There are several pivotal times in your life where you’re going to have to have difficult financial conversations – some related to your income, others to your consumption. While many of us are tempted to avoid these conversations and hope everything will come right in the end (let’s face it, they often do) you could have a far better wealth outcome if you just had some tools to make those conversations more bearable. Asking for a raise I wonder if this is even relevant anymore. The time spent in a job has shrunk enormously in the last half century. Gone are the days of job-for- life, or even 10-year tenures. The average length of a job today is 3 years. Most people find it easier to find a new job, at a better pay than going through the stress of negotiating a salary increase. (Frankly, even back in the day when I was in the corporate environment, this is what I did.) If you are an employer, then your tactic should be to not give increases to those that you want to ‘move on’ and allocate the budget to those you want to keep. If you, as an employee want to stay but need to negotiate – get help from AI. I asked the question ‘Who do I ask for a raise’ from Perplexity and was surprised by the quality of the answer I got. (If you haven’t got on the AI bandwagon – and age is not an excuse – then spend a bit of time on a free course like you can find at Coursera (AI for everyone for example). But perhaps a raise shouldn’t be your top priority but rather getting ahead of the AI game. AI is coming after your job in a way that we have not seen since the industrial revolution when machines replaced ditch diggers.  In a co-habitation arrangement Unless every single expense and asset is split 50-50, then there is a very good chance that one of the people in this partnership is going to come out worse for wear. Look at mimicking a prenup (ANC with accrual) where your pre-union assets are clearly shown, and you both share in your growth of assets thereafter. Be very careful about getting into a ‘without accrual’ arrangement – especially if you are the one that might be having to take a break from income earning to raise progeny. The two assets to pay particular attention to are the two largest (over time), property and pension. Yup, very difficult conversations that could result in no-cohabitation at all – but way better than a bitter, expensive ‘divorce’. When spending patterns aren’t aligned After infidelity, financial stress during a ‘marriage’ is one of the major causes of divorce. This is often because the spending patterns of the two parties are misaligned, but it could also be that ambition, values, work ethic are misaligned. Before you co-mingle your assets with another person, best you clearly understand your financial status first, and your partner understands theirs. Only then does it become possible to plot how these are going to merge into the future. Have a plan. A financial advisor can usually help you with this. My clients have found that my ‘RedFile system’ (still available free of charge on request) is a good place to start. While this might be a stressful thing to start (especially if you suspect that some aspects of your spending may be ‘off track’), by tracking one’s income and expenses over a period of time, you can regain control. In my experience, couples that have the most financial issues are when a Spender marries a Saver, or even worse, when two Spenders marry – which are you?  Spending/consumption in retirement At retirement it is even more important to scrutinize your spending patterns because you aren’t going to be able to increase the income you get from your investments meaningfully without eroding the capital and run the risk of the income running out before you do. There is usually a distinct difference between before and after retirement expenses – for example you may no longer need life insurance, you won’t be contributing to investments anymore (they are now going to be doing the job they were designed to do for decades – paying you an income/pension). This sort of income statement is a vital piece of your retirement planning – and best done well in advance of your retirement ‘date’. If you haven’t done any of this sort of planning (or ignored your advisor’s advice to rectify the shortfalls) then you might need to be open to a (perceived) less-than-ideal way of funding your retirement – like using a life annuity instead of a living annuity (you can read more here). I have found that if you give yourself time to digest uncomfortable truths, they cause less heartburn. As always remember to seek financial advice first before choosing any financial or retirement product. Choices made at this point often cannot be reversed.  Expectations of children Many of my clients are approaching or are in retirement, and the one common theme for those clients that are either battling to come right in retirement, or postponing the date because they cannot afford to – are those that are still supporting children well past their ‘eviction from the nest date’. In my experience this conversation is best started when the kids are in high school, at least 4 years out from matric, for example. Every family, and every culture is different, but let me just tell you how my Dad handled it. He told all three of us kids that he would pay for as much education as we wanted, right up to doctorate if we wanted, (only one repeat/change allowed) but thereafter we had to get a job and look after ourselves. In his words “When I pass, I am probably not going to leave you much, but this is your inheritance.” Divorce has made it much more difficult for parents today to have those conversations, but it should still be part of the co-parenting discussion you have. Let’s put it in perspective, if you could put away an extra R10k a month (invested at 10% pa) then you’d have an extra circa R1,5m in your retirement pot after a period of just over 8 years. Just a couple of difficult conversations at important times of your life can have a huge impact on your future wealth, find the strength and get the help to have them. |
| Articles and Blogs: Kick Start your own Retirement Plan NEW You matter more than your kids – in retirement NEW To catch a falling knife Income at retirement 2025 Budget Apportioning blame for your financial state Tempering fear and greed New Year’s resolutions over? Try a Wealth Bingo Card instead. Wills and Estate Planning (comprehensive 3 in one post) Pre-retirement – The make-or-break moments Some unconventional thoughts on wealth and risk management Wealth creation is a balancing act over time Wealth traps waiting for unsuspecting entrepreneurs Two Pot pension system demystified Keeping your legacy shining bright Financial well-being when dealing with Dementia and Alzheimers Weathering the storm Pruning your wealth farm Should you change your investments with changing politics? Taking a holistic view of your wealth Why do I need a financial advisor? Costs Fees and Commissions The NHI and what to do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |