When we look back on it, life seems to happen along a nice, neat timeline, but we all know it is never that simple. “Life” happens along the way, sometimes pushing us forward – in our career, relationships, health and wealth – but sometimes settling us back years. Nothing ever stays the same, and if you try and make it – something else will unravel. This is why wealth is an ecosystem, it is buffeted on all sides by variables that may or may not be in our control, and we all must build some resilience, pick up the pennies left on the floor and soldier on. In every ecosystem, some things will have more resilience than others (like cockroaches for example) – and that’s usually because they hustle and persevere until they come right, fatten up again, find a spouse and fill the world with more pests. The one thing that is always true about the timeline we live – is that we get old and less able to fend for ourselves and have less energy to persevere or to hustle –unfortunately that is also the time when there is no more room for mistakes, and mistakes that you make later in life have much harsher consequences. I always thought it would become easier in time to prioritise where I distribute my wealth, but I never accounted for the aspects of ‘life’ that invariably throw a spanner in the works. Expecting someone in their 20s or 30s to realistically look 35 years into the future toward a ‘retirement’, especially if you have a mortgage or children which seem to suck every last cent out of your income every month is a big ask. The reality is though, if you don’t start wrapping your head around it in your 40s, it’s going to be very difficult to catch up. From age 50 onward is what we planners usually call “the accumulation years” (saving up for a comfy retirement). Twenty years ago, this was the time when children were educated and financially self-sufficient, mortgages were paid off and there was more disposable income to put into investment. That is no longer the case. For decades now the trend has been toward marrying and having children later – in the thirties. Divorce rates skyrocketed from 1970 to 1980 and have stayed there since (US figures), but the number of women that have chosen to stay single and not marry has also doubled over the same period. Divorce is often the single most devastating impact on an individual’s wealth (and unlike death cannot be insured against – just planned for). Whatever your circumstances there is always time to try and set a better course. (Better, but not necessarily easier, it may require some hard sacrifices like working longer and living off less for example).  One the most often asked questions I get is where do I start? I suppose the most conventional answer is one step at a time – but what if I told you that perhaps you need to throw all the plates up in the air – and slowly learn to keep it there as you slowly make them bigger and heavier.  The biggest tip I can give you is to keep it flexible as possible – all your life. * Pensions, Provident funds and RAs are by their very nature inflexible, and the 2-pot system has made them even less so (don’t be fooled by the savings bucket) – but everything else should be much more flexible. This is the last place to add extra investment – and then only at the maximum tax-deduction level. * Emergency funds are an absolute must – some of the newer banks make this very easy with low fees and high interest rates. Yes, that’s where I keep my emergency fund. * Tax Free savings accounts are also a no-brainer and flexible. If you want to save for a child’s education a TFSA in their name is a way better option than those old fashioned and expensive endowment policies that some brokers will still try and flog you. * Flexible investments: There are a myriad of ways you can structure these but be aware of fees and keep to LISPs rather than insurance companies. Steer clear of upfront fees and keep the fund fees below 1.25%. Using ETFs is often a good place to start in the equity market – and you can do it yourself or at very low cost with something like Easy Equity. * Offshore investments: Contrary to popular opinion, these are not the be-all and end-all of investments but certainly are a valuable part of your wealth ecosystem – there are just ideas and sectors offshore that we don’t have here in RSA – AI for one. These can form part of your flexible investments, using feeder funds for example, but true offshore exposure using your forex allowance should be your goal. * Don’t ignore mitigating the risks to your wealth. Medical aid – even if it’s at the most basic level – is a no brainer. If your company doesn’t have group benefits, you need to protect your ability to earn income – at the very least in the long term, if not in the short term too. Both risks can decimate decades of carefully constructed investments and savings. * Partner up with an independent financial advisor as early as possible, their biggest value early on in your journey is not so much how much ‘extra’ they can make on your investments (markets do most of that job) but on what they can save you in every other aspect of your wealth journey. This post is also available as a podcast HERE |
| Articles and Blogs: Entrepreneurial wealth traps NEW Two Pot pension system demystified NEW 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 |