment of an administrator. This option is only available when your family member is a “mentally ill person or person with severe or profound intellectual disability”, so it excludes cases of purely physical frailty or disability, and suggests that in cases of mild dementia or mild cognitive impairment only curatorship is an option – but take legal advice on your specific circumstances. An extra element of cost and delay applies in larger estates, in that the Master must first commission an investigation into any application where the assets involved exceed R200,000 and the annual income is over R24,000 p.a.

A discretionary trust to address the purely financial aspects might also be worth considering whilst the person in question still has legal capacity. Take advice however on the costs, tax and other implications.

What about an “enduring” or “conditional” power of attorney?

In 2004 the South African Law Reform Commission recommended changes to our law to allow for alternatives like:

An “enduring power of attorney” (or “EPA”) which would remain valid despite the subsequent incapacity of the principal; and
A “conditional power of attorney” which would come into operation only on the incapacity of the principal.

Unfortunately, nothing concrete has as yet come of that, and although some legal commentators suggest that our courts might perhaps uphold a properly-worded EPA, the general consensus appears to be that they will not be recognised.

It boils down to this: get legal advice on your particular circumstances. We will gladly assist wherever we can.

Market Update: Amid Trump Turmoil, Diversification is the New Safe Haven

“The only certainty is that nothing is certain.” (Pliny the Elder)

For decades, US Treasuries (government bonds) and the US dollar have been the world’s primary safe-haven assets. Investors have been able to rely on them to hold their value due to America’s status as the world’s leading democracy, with deep, liquid markets and a steady, predictable economy.

However, this foundation is showing serious signs of cracking. The dollar has tumbled to multi-decade lows, while Treasury yields have risen sharply when they would traditionally decline (risk-averse investors typically flock to these assets). Trump’s decision to impose 50% tariffs on the European Union, before extending the deadline a couple of days later, highlights the administration’s erratic approach to trade policy that has markets constantly guessing the next move.

Other factors adding to waning confidence in the dollar and US Treasuries’ safe haven appeal include the risk of a widening fiscal deficit after Trump announced his “big, beautiful bill”, which is expected to add $3.8 trillion to the US budget deficit. Further adding to these concerns, Moody’s cut the US triple-A credit rating in May – primarily because of concerns surrounding the country’s fiscal sustainability.

Monica Defend of Amundi Investment Institute, captures the market’s evolving sentiment, saying: “Recent bond yield dynamics signal a shift from seeking safety in US assets to a reassessment of Treasuries and the US dollar as ultimate safe havens.”

Gold’s golden moment

Gold has stepped into this uncertainty, reclaiming its ancient role as the ultimate store of value. Gold prices have surged above $3 000 per ounce, gaining 40% over the past year driven by the appeal of gold being safe from the macro-economic and geopolitical turmoil.

Gold’s resurgence isn’t just about individual investor sentiment. Central banks have collectively bought more than 1 000 tons of gold each year since 2022, up from an average of 481 tons a year between 2010 and 2021. This institutional buying reflects deeper concerns about dollar-denominated reserves, with many central banks seeking assets beyond the reach of potential political weaponisation.

What this means for investors

While gold shines brighter in this environment, declaring it the definitive replacement for US Treasuries and the dollar as the world’s safe-haven investment may be premature.

The reality is that Trump’s unpredictability cuts both ways, sending markets into a tailspin when taking investors by surprise and then prompting sharp rallies when he backtracks on those decisions. “A clear pattern has emerged when it comes to Trump’s tariff strategy – hefty tariff threats soon followed by tariff pauses during which negotiations ensue,” notes analyst Tim Waterer.

Given this uncertainty and the fact that it will take some time to establish the safe-haven investments of the future, diversification has emerged as the new safe haven from the storms. Rather than betting everything on gold, investors should ensure they are spreading the risks across multiple asset classes and geographies. In Trump’s world, the only certainty is uncertainty, making a well-diversified portfolio the most reliable shelter from the storm.

If you have any further questions about how all of this affects your investment portfolio, please give us a ring.

Wealth Is Not Just About What You Earn

One of the biggest misconceptions about money is that many people believe the more you earn, the richer you are. But a high income does not automatically translate into wealth.

If you spend everything you earn, you have nothing, regardless of how much came in at the start of the month.

The trouble is that many people like to spend on things that make them appear rich. Ironically, trying to look wealthy is one of the greatest threats to actually being wealthy.

Back to the future

Think about the fact that middle class South Africans earn significantly more today than they did 40 years ago. The household savings rate in the country has however gone from over 20% in 1980 to below 0%.

The simple explanation is that people have higher incomes, but they also have much higher expenses. In 1980 going camping was a good holiday. Children thought nothing of wearing hand-me-downs. Birthday parties were a cake and a game of pass-the-parcel.

