You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

NEW SENS search and JSE share prices

More about the app

A financial strategy allows us to live well and end well

One of the immediate benefits of creating a long-term financial strategy is that it encourages us to adopt a long-term viewpoint.
Image: Shutterstock

A question that’s not asked often enough is whether the way we go about retirement planning is necessarily the best way. All too often, this milestone is overshadowed by the pressure of whether we’ve saved enough to see us through our next life stage: a new stage in which our future is directly correlated to how well we’ve managed to plan in the past.

I believe we often fall into the trap of focusing on the milestone too easily, and not enough on what precedes it or follows retirement. Instead of viewing retirement as a once-off event, I advocate building a financial strategy that allows us to live well through the phases of the “last third” of our lives, and to end well.

Moneyweb Insider INSIDERGOLD

Subscribe for full access to all our share and unit trust data tools, our award-winning articles, and support quality journalism in the process.

Choose an option:

R63 per month
R630 per year SAVE R126

You will be redirected to a checkout page.
To view all features and options, click here.

A monthly subscription is charged pro rata, based on the day of purchase. This is non-refundable and includes a R5 once-off sign-up fee.
A yearly subscription is refundable within 14 days of purchase and includes a 365-day membership.

Click here for more information.

What I mean is that it’s within our power to design the life we want, and then to pursue that relentlessly. And a financial strategy is a tool that allows us to put the numbers to those goals, giving us concrete markers to plan ahead and against which to measure progress.

A timeline of life

One of the immediate benefits of creating a long-term financial strategy is that it encourages us to adopt a long-term viewpoint. It’s human nature, after all, to be preoccupied by the present, which often produces poor decisions.

By looking into the distance, it’s easier to ignore the noise created by any short-term events and key to this is understanding the different life and financial stages you progress through in your working and post-work life.

Retirement, for instance, can be split into three distinct phases: the active years, the passive years and those in which you’ll need some form of “support” – from family or other means. So, your financial strategy has to take into account these phases and how your financial commitments change in each.

Focus on the controllables

At the heart of all of this is a clear understanding and command of your personal economy. This means giving thought to your life and what you want to achieve, throughout the seasons. And the best way to do this is to map out your life and your goals, and to put numbers to that.

Focusing on what you can control also allows you to ignore external noise that could distract you.

And when you do plan, I always encourage clients never to forget to dream. And to dream wildly, set goals and enjoy the fruits of their labour. Make wonderful plans for your future, things that you can really look forward to doing and that will make your heart sing. You have worked hard for the chance to do them, so don’t hold back at this stage.

Draw the roadmap

A key consideration in creating a financial strategy is being aware of the timeframe you need to plan for. Current generations, for example, can generally expect to live into their 90s, while younger generations are sure to live into their hundreds.

By planning what you want and how want to live, you can then determine whether your assets will support that vision. We also always encourage clients to share with and involve their loved ones in their vision which makes their plan far more empowering for them and removes many sensitivities later in life.

A top-down look

Above all, your financial strategy allows you to articulate the life you want to live, with clear milestones and benchmarks to guide you on the way.

Central to this exercise is taking stock of expected living and ad hoc expenses through retirement. For instance, the nature of your expenses in the early years of your retirement will be considerably different later on, when medical care expenses are likely to dominate.

In addition to general expenses rising, it’s also advisable to make allowance for irregular and unexpected expenses. Whether you’re replacing a car, or a hip, ad hoc and emergency expenses are sure to crop up and must be planned for.

Expect the unexpected

The value of planning for the unexpected is that it allows you to stay focused on what you can control. It’s the consequences of the “unexpected” that we aim to avoid and by being forearmed makes you less likely to make rash decisions based on any short-term input.

The choice is ours to live well and end well. Building a financial strategy is the best way to set our direction and destination that is supported by a retirement plan.

John Kennedy, director and regional head: Claremont, Citadel.

COMMENTS   7

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

Then you ask what is the ANC’S strategy?

Judging by action, it is steal the money for personal wealth.

Get Financial Fitness in your life

They say the first person to live to 150 has already been born. It had better not be me.

Where I think a huge problem developed over the past few years is property.

Many people believe it to be an investment that they can cash in and live on for the last few years.

At the rate property prices have grown only the agent makes something.

When you buy a property some agents ask over 8% commission including VAT. Add transfer fees and a few other things and you might break even after 5 years. If you then sell it you will loose over 8% again paying an agent. So you did not break even after 5 years it might be 10.

Property prices just don’t increase enough anymore to pay agents there FAT commissions.

On property you will make NOTHING unless you cut the agent out.

100% agree…. gone are the old days of people thinking investing in property is a guaranteed receipt for success. The sooner people wake up and realise you can never only rely on one type of investment the better…….

I stand in solidarity with every hardworking person who tries to save something for his retirement. This selfless venture, at the heart of the capitalist system, benefits all citizens. Capital in the form of a residence, bank deposit, life insurance, or pension fund is constantly applied to fund investors, thereby creating employment opportunities and widening the tax base. Capital savings and investment specifically benefit those who do not own property. Those who not own capital or property, and who have no access to capital through the banking system, still benefit enormously from the savings of other people.

The German pension fund buys the South African government bond that funds the social grant and finances the job-creation at SOEs. The local property-owner, farm or factory employs people and teaches them skills. The savings of the local pension fund member lends to the government, pay government employees, finances the social grant, educates poor students, builds roads and infrastructure and creates social stability.

When an individual owns a property and saves capital, he does his fellow-man a tremendous favour. He reaps personal benefits from the process, but those who do not own assets also reap very rewarding benefits. This brings us to the point – when a socialist government sets this beneficial process in reverse, it is not only the owner of capital who loses. When the populist government punishes, disincentivises and destroys capital formation by taxing it, those who do not own capital stand to lose the most.

The taxes on capital formation like capital gains tax, estate duties, the redistributive municipal rates and taxes, the redistributive cost of electricity, and BEE requirements prevent further capital formation and syphons off the benefits of the process of capital appreciation. The shortsighted socialist government basically uses the money that was supposed to create jobs, to give grants to the unemployed, as part of a vote-buying exercise. We can see how this is a dead-end street. After 27 years of socialist cannibalism of capital, we have reached the logical conclusion of this destructive process, a stagnant economy, runaway Debt/GDP and record unemployment.

This is why individuals struggle to retire comfortably. Too many people are trying to live off the same capital. Before the pensioner can reap the rewards of his lifetime of frugality, the myopic and ignorant voters have used their power over the legislative process to live off a large part of the capital appreciation already.

It is by means of the mechanism described above that collectivists plunder and destroy their own future when they endeavour to redistribute the capital of property-owners. The socialist always consumes the capital that was supposed to finance his bright future. Capitalist nations always, inevitably conquer socialist nations. Sometimes though the use of force and sometimes through donations and loans with strings attached.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: