Author: Gugu Sidaki

March 4, 2019 Blog, Financial Advisory

For better or worse: The financial impact of divorce (part 1)

I know very few people who enter into holy matrimony with the view to get divorced. Marriage is often entered into with a positive outlook and big dreams for the future with hardly any consideration of the potential for things going pear-shaped. The reality is that divorce is more prevalent than ever before, not just in South Africa but internationally too.

According to Stats SA, 44,4% of the divorces registered in 2016, were of marriages that lasted less than 10 years. 31,7% of the black African group, 25,4% of coloureds, 25,0% of whites and 22,4% of Indian/Asian couples who divorced had marriages that lasted between five and nine years.

Because of this, you have to get into marriage, not only with rose tinted glasses, but also with a plan that will leave both parties financially stable, in the event of a split. Not terribly romantic but realistic and absolutely vital.

I met a really interesting young lady recently who got divorced in 2018. Bontle, a 38-year-old woman from Soweto, spoke to me candidly about her experience and its effects on her finances. She has agreed to share some of her learnings and reflections about her finances pre ,during and post her marriage over the next few weeks, in the hopes that it will help many women like her juggling money and life.

Her background is similar many of ours – she’s the first of three girls in her family with two very hard-working parents who did the best they could under very difficult circumstances. Her mom, like many black mothers, was part of a stokvel where she diligently saved money throughout the year for home improvements and other luxuries over the December festive period. Her dad worked his way up in financial services where he learned about saving and investing and managed to build a comfortable nest egg for their retirement. Ironically, with all this information they had, neither of her parents ever discussed money openly with Bontle and her sisters.

This is our story.

February 25, 2019 Blog, Financial Advisory

When the tax is black

Our country’s history of segregation and economic exclusion has led us to this point. Many young people who now have tertiary education and the many who have moved out of the homes and townships they grew up in are usually the first to do so in their families. This comes with a lot of pressure and expectation to support and assist their siblings, ageing parents and often, extended families as well. This, and quite obviously so, comes at a great price and has often meant that individuals end up living way above their means and seldom have any funds left for saving and investing.

When black tax is spoken of, it is almost always in a negative light and it seems to me that our conversations around it don’t seem to progress beyond the financial burden it places on the provider. The reality is that a bulk of the country’s population is living below the poverty line and the vast majority of those people are black. That means, invariably, that black tax is here to stay. At least for the foreseeable future.

I think we need to try to elevate our conversations about family support beyond the cash contributions. Conversations need to be had about the benefits of personal financial management, regardless of the quantum in question. There is almost always a more optimal way to allocate money and maybe it’s time we recognised that we need help and for us to seek the services of a professional. Preferably, someone who understands the nuances and complexities of being upwardly mobile while black. I think we need financial literacy programmes specifically designed for families in these situations. Parents, siblings, children and extended families all need to be in the same room together and for money to be spoken of and how it affects every single individual. There needs to be an understanding that the provider has finite resources and that the recipients also need to be conscientious about their demands and spending habits.

It need not be a burdensome task. Giving back and helping those less fortunate than yourself should be celebrated and encouraged. Because at the end of the day, when one person succeeds, we all do.

February 18, 2019 Blog, Financial Advisory, Investments, Retirement

A new way

In our culture, when a woman gets married, she gets called into a room by aunts and other older female relatives and gets given the ‘lay of the land’. She’s taught never to question her husband about his whereabouts, to dress modestly when in the company of her in-laws, never to nag etc. I know this because I went through a similar process myself. It’s done in good faith and intended to help you navigate the complexities that come with being married and to ensure that you stay married. I suppose it was also a means for survival since men earned the money while women stayed home and tended to children.

I often try to picture how different life would be for many young women if they’d received financial advice, even the most elementary kind, in their teens and leading up to marriage. I imagine the aunts telling a young bride-to-be to open an investment account and for her to add to this money as often as she could. I picture the stern faces and hushed voices telling her to budget and for her to live within her means. And finally, and most importantly, if she ever decides to have children, she is to teach them everything she knows about healthy financial habits, as soon as they are able to grasp the concepts.

Unfortunately, we don’t talk about money. Not in the way that we should. We need to make it a habit to talk about money in a constructive way with our children and extended families (since many are either living with or supporting extended family). We need to talk about how to be responsible with money and how to grow and keep it, not just for us, but for others as well. It is possible to work towards changing the status quo for the next generation and I strongly believe that with a little guidance, we can make generational wealth a reality.

February 11, 2019 Blog, Financial Advisory, Investments, Retirement

A whole new world (Part 2)

My mother retired too early, the first time around. She also didn’t have a clear plan for her retirement. I remember sitting in a meeting a few years ago and getting 3 missed calls in a row from her on my mobile. I thought something was terribly wrong so I rung her back in a panic, thinking something was wrong. To my horror, all she wanted was to confirm if my brother and I were joining her for Sunday lunch (it was Tuesday when she called!). This carried on for a while until we had a chat with her about it because, besides it being incredibly hilarious, it was a little frustrating for her and us. She had time and didn’t know what to do with it. All she knew is that she didn’t want to work anymore.

She went back to work a couple of years later and she’s now had a 2nd bite at the retirement cherry. This time around, her calendar is full which is fantastic. She has a schedule and a clear plan for how she spends her time. I credit my brother and I for this.

A major part of a successful retirement planning journey is having an accountability partner. Someone who will tell you when you stray too far from your intended path. We all have blind spots and simply don’t know what we don’t know. Your financial accountability partner must be someone who understands the world of finance and knows the sacrifices that must be made and changes that are required for your financial success.

The Stanford Centre on Longevity sites the following as pitfalls surrounding retirement planning:

  • Failing to plan
  • Underestimating expenses
  • Underestimating years in retirement
  • Retiring too early
  • Failing to save enough

It is clear that there are many variables to consider when planning for a comfortable retirement that you simply cannot leave it to chance (or Google). A lot of the issues mentioned above require expert advice. A specialist in the industry. With a trustworthy, experienced advisor, you can navigate your way through it all with a certain level of assurance

 

February 4, 2019 Blog, Retirement

A whole new world

My mother turned 65 last month and jogs, does yoga and seems to be enjoying life now more than ever before. One of her cousins is in her late 70’s and is equally busy and looks great. She’s also still lucky enough to have her mother around who is a healthy, sparkly 90-something year old! Nothing about these women says they are slowing down anytime soon and it’s a marvel to watch. I can only hope to age like that and to enjoy my retirement in a similar way.

While it is still up for debate, the general consensus is that the global population is expected to live longer. In preparation for this, we at Wealth Creed, now assume that the average client will live to age 100 and we take this into account when we do our retirement planning for all our clients. If we assume that a client starts working at age 25 and they retire at 65, it means they spend an equal amount of time in retirement as they do in the workplace. The question then becomes, will the money saved up be sufficient? Should clients retire at 65 and look after grandchildren until mortality? Does that picture change with an increased probability of them living to see 100 years?

Recent research has also suggested that, while people are living longer, many are living with and dying from non-communicable diseases such as diabetes, heart disease, cancer and mental illness.

Your financial plan needs to accommodate the possibility of all of the above, whether they come to fruition or not. It also needs to encompass how you plan to live out your latter years. A few examples of this are listed below:

  • Frail care (do you see yourself in a home or would you prefer to be looked after in the comfort of your own home? What is the cost of either option?)
  • Income sufficiency (will you have sufficient income in your latter years to maintain your current standard of living?)
  • A living will (what happens when you are no longer in the right state of mind to manage your affairs?)

It’s a tough discussion but one that must be had, whether you’re the one planning to retire or have a loved one in that position.

January 21, 2019 Blog, Investments, Retirement

3 financial lessons learned from my toddlers

The holidays were brutal. I spent a solid 6 weeks with 2 very energetic toddlers and got very little rest. It was a little painful.

In any event, spending all that time with them reminded me of a few things that children do that can be applied to your finances, and life in general.

Be selfish

My children are born 2 years apart and fight constantly. Their biggest issue is having to share things –  toys, treats and mommy’s lap. Unfortunately (and I say this with a lot of guilt), the holidays were rough so the one with the loudest shriek and most animated tantrum at that particular time won.

Imagine, for one second, that you treated saving and investing in the same manner – you became selfish about it. Regardless of what was going on in your life, regardless of how much you wanted to splurge on a frivolous item, you prioritized saving/investing first.

Keep it simple

Have you noticed how simple children can be. Their lives are overcomplicated because of us! For example, all the fancy food that I buy and cook is wasted on them. All my children want are 2 minute noodles, plain spaghetti (yes, plain), plain baguette (the toppings are for my amusement), and pap with milk (imagine that!).

Managing your finances requires much of the same – don’t overcomplicate things. Keep your financial plan as simple as possible. There’s a higher probability of success that way

Do it now

I have learned never to tell my children in advance about anything fun that I want to do with them. If I plan to take them to the zoo over the weekend, I need only give them a few hours’ notice, otherwise I’ll never hear the end of it. The question is always – but why can’t we go now?? The same with ice cream, sweets and playdates. Why can’t it happen now?

Imagine if you stopped procrastinating and actually got things done now. Imagine if you stopped all your unhealthy financial habits now. How amazing would things be if, in your twenties, you decided to take out that RA and committed to saving funds for your retirement? The earlier you start, the less painful your financial journey will be.

January 14, 2019 Blog, Financial Advisory, Investments, Retirement

Your financial journey

There are many people who profess to have the remedy for poverty, low cash flow etc. You see them all the time on social media platforms claiming to have the key to your financial future. They flash their fancy cars and expensive homes and want you to join them on this crusade.

Having been in this industry for over a decade, what I can tell you for sure is this:

  • There is no quick-fix, no matter what anyone tells you
  • There is no magic formula to get you a million dollars in 6 months
  • No trading software is going to make you rich overnight (those who make this claim are highly irresponsible)
  • Depositing large sums of money into some scheme and recruiting 10 of your friends is also not the answer

The misconception people have regarding financial advisory is that we teach people how to make money. No. That you learn through your vocation, studies and sometimes through your hobbies.

There are three very important things that we do for our clients:

  • We help them to identify the amount that must be accumulated over time in order maintain a particular standard of living
  • We show them how to protect what they have amassed by helping them make wise financial decisions and to maintain healthy financial habits
  • We assist them with investments that will grow what they have amassed at a pace that makes financial sense

To get from where you are now to where you want to be financially is actually not exciting at all. It is a long and arduous process and the journey could take you an entire lifetime (unless you marry rich, inherit millions or win the lotto!). It is a journey that requires discipline, commitment and a long-term view.

The rest is noise.

January 7, 2019 Blog, Uncategorized

New beginnings

You made it to the new year. Congratulations!

We’d like to get you started in the new year with a new financial goal, inspired by one of the greatest investors of our time, Warren Buffet.

“The most important investment you can make is in yourself.”

― Warren Buffett

This not only relates to your financial wellbeing but all aspects of your life. While you’re busy making new year’s resolutions, please think about the most important factor in your planning – you.

You have to choose yourself daily, if you are to make a success of this life, however you may define it. Choosing yourself means prioritizing peace in your life over unhealthy family relations or friendships. It means choosing healthy financial habits as much as possible over keeping up with the Jones’.

As financial advisors, we recommend adding the following to your resolutions (if that is your thing):

  • Physical and mental health

Without health, you will have great difficulty pursuing your goals and enjoying the fruits of your labour. It’s beyond going to the gym and eating well.

  • Self-development

Learning a new language or getting another degree is great and could be the change you need. But, sometimes the change you need in your life is internal. A change in attitude, practicing gratitude and being less entitled may make a world of difference. Being honest about who and what you are is the first step towards self-discovery and self-development.