Those would not be considered acceptable in most middle-class households today.

This is not to suggest that people should not be entitled to enjoy their hard-earned money. On the contrary, if your income allows you to live a good life, you should appreciate it.

Self-discipline

However, nobody can grow their wealth unless they spend less than they earn, and save a significant portion to cover their future goals.

That starts with having an emergency fund to ensure that a financial shock doesn’t completely derail you.
It means ensuring that you are investing at least 15% and ideally 20% of your salary for retirement.
And it also requires thinking ahead to what sorts of big expenses like a child’s education or a new car you can save for now to be able to more easily afford them when the time comes.

As Thomas Stanley and William Danko wrote in their best-selling book The Millionaire Next Door:

“It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.”

For advice on budgeting and how to organise your long-term savings goals, speak to your financial adviser.

How Fit Are You Financially?

“He who has health has hope; and he who has hope, has everything.” (Thomas Carlyle)

Doing a financial health check can sound like a daunting idea. But it needn’t be.

Just checking a few simple things can give you a good idea of whether you’re financially healthy and on the right track. Here are four markers that you should look at annually to assess how you’re doing.

1. Is your wealth growing over time?

The first measure of financial health is your net worth. This is the difference between your assets (what you own) and your liabilities (what you owe). Your assets include investments, property, retirement savings, and cash savings. Your liabilities include debts such as a home loan, car finance, personal loans, and credit card balances.

How to assess your health:

If your net worth is positive (assets exceed liabilities) and growing over time, you’re in a strong position.
If your net worth is negative (liabilities exceed assets), but you are consistently shrinking the gap by paying off debt and growing your savings, that is a good sign.
If your net worth is stagnant or decreasing, that could indicate excessive debt or a lack of savings.

2. Could you handle a financial shock?

Life is unpredictable. Losing a job, facing unexpected medical expenses, or having to do urgent home repairs can happen at any time. An emergency fund acts as a financial safety net, helping you to cover these costs without going into debt.

How to assess your health:

A healthy emergency fund should cover at least three to six months’ worth of essential expenses (housing, food, medical aid, transport).

The best place to keep your emergency fund is in a low-risk account where you still earn interest, but can also access the money at short notice.

3. Are you in the debt danger zone?

A key measure of whether your debt is manageable is your debt-to-income ratio – the percentage of your income that you are spending towards repaying debt.

To work this out, first establish your gross monthly income before tax. Then check how much you are paying on debt each month, from your home loan to your credit card. Divide your debt by your income, and multiply that number by 100. You can also find debt-to-income calculators online.

How to assess your health:

Speak to a financial adviser for specific advice, but a general rule is that if you are spending less than 36% of your gross income on repaying debt, that is healthy.
If your debt-to-income ratio is between 36% and 50%, you are in the danger zone, and you should track whether this is improving or getting worse.
Anything above 50% is high risk and should lead you to taking urgent action.

Reducing high-interest debt as quickly as possible is a critical step in improving your financial health.

4. Are you on track for retirement?

Being financially independent means that you no longer have to work to sustain your lifestyle. You can live comfortably off what you’ve saved.

Of course, that doesn’t mean that you have to stop working. It just means that you have the choice.

For most people, this means being able to replace 70% of their salary. And a simple rule of thumb is that you need R1 million for every R5,000 you want to draw in income.

It’s difficult to know exactly how much you need to get there, but there are some useful targets that you can use. If you are saving over a 40-year working life, these allow you to measure your progress:

How to assess your health:

After 10 years, you should have saved at least 2x your annual salary
After 20 years, you should have saved at least 4x your annual salary
After 30 years, you should have saved at least 7x your annual salary
After 40 years you should have saved at least 12x your annual salary

Final thoughts

Assessing your financial health doesn’t have to be complicated. By looking at your net worth, emergency savings, debt levels, and retirement investments, you can get a clear picture of where you stand and what needs improvement.

Financial health is not about earning a high salary – it’s about how well you manage the money you have. With the right approach, anyone can take control of their finances and build long-term security.

To discuss your financial health, speak to us.

Could You Be Over-Insured?

“Too much of a good thing can be bad. After all, you can drown even in clear, clean, pure water.” (J. Grant Howard)

While long-term insurance is important in any financial plan, you may unknowingly be paying for more cover than you need. This is particularly possible if you have more than one policy in place.

This most commonly happens either when someone has both a personal insurance policy and a group insurance benefit through their employer, or they are required to take out insurance to cover a car or home loan. This duplication can lead to unnecessary costs without providing additional benefits, channelling money away from where it could be better used – for example, adding to your investments.

Understanding your cover

As a starting point, it’s important to understand how these different types of policies work.

