First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Financial planning - Four ways to plan for a healthy, w...

Defend Truth

Opinionista

The Financial Wellness Coach: Four ways to plan for a healthy, wealthy future

mm

Kenny Meiring MBA CFP is an independent financial adviser. You can contact him at Financialwellnesscoach.co.za. Please send your questions to [email protected]

Question: I am 30 years old and think that it is time for me to start managing my finances properly. What should I do?

Answer: I like to approach financial planning in the following order:

1. Protecting your life’s trajectory: You are earning an income and should do so until you retire. Your life and that of your family will be shaped by the income you earn and your ability to earn it in future years.

The first step on the path towards financial wellness is ensure that you and your family stay on the same financial trajectory.

You can achieve this in two ways:

Protect your income: Some companies offer income protection and disability cover as part of their employee-benefit arrangements, so check to see if this is indeed offered by your employer.

If this benefit is not offered by your company or if you are working for yourself, then you should get this cover in place. You can get this cover even if you are working for yourself and have several streams of income.

Protect your family: If you have other people who depend on your income to survive, it is important that you put structures in place to ensure that they can continue to live the same type of life should you die and your income stops. An easy way of covering this risk is to take out life insurance.

As you are young and probably healthier than you will be in future years, you should get cover at a decent rate and with a lot less hassle than you will in years to come. It is often a good idea to take out the option of future cover increases.

2. Budget and debt management: The second step towards financial wellness is to ensure that you do not spend more than you earn. Remember, in your life you will earn a finite amount of money. You can choose to spend that on great experiences or on paying back loans.

A key element towards managing your income is to have a budget. This helps to ensure that your spending is less than your income. If you would like a template for drawing up a budget, drop me a line and I will send you an Excel spreadsheet.

3. Short-term saving: You need an emergency fund to cover car and household appliance repairs and replacements.

Do not keep your short-term savings in your current account as it will just disappear in your normal cash flow. Either put it in your home loan and ensure you only remove what you have deposited, or have a separate account into which you transfer the money and do not see it. It may not give you the best returns, but you will avoid the temptation of using these savings for purposes for which they were not intended.

4. Medium- and long-term investing: Only once you have the first three financial wellness building blocks in place should you start considering making investments.

One mistake a lot of young people make when investing is to ignore the investment structure. I deal with a lot of people who have built up substantial investment portfolios without the help of a financial planner over the years. But many of these have been poorly structured and they often end up paying a lot more tax than they need to.

You can, for example, invest in the same unit trusts using a variety of structures, each of which will have different tax implications. These will have significant end results. There are three structures that you should consider for your long-term investments:

Tax-free investments: This is a great place to invest your long-term money. You do not pay any capital gains tax here, so it makes sense for you to invest aggressively with a long-term focus.

Endowments: Tax in an endowment structure is only 30%. If your current tax rate is above 30% or you expect it to be more than 30% in five years’ time, you should consider using an endowment structure as there can be a tax saving.

Retirement annuities: If you are investing for the long term, a retirement annuity will give you tax-free growth as well as an immediate tax break on your investment.

To summarise, you can ensure your financial wellness by:

  • Ensuring that your income stream continues even if you are unable to work;
  • Spending less than you earn;
  • Having an emergency fund; and
  • Using the right structures for long-term investments. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

No Comments, yet

Please peer review 3 community comments before your comment can be posted