20 money resolutions to take into 2020

It may be a bumpy year ahead – best review your finances now.
From investing decisions to long-term and short-term insurance - a list on handling your finances in 2020. Image: Shutterstock

As we head into a new decade, fraught with economic uncertainty and with the country on the brink of a recession, it could well be time to review your money habits. We rounded up the ideal money resolutions to ensure you start this decade off on the right financial foot.

Investing

1.Diversify your portfolio

South Africa’s equity market capitalisation equates to more than 200% of the country’s gross domestic product (GDP), the highest proportion in the world and a level that is simply not sustainable.

Economist, Kevin Lings of Stanlib, says in a low-growth economy, it’s high time that you start expanding your investment universe beyond equities.  He recommends geographic diversification, citing the fact that South Africa accounts for just 0.4% of global GDP.

 2.Incorporate non-traditional assets

Continuing the diversification theme, Craig Gradidge, executive director of Gradidge-Mahura Investments, recommends non-traditional assets such as hedge funds, Section 12J investments, structured products, broad-based black economic empowerment (B-BBEE shares), and private equity. “South Africans tend to be overexposed to unit trusts, endowments, retirement annuities and bank deposits,” he says.

3.Use your personal balance sheet as a frame of reference

Gradidge notes that too often, investors tend to assess their investment options in isolation. “Ultimately any investment should strengthen your personal balance sheet. A strong and well-constructed balance sheet is what carries you through changing market and economic cycles,” he advises.

4.Increase your contributions

Set up a debit order for your investments if you have not done so already and increase the contributions you are making. It doesn’t have to be a large amount: R50 a month amounts to an additional R600 contribution for the year.

5.Step back from the noise

As we head into a tumultuous period with low growth and a recessionary environment, you may find yourself daunted by the plethora of bad news. Resolve to be firm in your investment strategy, to ignore the noise and to remain committed to your long-term financial plan.

Long-term insurance

6.Revisit loadings. If you had a loading or an increased premium on your policy as a result of health conditions or dangerous pursuits, you can approach your insurer to reconsider the premium if your health has improved significantly or you no longer take part in a dangerous activity such as skydiving.

7.Quit smoking. Premiums for smokers can be significantly more expensive. If you quit smoking, insurers will often reduce your life insurance premium (after you have been smoke-free for about six months). Note that insurers are also starting to reassess the health risks around vaping.

8.Update your will. Make sure your will has been updated in line with any major life changes, such as having a baby or getting divorced. Also check that all the requirements have been met so that it can be recognised as a valid will.

9.Organise your documents. Get all your filing up to date and put all the important documents – such as your life insurance policy and will – in one place. Let a trusted family member or friend know where these documents are in case of emergency.

10.Read through your policies. Check the fine print on your life insurance policies and ask a financial planner to explain anything you don’t understand. In particular, find out what is excluded on the policy and why, so you can take steps to improve your cover before claims stage.

 Short-term insurance

11.Check the value of your insured household contents to ensure that you are insured for the correct amount. Bertus Visser, chief executive of distribution at PSG Insure, says your insurer will only pay out a claim proportionately to the sum insured, and if you have underestimated the value of your household contents, it can be a costly mistake. “If for example, you have R100 000 in contents cover but the real value of your goods is R200 000, your insurer is likely to only pay out R50 000, because you’re 50% underinsured,” he warns.

12.Update your insurer. Notify your insurer before starting with any renovations to your property as this can affect your cover. If a wall comes crashing down or there is theft of your home contents, there is a good chance of your insurer rejecting a claim because you did not inform it of a change in the risk.

13.Pay an annual premium. If you have access to a windfall, find out about paying an annual premium for your short-term insurance. You may receive a slight discount on the premium and it frees up money in your monthly budget.

14.Consolidate your insurance. There are often savings available through having all your valuable assets covered with one insurer rather than many. Having car, household and building insurance with the same insurer typically results in a lower total premium.

15.Increase your security. Your car, home or building insurance premium is calculated based on your risk profile. For example, you could reduce your car insurance premium if you’ve fitted your car with additional safety features such as a tracking device or an alarm.

Household finances

16.Avoid personal debt. While the festive season does tend to draw people into purchases they often can’t afford – do your best to avoid getting into more debt. Hardi Swart, director of Autus Private Clients and Financial Planner of the Year 2019, says he often warns clients about the dark side of compound interest.

“While compound interest works heavily in your favour when you’re investing, it works just as hard against you if you don’t pay off your credit card every month. The interest is added to the balance of your debt, which means that you pay interest on your interest charges as well as on the loan itself.”

