The Problem With Money

The biggest problem surrounding money is the lack of knowledge on how to spend and save it!

This is a topic that lies very close to home as it is such valuable knowledge that can literally save you years of heartache, stress and grief.

Schools force learners to take a subject called Life Orientation for their entire school career and insist on teaching pupils skills they’ll never use. Why are we not taking the valuable time we are forcing students to sit down and listen, to teach actual life skills!

Why aren’t we teaching tax in schools? Why aren’t we teaching budgeting, wealth creation and smart financial decision making in schools? We live in a poverty stricken first world country and no one is standing up and helping to grow a new, educated, money savvy generation.

Wealth is a success vehicle that can and should be created as soon as possible. There is no such thing as “later” or “I’m too young”. Parents don’t talk to their children about money and because of that kids grow up to be adults who don’t know what a good salary is, don’t know how to prepare for inflation and don’t have enough to ever retire. The uneducated poverty stricken cycle thus continues.

Let’s make a change! Let’s talk about money, because if you don’t, the next generation won’t either.

Why R500 a Month Is Not Enough

So you’ve spoken to a random financial advisor and you both agreed that putting away R500 a month would be enough of a saving, right? Wrong!

If you are anything like me you have the perception that R500 a month is a lot of money and that over a period of 20 years magical money making fairies would have visited your account a few times and turned your R500 into R5 000 000… Keep dreaming!

The harsh reality is that you are putting away a minimal amount of money into a fund that is only expected to grow between 9% and 12% per annum.

So let’s work that out… (R500 x 12 months) + 9% (let’s be safe here). And the total is R6 540 in savings for the year. Congratulations, you’re a millionaire.

Chances are you’ve put away less for the entire year than what you spend on rent or a bond in one month! Although interest does make your money grow, you still have to make sure that you plan smartly and put away enough so that it grows with your ever increasing lifestyle.

If you truly want to become financially free, make sure you try and get to R1m in savings as quickly as possible. It’s going to be hard and you’ll have to bite the bullet for quite a number of years, but do that and you’ll see how favourable even a 9% growth on your money will be!

Take the leap and invest in yourself today. Ask us how!

Can you afford to retire?

The name says it all. Can you quite literally and figuratively afford to retire? Did you put away enough money into savings and investments to enjoy a real return?

It is estimated that only 6% of South Africans can afford to retire completely independently of others – a shocking figure.

So why is it that such a low percentage of South Africans are able to retire? The answer is simple. South Africans do not have a mentality of saving. Blame it on low wages, the economy, socio-political background… no matter what the reason, there is no culture of saving.

Remember when you went to the shops with your parents as a kid and asked for basically everything you could get your hands on and your parents just turned around and said “NO”? That’s the attitude you need to adopt yourself to control your own spending.

The wise always say that you should save first, then spend what’s left after saving. This rule applies no matter who you are. You can’t have everything you want and you can’t buy everything you get your hands on. Sometimes you need to make the hard decision and shy away from instant gratification.

You should be saving and putting away about a third of your monthly salary if you want a comfortable retirement. If you are a freelancer of self employed and your monthly income fluctuates, then you should work on projected figures. (Total yearly income, divided by 12). This sounds impossible, but the answer is simple – live below your means!

This money can’t just lie in a bank account either as your interest is so low that you will never see a real growth on capital. You should be investing this money into Unit Trusts, Endowments and ideally Retirement Annuities to get you a greater return on investment through higher interest rates.

So how do you know if you’re putting away enough? The short answer is, you probably don’t… You should speak to a Financial Advisor who is able to do a full financial needs analysis to determine how much money you’ll need on a monthly basis once retired, how long you have left to save and work back from there to determine your ideal monthly savings.

The truth is often times very shocking as you get plenty of advisors running around telling you that you should take out a R500 per month Retirement Annuity if you want to retire. In the grand scheme of things, this won’t even be a drop in the ocean compared to what you should really be putting away!

While it’s always a good idea to start somewhere, and put away something rather than nothing, you should be taking matters into your own hands and be increasing your monthly contribution as often as possible to be able to get to one third of savings towards retirement.

This may seem like a daunting task to face, but the long term reward would be so much more worth it than instant, smaller rewards that will in essence waste your money over the years.

For more information regarding retirement, please make sure to contact the Smart Planner to help get you into the right savings culture, with the right product for you.

 

Being Rich vs. Acting Rich

Have you ever noticed how some of the richest people in the world live such mediocre lives, yet those who live lavish lifestyles don’t really have a lot of capital? It’s the basic principle of being rich vs. acting rich.

Warren Buffet plans his breakfast meals according to the stock market each morning. If the stocks did well, he’ll have a slightly bigger breakfast, if the stocks dropped, he’ll have a slightly smaller breakfast. Why on earth would one of the richest men in the world need to do that? The answer is, he doesn’t, but he understands the concept of living within his budget.

Rich people are rich because they find ways to save money. They buy less unnecessary “wants” with instant gratification like take-out and they find ways to settle their debts quicker. In the end, they have a clear focus on the bigger picture, rather than focusing on impulse buys.

Ideally you’d want to live debt free as quickly as possible. This means cutting your budget to live well under your means and paying back your debts twice as fast. This way, you lose out on all the extras in the short term, but in the long run you’d have saved thousands on interest alone.

That’s why you often see people who are money rich wearing hand-me-downs and driving reliable cars because they understand the value of actual money and they make sure that they save as much of it as possible.

People who buy flashy and expensive things have an inferiority complex and find the need to show off due to society’s pressures. You should only compare yourself to you, or you’ll live a life off endless stress inducing debt just to “keep up with the Joneses”.

The short answer is this – Live below your means, pay off your debts as quickly as possible and put as much money away as you can into savings and investments. That’s how you’ll be truly rich!

The choice is yours. Do you want to live a life of endless stress but have all the latest technology and face the chance of losing everything anyway? Or do you want to live a stress free, debt free life with real money in investments that keep multiplying and own everything you have?

Make sure you plan the smart way… contact us today for help and advice on becoming financially smart!