Personal insurance is generally something you would take out with the help of a financial adviser. It is designed to cater specifically to your financial needs and circumstances.
Group insurance is provided by your employer as a benefit. These policies typically offer life cover, disability cover, and sometimes critical illness cover, often at a lower cost than personal policies due to the pooled risk across all employees. By their nature, they are, however, not personalised and may have limited payouts.
Insurance that you’re required to take out to specifically cover a loan will be a simple life insurance policy to cover the value of the loan.

Where overlap happens

You might assume that having more than one policy means you have double the protection. But this isn’t necessarily the case.

If you have a personal life or disability insurance policy and your employer provides similar cover or you take out another policy to cover a loan, you could be paying for unnecessary duplication. This can happen in several ways:

Life cover: If your group life cover already provides sufficient payout to settle debts and provide for your dependents, a separate personal policy may not be necessary.
Disability cover: Some policies pay a lump sum, while others provide income protection. If both your group and personal policies offer the same type of cover, the benefits may not stack as you expect. Particularly in the case of income protection, you can only ever insure a portion of your current salary. If you have personal cover for 75% of your earnings and group cover for 75% of your earnings, for example, they won’t add together. You will only ever get a maximum of 75%, so you are paying for unnecessary duplication.
Critical illness cover: If both policies include critical illness cover, check if they cover the same conditions. Having overlapping policies could mean you’re paying for cover you don’t actually need.

What happens when I retire or change jobs?

It is, however, important to consider that you probably don’t want to rely solely on group insurance. That is because it’s tied to your employment, and if you retire, switch jobs, or your employer changes their benefits, you may lose your group cover.

This can leave you without insurance at a time when obtaining a new personal policy might be more expensive due to age or health considerations. For this reason, while reviewing your cover, it’s important to ensure you have a sustainable long-term plan that remains in place regardless of career changes.

How to assess your needs

To determine whether you are over-insured, consider the following steps:

Calculate your required cover: Assess your financial obligations, including debt, living expenses, and dependents’ needs, to determine how much cover is actually necessary.
Review your existing policies: Compare the benefits offered by your personal and group policies to identify any duplication. Bear in mind that extra cover may be justified in certain instances, such as if you have high liabilities or many dependents.
Understand benefit payouts: Insurance companies may not always pay out in full if multiple policies cover the same risk.
Speak to a financial advisor: A professional can help you structure your insurance optimally, ensuring adequate protection without excessive costs.

The bottom line

Insurance is meant to provide financial security, but paying for duplicated cover can drain resources unnecessarily. That’s why you should carefully review your personal and group insurance policies to ensure you aren’t over-insured.

By aligning your cover with your actual financial needs and understanding where overlaps occur, you can strike the right balance between protection and cost-effectiveness.

To discuss whether your insurance cover is appropriate, speak to us.

Budget 2025: How It Affects You and Your Business

“… the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration.” (Finance Minister Enoch Godongwana – Budget 2025)

The tabling of Finance Minister Enoch Godongwana’s fourth Budget in February was marked by an unprecedented three-week postponement, following a deadlock around the original Budget proposal to increase VAT by 2%.

A revised Budget, finally tabled on 12 March, proposed a 0.5% increase from 1 May 2025, with a second 0.5% VAT increase from 1 April 2026 – but the proposal was still not enough to satisfy most other political parties.

In his Budget Speech, the finance minister called the Budget proposals “a bold and pragmatic approach” to ensure the economy grows “much faster and in an inclusive manner”. He admitted that the economy has stagnated for over a decade, with GDP growth averaging less than 2%, while forecasts for medium-term GDP growth are a dismal 1.8%.

While the powers that be attempt to reach consensus on the Budget 2025 proposals, businesses and individuals in South Africa will find little support from the fiscus to survive these low-growth economic conditions.

This is evident from our overview below of the most pertinent Budget 2025 proposals. In a nutshell, the finance minister is trying to cover another substantial Budget shortfall by directly and indirectly increasing the tax burden on corporate and individual taxpayers.

Budget proposals that will impact you

The 0.5% VAT increases proposed for 2025 and 2026 will impact every South African, while disproportionately affecting lower-income households strained by high electricity costs, inflation and interest rates in a weak economy. To alleviate their impact on poor households, the list of zero-rated food items is extended to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals.
Personal income tax brackets will not be adjusted for inflation for a second year running. This means that, like last year, individuals who receive a salary increase will again pay more tax, and could be pushed into a higher tax bracket.
No inflation adjustments were proposed for tax rebates or medical tax credits – which once again translates into more tax payable by individuals.
Above-inflation increases in the excise duties on alcohol (6.75%) and tobacco (4.75 – 6.75%) are no surprise. This means that with immediate effect, the duty on:
- a 340ml can of beer increases by 16c
- a 750ml bottle of wine goes up by 29c
- a 750ml bottle of fortified wine goes up by 48c
- a 750ml bottle of spirits will increase by R5.97
- a 23g cigar goes up by R8.49
- a pack of 20 cigarettes rises by R1.04
- vaping products increase by 14c per millilitre
A one-year extension in the R370 social relief of distress (SRD) grant and above-inflation increases ranging from R30 to R130 per month in other social grants will provide minimal relief to the poorest South African households.
SARS has been allocated R3.5 billion this year and an additional R4 billion over the medium term to enhance its tax collection capabilities, so taxpayers can expect increased scrutiny and administration.

