IOL Money Issue 2

IOL

MONEY

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SEPTEMBER 2020

SPRING CLEAN YOUR FINANCES TIPS ON REDUCING YOUR DEBT IS YOUR INSURANCE UP TO DATE?

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CONTENTS FEATURES 6 sports stars who went broke Free yourself of debt

Spring clean your finances

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Top 10 tips on reviewing your insurance

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Are financial advisers worth it?

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REGULARS Planning Perspectives Your ultimate lockdown checklist – Part 2

Quotes on managing your money

CONTACT US PUBLISHER Vasantha Angamuthu vasantha@africannewsagency.com

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EDITOR Martin Hesse martin.hesse@inl.co.za PRODUCTION Renata Ford renata.ford@inl.co.za DESIGN Dominique Owen dominique.owen@inl.co.za BUSINESS DEVELOPMENT Keshni Odayan keshni@africannewsagency.com SALES Charl Reineke charl@africannewsagency.com Kyle Villet kyle.villet@africannewsagency.com GENERAL ENQUIRIES info@anapublishing.com

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Money Basics

The cost of having it now versus later

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Money Quiz

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Rands and Sense Understand your credit profile

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Important contacts and links

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SPORTS STARS WHO WENT BROKE

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FROM THE EDITOR SPRING, officially beginning on September 1, is when we emerge from hibernation and enjoy the wonders that nature has to offer. This year, with the Covid-19 lockdown keeping us homebound this winter, a chance to enjoy the great outdoors is particularly welcome.

Spring is also the time of year when many people engage in a thorough clean of their homes, getting the vacuum cleaner into all those dingy corners and turfing out the junk that has built up over the year.

So while you’re taking the trouble to spring-clean your home, why not do the same with your finances?

Delve into those half-forgotten files, open the documents, and check where you are financially.

Make a list of all the things you own (your assets) and what you owe in debt (your liabilities). Do the same with your income and expenses. How can you improve your financial situation by cutting down on unnecessary spending, reducing your debt, and putting something away in savings?

Do you need to upgrade your insurance? Do you need to tell your insurer about any changes in your personal circumstances?

This exercise is especially important at the moment, when Covid-19 has brought so much uncertainty into the world. Will you still be employed by the end of the year? Will you have been forced to take a pay cut? How will the South African economy survive the devastation caused by the lockdown? What measures can you put in place to give you some financial cushion, such an emergency fund, if you are suddenly without a job?

Once a year is perhaps too seldom to be asking these questions, but at least, if you haven’t asked them for a while, now’s the time, when nature puts a spring in your step, to do so.

Enjoy this month’s edition.

Martin Hesse EDITOR | MARTIN HESSE | martin.hesse@inl.co.za

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Designer | Mallory Munien

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S PO RTS S TA R S WH O WE NT B RO KE

People who become rich early in their careers, such as sports stars, are prone to mismanaging their money and vulnerable to exploitation by those eager to grab a share. The stories of these stars who went broke offer lessons on avoiding risky investments and expensive court cases, living within your means, and saving for a rainy day.

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EVANDER HOLYFIELD

DIEGO MARADONA

DOROTHY HAMILL

This American boxer’s extremely successful career earned him many millions.

His financial difficulties started with child-support issues that turned into a major downward spiral. The sale of his multimillion-dollar mansion barely scraped the surface of what he owed the bank and the taxman.

The world watched as he was forced to sell off his worldly possessions to settle his debts.

Widely regarded as one of the world’s greatest soccer players, this Argentinian star played in four consecutive World Cups, finally helping his team win the trophy in 1986. In 2009 the Italian tax authorities caught up with him and demanded that he cough up $54 million in unpaid taxes, a move which forced him to file for bankruptcy.

America’s ice skating wonder girl took home the gold medal at the 1978 Olympics.

After earning huge amounts through touring ice shows and endorsements, Hamill filed for bankruptcy in 1991. She had lost money on business ventures and incurred court costs in the fight for custody of her daughter and medical costs when she was diagnosed with breast cancer.

LEON SPINKS

BORIS BECKER

JOHN DALY

This American heavyweight boxer earned about $4.5 million during his career, the peak of which was when he defeated Muhammad Ali in 1978.

Less than 20 years later, he was broke and homeless. He admitted to spending frivolously and squandering his earnings, mostly on drugs, and had many run-ins with the law.

Tennis’s former world numberone and triple Wimbledon champion was declared bankrupt by a British court in June, 2017. The German player owed Arbuthnot Latham & Co, a private bank, a large sum since October 2015, and the court found there was no evidence he could pay back the amount.

Becker’s worth was once thought to be more than $126 million.

American golfer John Daly was a household name for years, and he made a substantial amount of money, winning many championships, including the US Open in 1995. In a 2006 autobiography, he admitted to a huge gambling problem – he said he had lost an astounding $50to $60 million in the casinos. He also fought alcoholism for many years.

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FREE YOURSELF OF DEBT Spring-cleaning your finances?

JOHN MANYIKE offers advice on what should be your number-one priority: reducing what you owe IF COVID-19 has taught us anything, it’s the importance of responsible debt consumption.

This may be the time to spring clean your finances to ensure that, beyond the pandemic, we are able to avoid falling into the debt trap.

A staggering and yet understandable 58% of households in South Africa’s metropolitan areas are facing high or overwhelming financial stress as the Covid-19 crisis knocks savings and raises debt levels, according to the latest Old Mutual Savings & Investment Monitor.

This is because life can be unpredictable. You could literally be jobless tomorrow and so, the less debt you have, the less you have to worry about in the unfortunate event that you’re unable to service it.

STEPS TO FREEDOM Here are some practical steps that can help you become debt-free:

accounts and credit card. Paying off small debts can boost your confidence and the feeling that you are making progress. Alternatively, target the most expensive debt, which is the debt that carries the highest interest rate.

4. Revisit your entertainment budget: Perhaps instead of paying for a full bouquet on your subscription TV, you can opt for a cheaper option.

5. Reduce your takeout budget by half.

1. Avoid becoming a payday millionaire: Payday millionaires spoil themselves rotten, then go broke three days after payday, because they have spent the little money that was left after debit orders.

6. Don’t borrow from your future self and don’t be tempted to draw from your retirement savings.

2. Make a conscious decision to live within your means: Make use of a budget, by identifying what is a need and what is a want.

TIMES ARE TOUGH For many South Africans, payday is a stressful experience because of overindebtedness and growing financial constraints. We at Old Mutual believe that simple debtrelief guidance and advice can go a

3. Start by paying off small debts first: This could be your clothing

7. Side hustles are also helpful in paying off your debts quicker.

long way to greater peace of mind and fostering long-term financial stability and wellness.

Not everyone who is over indebted fell into that situation because of recklessness or irresponsibility. Circumstances differ from person to person.

But there is a portion of our population that is credit hungry, who live for debt and verification, the Instagram flashy lifestyle and instant gratification.

Times are extremely tough, and the ongoing crisis and constant negative news cycle is feeding into this sense of hopelessness.

However, the key is to understand that getting out of debt is possible and can be done.

The stark reality is that the South African economy was in trouble before Covid-19, with rising unemployment and slowing income growth limiting the ability to save. There is no greater time than now to take control of your finances and know better to do better.

Savings behaviour will play a big role in shaping the post-pandemic global recovery. Although the crisis has certainly made saving a lot harder, it remains possible to reverse South Africa’s poor saving record through a sustained collaborative effort, across the economy, with financial education, trusted advice and support at its core.

John Manyike is the head of financial education, Old Mutual

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You could literally be jobless tomorrow and so, the less debt you have, the less you have to worry about in the unfortunate event that you’re unable to service it.

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Single mom and lawyer Fadia Arnold shares her personal experiences in trying to better manage her money

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How to SPRING CLEAN your finances

Even if you put R10 a week into a savings account, do it, and pick the option that does not allow you to withdraw your savings on any given day based on your mood

I HAVE never been good with money. In fact, it has become quite the superfluous comment from my family members and friends that I have the amazing ability to make money, by, for example owning my own law firm or legal consultancy or likewise business related to my chosen legal profession.

