Category: Retirement

August 12, 2019 Blog, Financial Advisory, Investments, Lifestyle, Retirement

Financial implication of relationships on women

Women do not accumulate sufficient funds in their retirement as men do and one of the factors affecting this is relationships.

Motherhood

If a woman chooses to have children during her lifetime, this has been seen to negatively impact the growth of future earnings. We already know about the gender pay gap but what is even more worrying are the findings in a study conducted by Joya Misra, Professor of Sociology & Public Policy, University of Massachusetts Amhers with the assistance of two economist.  In this study, they found that not only was there a gender pay gap, but that there was a further disparity between incomes of women with and women without children, despite their education and experience levels. This is the motherhood wage gap.

Single parenthood

The Investments and Wealth Institute released a report titled ‘Women and Retirement Security’ where they found that 80% of single parent families in the United States were headed. In South Africa, 61.7% of births registered last year were missing the father’s details. It could then possibly be that most of those women would be raising their children alone. This naturally has major financial implications.

Women are more likely to be caregivers.

The same report from the Investment and Wealth Institute found that women are more likely than men to be caregivers and less likely to have a family caregiver themselves. This affects wealth accumulation over time.

With this information at hand, it becomes imperative for women to prioritize their finances long before, and during, the effects of motherhood and the various other stages of their relationships. If women were able to anticipate these life stages well in advance and to plan for them effectively, we just may tip the scales in their favour regarding their finances.

August 5, 2019 Blog, Financial Advisory, Retirement

Women’s month

I always have mixed feelings about celebrating Women’s Month in South Africa. We’ve made great strides but also seem to be falling behind on too many important issues.

In the financial planning space, it has become very clear that more work needs to be done to assist women with making better financial decisions. There are many issues to be highlighted but we’ll be addressing just four of them this women’s month.

The most obvious one of them all is income. A recent PWC report found that women are consistently paid less than their male counterparts across all industries in this country. There is not a single industry where women out-earn men. Lower education levels in women used to be cited as one of the main drivers but more data is proving this argument to be false.  

The World Economic Forum’s Global Gender Gap Report benchmarks 149 countries on their progress towards gender parity and the drivers of it. The Education Attainment Gap (Percentage of the population aged 15 and over with the ability to both read and write and make simple arithmetic calculations) globally is now at an average of 5%.  According to this report, ‘Thirty-six countries have now achieved full parity and another 49 countries have closed at least 99% of the gap in education. Even the worst performer (Chad) is more than halfway to parity (57%), while the second- and third-worst performers (Guinea and Congo) have bridged two thirds of the gap.’

A snapshot of South Africa’s current gender parity:

  • There are more women than men who are enrolled at tertiary institutions
  • There are more female professional and technical workers than there are men
  • Labour force participation is almost at parity and men occupy most of the senior positions

The gaps in education between genders is almost closed. In many instances, women are becoming more educated than men, yet are still being paid less. South Africa, ranked 19th overall, is said to have made some progress on the Political Empowerment sub index but has seen a decline in wage equality. (Wage equality between women and men for similar work). This speaks to an unwillingness for gender pay gap redress. That is why financial planning, for women in particular, is so crucial if we are to have any hopes of living and retiring securely.

July 22, 2019 Blog, Retirement

Joie de vivre

Are you happy? Do you possess feelings of great pleasure? This is joy.

Apparently, the amount of joy one feels improves with age. A study conducted by Comfort Keepers, a senior care specialist company in California, found that people above the age of 60 years possessed the most amounts of joy. Many of the individuals surveyed cited the following as their sources of joy and happiness, in order of priority:

  • Family
  • Love
  • Music
  • Wife
  • Food
  • Friends
  • Children
  • Dog
  • Grandchildren

Robin Seaton Jefferson summarized these findings in her contribution to Forbes magazine three weeks ago in her article titled Good News, America. Survey Says We Get More Joyful As We Age. I urge you to read it and to read the joyful activity results per state, by Comfort Keepers.

It just may help you refocus your energies onto more important things in life.

May 13, 2019 Blog, Financial Advisory, Financial literacy, Investments, Retirement

Home ownership versus your ability to accumulate wealth

Owning your own home, whether it’s a bachelor pad or five-bedroomed mansion, is a deeply personal and emotional attachment we have to a space that transcends rationality. It is bigger and more important than just being about bricks and mortar. For many, home represents a great sense of achievement, independence, protection, love, a refuge and so many other intangibles. In South Africa, the vast majority of the population was restricted from owning their homes and from living in certain areas due to their skin colour. As such, it seen as a sign of progression and pride when one is a home owner.

That is why it is so difficult to contain the subject of home ownership within the confinements of money and affordability. That being said, the financial aspect of home-ownership is just as important as all other variables. In fact, how much you commit towards your home (be it in monthly mortgage installments or the full price tag) can seriously hinder your ability to accumulate wealth over time. Sarah Stanley Fallaw, the director of research for the Affluent Market Institute and co-author of “The Next Millionaire Next Door: Enduring Strategies for Building Wealth”, found that some of the richest people in the world spent a very small portion of their wealth on their homes.

Here are three important things to consider regarding the expenditure on your home:n

  • No more than 50% of our income should be spent on your needs (this includes your living expenses)
  • You should not be spending more than 30% of your income on living expenses (this includes levies, rates and taxes, monthly mortgage repayments and maintenance of your property)
  • The value of your home should not be more than 3 times your annual salary

Sticking to these guidelines will undoubtedly have an impact on where you live and the type of home you are able to buy. For many, these are non-negotiables and that’s what makes this subject so difficult –  you are having to confront the fact that your dream home could be getting in the way of your ability to accumulate sufficient wealth in other vehicles over time.

May 6, 2019 Blog, Financial Advisory, Financial literacy, Investments, Retirement

Winter is here

It has become evident that burning excess energy unnecessarily is a no-no (in my world anyway). I’ve hung up my running shoes and have given my gym ensembles a break for now because winter is here. And yes, I am well aware that summer bodies are made in winter ????

I’m looking to buy a few good books over the next couple of weeks to keep me occupied while sitting snuggly near the heater. And I’m also waiting with bated breath every week to catch up on the latest episode of Game of Thrones. You see, in my household, once the children are asleep the dragons come alive!

Yes, it is pure fiction and adults really have no business getting excited about fire-breathing dragons, but I feel that it contains many valuable lessons. For those who don’t care much for the show, I promise not to bore with all the gory detail (maybe one or two more articles about this topic in the future and I’ll stop!) but would like to leave you with one of my favourite quotes from one of the most cunning of characters, Lord Petyr Bailesh.

“Don’t fight in the north or the south. Fight every battle, everywhere, always, in your mind. Everyone is your enemy, everyone is your friend, every possible series of events is happening, all at once. Live that way, and nothing will surprise you. Everything that happens will be something that you’ve seen before”

I try to apply to this to my life in general but to my finances in particular. Here are my top 3 lessons:

  • Don’t choose your battles when it comes to your finances. Fight all of them! Unfortunately, very few people have the luxury of choosing one investment strategy over another. You must consider all of them if you are to reach your financial goals. You need an emergency fund for rainy days (short term). You need retirement savings for your latter years (long term). Life happens in between the short-term emergencies and the long-term planning so you need to consider how to account for that as well. And that’s just scratching the surface.
  • Plan for the divorce right at the beginning, because life happens. A friend today could be a foe tomorrow, so you must structure your life and your finances in a way that all parties to the union are taken care of. A one-sided union is bound to be a disaster in the future. This applies whether you’re a spouse, business partner or an employer/employee.
  • Play out every possible scenario in your mind and plan for each one accordingly. A considered and predictable outcome, whatever it may be, is the best outcome because you will have a plan for it. What would you do, if you reached your financial day-zero today? Do you have a plan B? How will you execute this alternative plan? If your life turned out well, what would it look like? How will you manage your finances then?

It sounds tedious but necessary if you are to triumph over the many disappointments that life will throw at you.

April 1, 2019 Blog, Financial Advisory, Investments, Retirement

A grim picture

In simple terms, financial literacy is the ability to make sound decisions regarding saving, borrowing and investing. It is the basic comprehension of the principles of personal financial management.

April is world financial literacy month and a time to highlight and reflect on the importance of financial education and its effects on the citizenry as it is widely accepted as one of the biggest contributors to the inequality gap. The less an individual knows about the basic principles of personal financial management, the less likely they are to budget and save, and the higher the likelihood of unnecessary debt accumulation.

There are three questions created by Director Annamaria Lusardi and Professor Olivia S. Mitchell of the Global Financial Literacy Excellence Centre, which have been used in more than 20 countries to measure financial literacy levels. They test the comprehension of compound growth, real returns and diversification. Their studies have found that there are low levels of financial literacy in both developed and developing countries globally.

The key findings in the Standard & Poor’s Global Financial Literacy Survey were most startling. They surveyed more than 150,000 individuals from various countries around the globe using the three questions developed by Director Lusardi and Professor Mitchell to compile this report. Denmark and Norway ranked tops with a 71% adult financial literacy rate respectively. Surprisingly, the US, a leader in economic growth ranked 14th in the world with only 57% of their adult population being financially literate.

The situation is much worse in South Africa. Only 42% of the South African adult population are financially literate. The latest Momentum/Unisa Consumer Financial Vulnerability Index found that most consumers don’t budget, live beyond their means, have no self-control with spending and new debt and don’t consider risks when taking on more credit. These are all symptoms of a lack of knowledge regarding personal financial management. To make matters worse, the deteriorating economic conditions in our country will undoubtedly have a more pronounced effect on such consumers.

It is, therefore, more important than ever before for individuals to have honest conversations about money and to seek the counsel of experts in the field to guide them along the way. If you cannot afford the services of an advisor, look for free tools online and for institutions that offer free material. The Financial Planning Institute is a great place to start.

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.