Budget proposals that will impact your business

The 0.5% VAT increases proposed for 1 May 2025 and 1 April 2026 will certainly impact all companies in South Africa’s struggling economy, with a disproportionately negative impact on the small and micro businesses that are crucial to economic growth.

VAT hikes directly raise the cost of goods and services, impacting competitiveness and profitability.
Higher prices resulting from the VAT increase will reduce consumer purchasing power in an already-constrained economy.
The VAT increase could trigger inflationary pressures, further eroding household incomes and potentially forcing an interest rate hike.
Two VAT increases over two years will also result in a significant administrative burden on businesses to implement the required changes to their systems.

Some good news

The general fuel levy and the Road Accident Fund levy will not be increased again this year, providing tax relief of R4 billion. However, the carbon tax on fuel and diesel will increase.
Property buyers will benefit from an upward adjustment of 10% in transfer duty brackets from 1 April.
A R1 trillion investment over the next three years in public infrastructure spending, focussed on transport and logistics, energy, and water and sanitation, should positively impact on the economy.
Besides the proposals detailed above, Budget 2025 included no other tax proposals or tax hikes, with no mention of a wealth tax or the National Health Insurance (NHI).
In a media interview following the Budget Speech, the minister said that if the economy does well, the VAT increase in 2026 may not be necessary.

How best to manage your taxes going forward?

There is (on 3 April) still huge uncertainty regarding the budget proposals. Expect a lot of political manoeuvring and perhaps some major changes in the days ahead!

The tax proposals eventually adopted, as well as other technical amendments in the 2025 Budget, will likely require professional tax advice.

If you have any questions about how the budget affects your investments, please speak to us.

Market Update: Tariffs, Tariffs, More Darn Tariffs

Since returning to office in January 2025, President Donald Trump has implemented a sweeping series of tariff measures – the latest of which is a 30% tariff on South African exports to the US. These decisions have sent shockwaves throughout the global economy and created significant market uncertainty.

At the latest SA Reserve Bank meeting, Governor Lesetja Kganyago summarised the current global state of play: “The world economy is experiencing extreme levels of uncertainty. Trade tensions have escalated, and longstanding geopolitical relationships are shifting abruptly.”

V is for volatile

The fallout from the tariff announcements has been wide-ranging. It has triggered volatility in currency markets, particularly affecting emerging market currencies. Developed countries’ stock market performance has sharply diverged, with European equities outperforming the US this year.

The widespread uncertainty has also weakened consumer and business confidence, resulting in many companies adopting more cautious approaches and postponing investment decisions, which could weigh on global growth prospects.

Copper prices are surging to record highs in anticipation of potential tariffs, and gold prices have reached record highs of more than $3,000 an ounce as investors seek safe-haven assets amid the uncertainty.

C is for caution

The tariff situation has prompted the South African Reserve Bank to keep interest rates unchanged at its last meeting despite cooling inflation. This reflects its concerns about the potential inflation impact of tariffs and their impact on the rand.

There will also likely be fewer future rate cuts than anticipated over the next few years as the SARB adopts a “meeting-by-meeting” approach due to the uncertain environment. As Standard Chartered economist Razia Khan noted, “The global risks are real – and the SARB’s caution is justified.”

The impact on SA’s growth will depend significantly on how the tariff situation evolves. If trade tensions ease, the effect may be limited. However, a full-blown trade war would likely have substantial negative implications for economic growth.

The bottom line

As long as tariffs dominate the global agenda, investors in South Africa can expect:

Elevated levels of market volatility
Periods of weakness in the rand, particularly if trade tensions escalate
Limited interest rate cuts
Challenging times for sectors heavily exposed to global trade

As such, diversification across markets and asset classes remains all-important, and investors should avoid making any rash, fear-based investment decisions. Though the world order may be completely changing before our eyes, unanticipated investment opportunities typically emerge amid maximum uncertainty, so be on the lookout.

If you have any further questions about how all of this affects your investment portfolio, please give us a ring.

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Physical Address:

73 Kariba St, Lynnwood Glen, Pretoria, 0081

Telephone:

+ 27 12 348 1386

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+ 27 12 348 3706

Email:

[email protected]