  • Pay yourself first

Route money towards a savings/investment product before your monthly living expenses and other discretionary purchases. This method ensures that you continue making your chosen savings contributions monthly and removes the temptation to overspend unnecessarily. 

Have a good week!

December 10, 2018 Blog, Uncategorized

Happy Holidays

Should you have to time read during the upcoming holidays, here’s a reading list that’s highly recommended. This comes from Sam Parr of the Hustle. He recommended this list in 2015 and according to him, you’ll know more than 99% of MBA graduates once you’ve gone through these books. I’ve read Mastery and 48 Laws of Power so far. Both great reads.

 

“Titan: The life of John D. Rockefeller, Sr.” by Ron Chernow – A must read for anyone interested in business “The 48 Laws of Power” by Robert Greene – Strategy: How to navigate the corporate world
“Influence: The Psychology of Persuasion” by Robert B. Cialdini – Sales: Getting people to buy what you’re selling “Letters to Berkshire Hathaway Shareholders” by Warren Buffett – Communication: You need to know how to talk good
“Confessions of an Advertising Man” by David Ogilvy – How to make things look sexy “Team of Rivals: The Political Genius of Abraham Lincoln” by Doris Kearns Goodwin – Organizational Theory: Learn from America’s greatest president
“The Intelligent Investor” by Benjamin Graham – Finance: Written by Warren Buffett’s mentor “The Wealth of Nations” by Adam Smith – Economics: Dull but necessary
“The Adweek Copywriting Handbook” by Joseph Sugarman – Copywriting: The most underrated skill in business “How to Win Friends and Influence People” by Dale Carnegie – Networking: One of the best-selling books of all time
“Mastery” by Robert Greene – Self-development: Often ignored but most important

 

 

The Wealth Creed team wishes you and yours a peaceful, enjoyable and safe festive season.

We’ll resume our weekly newsletter in the new year.

 

Happy holidays!

December 3, 2018 Blog, Financial Advisory, Investments, Retirement

‘Tis the season…

The tinsel is strewn and the Christmas lights are up EVERYWHERE. The holidays are fast approaching and expectations are running quite high with children and what gifts they’ll be getting.

There is nothing better than giving presents to children. The excitement and shear joy they experience with gifts is quite special. But, if your household is anything like mine, they already have more than enough.

If you are brave, and are willing to face the tears and heartache, consider not buying them gifts this year. Or rather, consider gifts of a different kind. How about an investment voucher? We’ll call it the i-voucher. You really can go to town with this one. Type and print it out and present it to them in exactly the same way you’d present a gift card – in a little envelope or small gift box tied with a ribbon. Here comes the hard part. You have to explain to them what it is and why you’re giving them this i-voucher instead of the latest X-box or Barbie doll.

Our responsibility to our children is the provision of a roof over their heads, food, education, a safe and loving home environment etc. It’s also really ok to spoil them occasionally but if you really want to prepare them for the future, teach them healthy money habits. Now is the best time to start.

For younger children (below the age of 7), perhaps a piggy bank would work better. At this age, they need a visual representation of money. Let them know that the money you give them now over the holidays is a gift. Beyond this point, consider getting them to earn it, no matter how trivial the chores may seem. They need to learn about the relationship between effort and financial reward especially during the holidays when they have more idle time. For older children, the i-voucher could work very well.

There are three important points you need to try and get across to them with this exercise.

  • They need money to be invested for the future
    • Help them dream and write down all the things they’d like to get when they are older – travel, property, a car etc.
    • Open an investment account in their name and track the performance with them. Show them how their money is growing over time and how satisfying it will be when they eventually get to spend it.
    • Delayed gratification is all about discipline – a super important lesson to teach children (and adults!)
  • They need money to spend on items they really want in the short term – ice cream, toys, movie tickets or even that X-box.
  • They need money to share with others (be it siblings, friends or people less fortunate than them.
    • This you’ll have to enforce and explain the importance of giving