2021, we made it! 2020 has sure taught us a lot – and currently we are all hoping that 2021 will be different! The second waves of Covid 19 are still causing a lot of fear and uncertainty – globally, and without certainty about a vaccine – and the effectivity of it, our futures are still uncertain.
We all learned valuable lessons last year and reflection is key to making changes in the future. Here are 21 tips for you, your family, and your business to take on towards a successful 2021.
1. Schedule a meeting with your financial adviser to plan for the year ahead. Structuring the appropriate planning as well as goals from the start will ensure you protect your plans and bring peace of mind for the year to come.
2. Review your existing personal investment portfolio while considering these questions:
- Are you making provision for retirement?
- Are you optimising your annual tax benefits?
- Do you have an emergency fund in place?
- Do you have additional planning in place – for the next holiday perhaps?
- Are you aware of your fee structures, and the underlying funds you are invested in? Ensure these are suitable for your risk profile and personal goals.
- Is your portfolio sufficiently diversified to ensure a resilient portfolio?
- Another year passing means we are also entering new life stages – have you recently reviewed your will?
3. Once your portfolio is structured, the next step is to ensure you are saving sufficiently. You must save the correct component of your income to reach the required replacement ratio at retirement, and this needs to be reviewed annually. Not only adjusting for inflation, but also accounting for any increases in income.
4. Review your risk cover. Do you have sufficient cover in place to protect firstly yourself, and secondly your family should anything happen to you?
- You need sufficient life cover, income protection, disability cover and severe illness cover.
5. Review your family’s financial planning; (see below)
6. As well as the financial provision in your business.
- Does your co-shareholder have sufficient cover in place? Such as retirement savings, emergency funds and risk cover?
- Do you need to plan for your children’s education?
- If you are a business owner or a co-shareholder a business – are you covered? Death, disability and illness cover
- as well as provision for protecting your business overheads if something unplanned should happen.
7. Do you have an updated will in place? Does your will reflect your current wishes, and is the will executable? Our intentions are best kept, and legally sound when written down correctly.
8. Have you received advice whether you require a trust structured in your portfolio?
9. Have you met with a tax specialist to ensure your holistic portfolio is structured not only tax efficiently, but also ensuring your continuity planning is on track?
10. Do you currently have any debt in place, and if so, do you have a plan to pay it off (life covered structured to pay off debt), should something happen to you, while also keeping sufficient risk cover in place to replace your monthly income in the household?
11. Set up a budget for your family to ensure you are spending your income wisely. Hidden expenses creep up when we fail to plan, and debt can snowball. This also applies to setting your retirement goals – really understanding what your monthly needs are – this way you can plan to ensure you will be able to replace this income at retirement.
12. Medical aid – have you reviewed your plan? Do you know what you and your family are covered for?
13. Do you have GAP cover in place?
14. Are you making an effort to upskill yourself in the financial/investment world? This allows for more robust conversations with your adviser and the opportunity to educate your beneficiaries.
15. Do you have sufficient diversification in your portfolio in terms of asset classes? Ensure that you know what your portfolio looks like. Cash, bonds, property, local and global equity exposure can all be included in your portfolio depending on your risk profile and risk tolerance. Not all asset classes behave the same in market cycles. By ensuring your portfolio is appropriately diversified, you are protecting yourself optimally against volatility, unplanned events (just think about 2020), and market cycles, which need to be planned for.
16. Ensure you have sufficient offshore diversification in place too. Many South Africans are primarily invested in SA. Your income, property and most of your investment portfolio is invested locally – therefore ensuring you are diversified offshore appropriately is imperative.
17. Our local economy has taken a knock – even more so after prolonged lockdowns and retrenchments are unfortunately a reality. Do you have sufficient provision in place to ensure you can take care of yourself and your family commitments if you become retrenched? And are you upskilling yourself to ensure you will be in the best possible position for a new job offer?
18. Understand tax implications on withdrawals. Many investors penalise themselves greatly by making withdrawals on resignation, retrenchment, or retirement from their retirement funds at work – and losing large components of hard-earned money to tax.
Ensure you approach tax specialist to do a detailed tax calculation before considering any withdrawals. Preserving or reinvesting your funds on changing life events will always be advised. Speak to your adviser before making any decisions.
19. Protecting yourself against unwanted tax implications in your portfolio is beneficial and imperative. Different investment vehicles have different potential tax implications, ranging from income tax to capital gains tax. There are many different tables available comparing different investment products, and their tax treatments, so ensure you are aware of these by speaking to a financial advisor, as well as a tax advisor if needed.
20. Offshore allowances – if you are making use of your annual offshore allowances, be aware that every transaction adds to this.
21. It’s not always easy to ensure your investment portfolio and risk portfolio are set up comprehensively. Some of the aspects you are planning for might never happen, but life remains unpredictable and economic or health-related issues could arise. Sufficient planning will make the mountains of life much easier to scale.
May you have a safe and successful, healthy and happy 2021!