17.Budget, budget, budget. Swart says a budget does not constrain you, but helps you prioritise your investing and spending patterns. “The budgeting exercise will teach you the true worth of money and is one of the most powerful tools for long-term wealth creation.”

18.Use your tax breaks. When you commit to saving and investing, it makes sense to make optimal use of the tax breaks available to you. For example, your contributions towards retirement funds such as retirement annuities, provident- and pension funds are tax-deductible. Swart notes that this effectively lowers your tax rate, freeing up more money for you to invest. “Also, the growth within your retirement funds is not taxed, which speeds up the growth of these investments,” he notes.

One can also take advantage of tax-free savings accounts. The limit on these is R33 000 a year and R500 000 in your lifetime.

19.Don’t over-invest in your home. “This should be regarded as a lifestyle asset, rather than an investment. Although the return on residential property generally keeps up with inflation, the cost of maintaining a home effectively reduces the growth rate. If you over-invest in a residential property, you run the opportunity cost of not being invested in more equity, which outperforms property by far in the long-term,” Swart advises.

20.Invest in your family. Prioritise special family experiences over excessive partying. Time is the most valuable commodity and a gift that you can give anyone. “Why limit your gifts to expensive items that will lose value over time – open a tax-free savings account for your child or top up your spouse’s retirement annuity – with some flowers on the side.” Swart concludes.

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Most important: get as much of your money offshore, because the JSE has become uninvestable.

Nothing happens on the JSE with the exception of Gold, Platinum, Palladium and Iron ore stocks.

All very valid points.

Think of the following when you “revisit” the insurance on householders content.

How often do you hear of a thief caught for stealing a lounge suite or a king size bed. Curtains or double door fridge? etc.etc.

Nowadays they mostly steal small electronics.

You pay a premium on the whole value including items that never gets stolen. They include replacement values of all these items when they decide how much to pay you out for the Cellphone stolen. You will most probably not be in a position to replace the phone again with the same.

Then ask yourself why do you just keep paying and the insurers laugh all the way to the bank. Have a look at Douw Steyn’s new Rolls. You paid for it.

Short term insurance is more hassle than it is worth.

Totally agree, Speculator. I live in a complex, nothing fancy, just electric gate and electric fence. 20 years ago, I cancelled my householders insurance. To date, I have saved well over a million rands. And I have a reserve fund of about R75K to cover emergencies. When they calculate your householders insurance they include things like books and furniture which are virtually never stolen. A real con. Just insure for Fire and Flood and save the rest.

“Financial Journalists” need to get up to speed with the 21st century! Repetitive advice on 20th century archaic financial products does not cut it anymore.

AI, robotics, blockchain, crypto, autonomous vehicles, instant cross-border payments in gold, privacy security etc. have revolutionised the investment landscape;

Where is the research on these and ICOs (not IPOs), Venture Capital, Online Affiliation Businesses and the like that anyone can invest in.

How about researching how communities can co-insure & save through the blockchain instead of through the mega-profit corporates…both long-term and short-term?

The list goes on…people should do some homework instead of relying on advice that is based predominantly on 20th century garbage.

I appreciated the article. Some very good advice for a 73 year old pensioner who has lost all faith in financial institutions.

Bitcoin has been named the best performing asset of the last ten years. My 2020 resolution is to dollar cost average again, and buy small amounts every month going forward.

Haha – Ok now I know – Magnus has now also become a untouchable?

Yes, I know I must be very careful with regard to any criticism of Magnus (funny how he now seems to have obtained free publicity from Biznews!)
Using the news or business press to carry positive stories about your company or your products and your views and cultivating a good relationship with local press representatives, should be one’s aim. On negative views and stories, the story is always in the telling!
Problem is Ryk, sensation is selling stories in the mainstream media. ‘’Die Huisgenoot’’ must be the best example.
Yes, you are under obligation to sensor all ‘’free comments and articles’’ that you receive daily from your readers/listeners. I thought the two articles that I wrote would be ‘’canned’’, and maybe rightly so.
You have now drawn a ‘’line in the sand’’ with regards to criticism on an article that I feel Magnus really slated this country and certain people – that’s my view.
The problem that now arose from this is that I feel he has become an ‘’untouchable’’ and nobody can ‘’air their views’’ – Ryk, tell us what we can do and say if we don’t agree, please!
If this article is also too ‘’personal’’ and gets binned as well – then so be it – if not – well done and a happy new year!

This article is for the 7 %

End of comments.

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