Every new year comes with a fresh set of resolutions. Often these are left by the wayside before January is over. When it comes to finances, it’s a common joke that January is the longest month of the year, with the time between pay cheques stretching from around December 15 to January 25 and straddling the ‘silly’ season.
But what if you tackled it differently? Just as getting physically fit requires discipline and time, you can also get your finances into shape by implementing a year planner. Here’s how:
This is the month when you plan, plan, plan. If you haven’t already sorted out school fees, find out about the upfront discount you qualify for when you pay fees upfront for the year. This discount actually works out to a worthwhile saving.
Discounts will vary between schools and range between 2.5% to 7%. Some schools also offer a sibling discount where you receive a discount on your second child’s school fees. Should you decide that you would rather make regular, monthly payments, factor this into your budget and make payment arrangements with the school. Take into account expenses such as stationery, computer equipment, extramural activities, uniforms and sports attire.
The shortest month of the year, this is also a month dreaded by some as it is tax season. Maximise your tax breaks by topping up your retirement annuity. Ask a financial planner or a tax consultant to help you do your tax return so that you don’t end up paying more tax than necessary. If you use a car for business purposes, make a note of the mileage on February 29 (2020 is a leap year) and ensure that you have all your supporting documents in order. Sars requires you to keep your supporting documents for up to five years. Andre Basson of Brenthurst Wealth Management notes that you can contribute up to 27.5% of your annual taxable income in a retirement annuity, subject to a maximum tax deduction limit of R350 000 per annum.
Use this month to review your short-term and long-term insurance. Find out if you are insured for the correct values on your car and household insurance. When it comes to your car, find out if you are insured for retail value or market value. According to short-term insurer Santam, the retail value is the average price a car dealer would sell it for.
Insuring for retail value means you can replace your car with a similar make and model.
Market value is almost always lower than the retail value and takes into account a number of variables, including mileage, vehicle condition, service history and accident reports. If you were to sell your car privately, the market value would be the price that you could likely sell it for.
Take an inventory of your household contents and obtain valuations where required. Check this against the amount you are insured for. Some insurers will have a list of approved valuers you can use.
If you have lost a significant amount of weight or stopped smoking in the past year, let your long-term insurer know. This information is important so they can reassess your risk and possibly adjust your premium accordingly. You also need to reconsider your life assurance needs if you have had any major life changes such as having a child, getting married or divorced, or changing jobs.
A budget is not a static document but something that needs to be reviewed regularly. If you haven’t already done so, review your budget – check where your money is going and where you can cut expenses. Lebogang Gaoaketse, Communications, Social Media and PR Manager at WesBank, says it’s vital to take note of exactly how much money you have available and work out your budget accordingly. “This can help you draw up a watertight strategy for your finances that will carry you through the tough economic year ahead.” If you’re not sure where to start, Old Mutual has a budget template that you can adapt for your use.
Winter is coming. This is when you want to review your energy use before the electricity bills skyrocket. Investigate and weigh up the installation costs of a solar geyser against the potential savings. Eskom says that a family using 200 litres of water a day and a 150-litre geyser can save as much as 122kWh of energy per month, if they drop the thermostat temperature from 70ºC to 60ºC and keep the geyser off from 6am to 9pm (15 hours) each day. A simple change in habits can result in significant savings in this case.
The year is halfway through and it’s a good time to review how much money is left in your medical savings account. Schedule your health checks such as the optometrist and dentist.
If you have a self-funding gap, find out from your medical aid how much you’ll need to spend before you get past the threshold so that your medical aid will cover your costs – and build this into your budget if it’s not accounted for already.
Deon Kotze, head of Discovery Health Research and Developments, says that 65% of members with a self-funding gap deplete their medical savings before the year is out.
It’s savings month and a good time to review your savings plans. Are you on track to meet your savings goals and are you in the right products? Check how much you’re paying in fees: remember that a difference of just 0.5% can make a significant dent in your savings. Prem Govender, chairperson of the South African Savings Institute, says by July 2019 South Africa’s household saving rate had declined to -0.5% of gross domestic product, while our household debt as a percentage of disposable income was 71.9%, “meaning that for every rand earned, nearly three quarters is spent on debt.”
Women’s month. According to Statistics SA’s 2018 General Household Survey, women head almost four out of ten South African households (37.9%). Furthermore, studies show that women are paid at least 25% less than their male counterparts. Vumile Msweli, chief executive of Hesed Consulting, advises women to find out what the role pays before accepting a job. “You can do this by chatting to recruiters and male colleagues. Always ask for a dummy payslip to see if your take-home is in fact higher than your current earnings and use this as a base for your salary negotiations.”
If you’ve let your filing fall behind during the year, spring clean and get your documents in order. Most schools require a term’s notice if your child will be leaving. So, if you are planning on changing your child’s school in 2021, now is the time to give notice at their current school. If you fail to give proper notice, you might find yourself liable for a term of school fees that you would not otherwise have paid.
Medical schemes start putting out their annual increases for the following year around October and November. Review your plan to check that it is the most suitable plan for you and compare the benefits you receive to the premiums you’re required to pay. Most medical schemes will have consultants who can talk you through the different benefit options.
If you will be lucky enough to receive a bonus in 2020, this is the ideal time to plan how you’re going to spend it. The 13th Annual Holiday Shopping Survey from Accenture, released in October 2019, says there’s a growing trend where consumers are moving away from buying physical items, in favour of ‘experience’ or ‘service’ gifts, such as travel, concerts, lawn care, home cleaning and spa treatments. Lettie Mzwinila, specialist in strategic markets from Allan Gray, suggests you adapt this slightly and consider opening an investment, such as a unit trust or tax-free investment account, on behalf of someone you love. “Starting a unit trust or a tax-free investment can cost as little as R500 per month and adds up to an investment of R6 000 over a year.”
The month when common sense tends to go out the window. FNB chief executive Jacques Cilliers cautions against taking on debt to cover the cost of purchases such as food and travel. “Credit or loans should be used in a way that balances the cost of long-term gains with day-to-day living expenses,” he says. Cilliers advises using an additional income such as a bonus, towards building a small buffer in your budget to supplement new year expenses such as school fees in January.
“People travelling during the holidays should make every use of rewards programmes and purchase fuel or discounted airline tickets with those programmes. Taking a careful approach to spending has become increasingly important in the current climate of a subdued economy.”