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Ben Charlton

Ben Charlton

A financial planner can be someone who sees you as a number; they sell you the product that works best for them, they do exactly what you ask for, no more and no less. We are not like that, to us, our job is not to sell you a product, it’s to help you realise your dreams.

Why you should stay invested?

Not staying invested and reinvesting choices can greatly affect the earning potential of your long-term investment. Staying invested as the graph indicates above, the greater portion of the markets interest earnings was allocated to those investors who had stayed invested.

 

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What Investment blunders to watch out for?

A financial plan is a map of your wealth creation when you decide that it is time to consider investing. Compiled below are a few mistakes to look out for. If any of these sound familiar it could mean that you are heading in the wrong direction and that it is time to meet with a financial planner.

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How to make the most out of your dividends

Investing in a company could be quite lucrative, it is the practice where you can earn dividends that represent a distribution of corporate earnings to company shareholders and usually take place as cash or as stock.

If you hold a large portion of your Investment Portfolio in stocks, you will be unable to appreciate these capital gains until your shares are sold. However, if these stocks pay dividends, you will receive a cheque in the mail regularly for your share of the companies' profits.

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The poison of your Financial Position

A sound and happy financial situation depends on each person. There are many factors that influence this position such as, values, priorities and future goals. It depends on characteristics such as income, debt, net worth, savings, investment and lifestyle. A financial plan is in effect a composition of important financial decisions, making the right choices for your future financial position. Debt is the single biggest enemy of your financial freedom. It is a well-known fact that purchasing goods and services that could have been paid for with cash, on debt , costs you so much more than it would have if you had budgeted and saved towards it.

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7 Components of an Effective Financial Machine

A financial plan is the "engine" that drives your fortune and this machine is made up of various parts. A financial plan has a management component for income, expenses, debt reduction and savings and considers your short and long term goals while taking various risk factors into account.

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Personal-Finance Fancy cars and labels – do they make us happier?

We hear this often – your appearance makes you confident and happier, right? As such, many strive to make a statement with the cars they drive and the clothes they wear. We live in a materialistic world, where our identity and egos are defined by what we own, which car we drive and what clothing labels we wear.

There is an assumption that the fancier the car and the more expensive the label, the more sophisticated we look, and the more impressive the statement is that we make, the more confident we are. It is also assumed that the more sophisticated we look, the happier we become.

However, research has shown that if you were unhappy before you got your fancy car or your designer threads, your happiness will be short-lived after you get them because you’ll adapt to being flush after a couple of weeks and it will no longer be exciting or fulfilling.

What this means is that you need something else to make you happy. Think about it, you buy your designer dress today for an event, and the next time there is an event, you look through your closet and you feel like you have nothing to wear, so off you go to buy another one. If you were happier before you bought your fancy car or designer clothes, you will continue to be happy because you have an internal locus of control.

What you own does not define you, but your self-awareness, self-management and the prioritisation of happiness in your life does. It is meeting the unquenchable need to become more, be more and do more that is innate in all of us.

When you do not prioritise happiness and you measure your self-worth by how much money you have or what car you drive, you will constantly be met with changes that you cannot control and you will become unhappy.

Another interesting issue is that of affordability. Many people have overextended themselves by buying fancy cars and designer clothes on credit so they can feel happier, or so they can numb their negative emotions of insecurity, low self-esteem and negative self-image.

So, for example, let’s say you bought a fancy luxury car that you were unable to purchase cash. If your total monthly vehicle expenses, including the principal debt, interest and insurance, exceeds 10% of your gross income, you cannot afford the car and you are overstretching your finances. A car, being a depreciating asset, should not cost more than 10% of your gross earnings.

Many people are stuck in jobs that make them unhappy because they have a car that is costly to repay, which means they are stuck. Happiness is about overall well-being – it’s not about one fancy item or one area of our lives.

Another factor to consider is the process where someone exercises financial discipline, and works on building up their wealth first. Once they have enough interest-generating assets, they can afford to buy the luxury car and designer labels.

Most people, unfortunately, seek instant gratification – they want to enjoy now and pay later. Instant gratification is instant gain with long-term pain.

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How to take the dread out of retirement

RETIREMENT is a dreaded word in this country, where fewer than 10% of retirees are able to be financially independent at retirement. There are always so many pressing issues at hand that looking years and years ahead into how our finances will look at the age of 60 can seem distant and unimportant.

We all know how quickly time goes by and this period in your life creeps ever closer year by year; the critical factor is simple – the earlier you start, the better. Someone investing R500 a month at the age of 20, given an 8% growth per year and a retirement age of 60, could see their investment grow to over R1.7m in 40 years.

However, someone only starting to save for retirement at the age of 30 would need to invest R1 200 every month to get the same end result. The beauty of compound interest means the younger you start, the easier this whole process is going to be. The scary thing is that only about a quarter of individuals between the ages of 18 and 30 are saving for retirement.

Another thing that few take advantage of is the tax incentives that come with saving in a retirement fund (retirement annuity, provident fund and pension fund). These incentives allow for tax deductions on contributions up to 27.5% of an individual’s taxable income (capped at R350 000 per year).

This means that for an individual who is earning R200 000 per year, if they or their employer make contributions of R20 000 to their retirement fund during the course of the tax year, only R180 000 of their income is taxable. Based on the tax they have already paid during the year, they will get a rebate on the tax that the South African Revenue Service owes them, dependent on how much retirement savings they have made during the year.

Saving is difficult in general, especially in a country where household debt is around 80% of household income. We as a country need to become better at saving and drastically reduce our culture of spending more than we earn so that future generations do not fall into the same debt trap that many have today, making retirement saving a distant afterthought.

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