New Year, New Resolutions: Improve Your Financial Health in 2021

Good day,

The new year holds promise of fresh starts for many – especially this year. The start of this new decade has been transformative to say the least, and many people are excited to start anew in 2021. We all learned valuable lessons last year and reflection is key to making changes in the future. Here are 15 tips for you, your family, and your business to take on towards a successful 2021:

  1. Review your financial portfolio to plan for the year ahead. Structuring the appropriate planning as well as goals from the start will ensure you protect your plans and bring peace of mind for the year to come. Are you making sufficient provision for retirement? Do you have an emergency fund in place?
  2. Once your portfolio is structured, the next step is to ensure you are saving sufficiently. You must save the correct component of your income to reach the required replacement ratio at retirement, and this needs to be reviewed annually. Not only adjusting for inflation, but also accounting for any increases in income.
  3. Review your risk cover. Do you have sufficient cover in place to protect firstly yourself, and secondly your family should anything happen to you? You need sufficient life cover, income protection, disability cover and severe illness cover.
  4. Review the financial provision in your business. Does your co-shareholder have sufficient retirement savings, emergency funds and risk cover in place? Are YOU covered? Are your business overheads covered if something unplanned should happen?
  5. Are you planning for your children’s education?
  6. Review your short term insurance. If you feel you’re paying too much for your short-term insurance, don’t settle for the first quote you get.
  7. Do you have an updated will in place? Does your will reflect your current wishes, and is the will executable? Our intentions are best kept, and legally sound when written down correctly.
  8. Do you have an action plan to pay off your current debt?
  9. Set up a budget for your family to ensure you are spending your income wisely. Hidden expenses creep up when we fail to plan, and debt can snowball. This also applies to setting your retirement goals – really understanding what your monthly needs are – this way you can plan to ensure you will be able to replace this income at retirement.
  10. Have you reviewed your medical aid plan? Do you know what you and your family are covered for? Do you have GAP cover in place if your medical aid is only paying 100% or 200% medical aid rates?
  11. Do you have sufficient diversification in your portfolio in terms of asset classes? Ensure that you know what your portfolio looks like. Cash, bonds, property, local and global equity exposure can all be included in your portfolio depending on your risk profile and risk tolerance. By ensuring your portfolio is appropriately diversified, you are protecting yourself optimally against volatility, unplanned events (hallo 2020), and market cycles, which need to be planned for.
  12. Ensure you have sufficient offshore diversification in place too. Many South Africans are primarily invested in SA. Your income, property and most of your investment portfolio is invested locally – therefore ensuring you are diversified offshore appropriately is imperative.
  13. Our local economy has taken a knock – even more so after prolonged lockdowns and retrenchments are unfortunately a reality. Do you have sufficient provision in place to ensure you can take care of yourself and your family commitments if you become retrenched?
  14. Understand tax implications on withdrawals. Many investors penalise themselves greatly by making withdrawals on resignation, retrenchment, or retirement from their retirement funds at work – and losing large components of hard-earned money to tax.
  15. Offshore allowances – Make use of your annual discretionary offshore allowance. South Africans are allowed to transfer up to R1 million offshore per calendar year without having to obtain a Foreign Tax Clearance Certificate.

May you have a safe and successful, healthy and happy 2021!

Warm Wishes,

Jacques Momberg

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