But I still do not own a home, have a honey pot or nest egg I put savings into for when I retire, and I am still living the neverending month-to-month survival many of us endure. Have you ever seen the Will Smith film “Pursuit of Happyness”? If you’ve seen the film, you know the struggle. Also, it’s based on a true story – watch it, it might change your life.

Interesting facts about interest I decided, this year in fact, I am done living month to month. So, what could I do to change my circumstances?

First up, the credit card needed to be annihilated. I took a scissors, cut my credit card in a few unrecognisable pieces and then I called the bank and asked them to deduct R1000 a month on top of the monthly instalment I already had to pay. That way I am paying off the credit and the interest, and some more.

Next, the ever-thirsty daily call from a bank or financial services provider offering you a personal loan. Wouldn’t it be great to get a R100 000 into your account today and book a holiday?

No, because you will spend years paying off the interest on that loan before you even get to

paying off the actual loan.

If you are in dire circumstances and have no alternative, then shop around for a loan with the lowest interest rate. If at all possible, ask your friends or family, who might be able to assist you with an interestfree loan. You can then sign an acknowledgment of debt which will stipulate the terms of repayment, with no interest.

Parents: mind the Gucci Children are expensive, don’t I know it. More than half my salary is spent on my toddler. I was not prepared. Over the past 2-3 years I have learned some nifty tricks to save: l Buy everything in bulk, it’s always cheaper l Your toddler or baby does not need branded clothing or shoes, your toddler just needs clothes, and love. The name on the item of clothing is not worth your child’s future. If you want to ensure your child’s future, invest in his or her university or college savings fund monthly now, not on T-shirts from the baby Gucci store, don’t be ridiculous, unless you can afford to of course, then zero judgement l A few years ago I used to work at a top-10 national law firm, financially allowing me the luxury of attending at the hair salon twice or thrice a week. I look back and would do anything to have washed my own hair and have all that cash returned.

The lesson: circumstances could change, jobs are not permanent, you cannot predict the future, so ensure you protect yourself

and mindfully use your salary on necessities, just in case circumstances change. This is not to say do not treat yourself once in a while – definitely do that, if you can afford to.

Retirement annuities If you have not already started, start right now and shop around for a suitable retirement annuity you can contribute to, even if it’s just R100 a month. You’ll be elated in 50 years from now, I promise you that. This is a must.

If you take anything away from this article, take this advice.

Save, save, save!

This part is self-explanatory.

Even if you put R10 a week into a savings account, do it, and pick the option that does not allow you to withdraw your savings on any given day based on your mood for the instant gratification of buying a tiny Versace bag for R15 000, which you will regret, and barely use.

Trust me, I know – that is a true story.

I literally cannot believe I did that. Instant access to large sums of money via credit cards, overdraft facilities, or drawing instantly from your savings accounts is a situation you should never put yourself in.

Don’t live a life you cannot afford.

Save, invest, stay away from debt, plan your monthly family budget and stick to it.

Starting a business? Get professional financial advice first and dedicate yourself to success and financial freedom.

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TOP 10 TIPS ON REVIEWING YOUR INSURANCE Keep your insurance for real catastrophes which result in unexpected large losses and avoid claiming for

Pictures: Unsplash.com

small events that you could cover from your own pocket.

“SPRING is in the air, and while we get ready to embrace the warm days of summer, we should also brace ourselves for rising costs of living and the unique financial challenges presented by the Covid-19 crisis.

Giving your insurance cover a good spring clean is a great place to start,” says Tyrone Lowther, head of Budget Insurance.

“You’d be surprised at the major difference that a few minor adjustments can have – helping you to save anything from a couple of hundred, to thousands of rands each year.”

Budget Insurance has compiled a list of ways you can reduce your monthly insurance premium while still remaining insured:

gadgets have come down in price, so you really shouldn’t be paying to insure an item that was more expensive when it first hit the market than it is nowadays.

3. Don’t duplicate cover: If your car or home insurance company offers free roadside assistance, you needn’t opt for the same benefit from, for example, your medical aid provider.

1. Insure your vehicle for the correct value: Drivers of older vehicles must ensure that they are not overinsuring their cars. Some insurers take into account the vehicle’s depreciated value, but not all insurers do, so make sure your vehicle is insured for the correct value.

2. Update your home contents policy: When it comes to home contents insurance, opportunities to reduce your premiums could lie in carefully and regularly updating your household inventory. Review your household inventory every six months and adjust the total insured sum accordingly. When you calculate the insured amount of your home contents, make sure you are using replacement values and not market values. The replacement value is what it would cost you, at the time of a claim, to replace all your belongings with similar brand new ones. Remove old and discarded items that no longer need to be insured from your inventory list. Why should you pay for cover on a computer that stopped working in 2017? Similarly, the costs of some appliances and

claiming for small events that you could cover from your own pocket.

When you claim for every little scratch, your insurance provider will raise your premium to reflect the higher risk you pose.

6. Increase your excess: You could reduce your monthly premium by increasing the excess you pay when you claim. Ideally, you want to pay the lowest excess you can in the event of a claim.

However, opting for the lowest excess might make your premium too expensive for you. It’s best to find a balance where you’re paying a reasonable premium and your excess is not so high that you won’t be able to afford that amount should you need to claim.

7. Combine your policies: By insuring your car, home contents and buildings insurance with the same insurance company, you could qualify for a discount.

4. Increase your security: Your car, home or buildings insurance premiums are calculated based on your risk profile. Your risk profile is based on a number of things such as where you live, the type of car you drive, and the security measures you have in place, among others. 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.

You could get a reduction on your home insurance premium if you’ve invested in an alarm system for your home or are subscribed to a security company.

5. Don’t claim unnecessarily: Keep your insurance for real catastrophes which result in unexpected large losses and avoid

8. Shop around: It does not matter which insurance company you use, as long as you insure your possessions. This leaves you free to shop around for the best deal.

9. Review your cover on a regular basis: As your individual needs change so may your insurance needs. For instance, you may no longer need full comprehensive cover on an older or second vehicle, and may want to consider insuring it for limited cover.

10. Make sure you keep your details updated: Insuring your vehicle for private use if you no longer use it for business, or if your vehicle is now parked in a more secure environment overnight, like inside a locked garage, will save you money, so let your insurer know. | Supplied by Budget Insurance

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Planning Perspectives Your ultimate lockdown finance checklist – Part 2 Lesego Monareng teaches you how to survive these covid times by budgeting and learning how to use money better

MANAGING your personal finances, as well as planning and investing for the future, are essential survival skills.

Last month, I discussed the first two pointers on my checklist: drawing up a budget and managing your debt. In Part 2 (points 3 to 5) we look at investing offshore, building an emergency fund and estate planning.

3. LOOK BEYOND OUR BORDERS

The spread of the virus is a good illustration of how small the world actually is.

When it comes to managing your money, you need to adopt a global perspective.

Investing in South Africa is great, but will you get the same returns as an investment that is exposed to global markets?

Likewise, are your investments spread across various sectors (such as medical, technology, resources, agriculture), asset classes (equity, property, bonds, and cash) and currencies? This is called diversification and it’s essential for long-term financial growth. But investing is not something you can easily learn on YouTube. Rather speak to a trusted Certified Financial Planner (CFP) who can assess your individual situation and make sure your investments are adequately diversified.

4. BUILD AN EMERGENCY FUND

Every industry has been affected by Covid-19 and retrenchments are rife. Your job might be secure now, but that can change in an

instant, which is why you should start an emergency fund immediately.

Here’s a scary statistic: most South Africans are only one pay-cheque away from poverty. Imagine losing your home, your car and all the other valuable possessions you’ve spent many salaries acquiring over the years?

The rule of thumb is that your emergency fund should equal at least three months’ income. It’s hard to save when money is tight – this is where your budget comes in.

Weed out any unnecessary expenses and balance that with repaying debt and starting an emergency fund.

5. THINK ABOUT WHAT WILL HAPPEN WHEN YOU’RE GONE

Before Covid-19, death was probably a distant thought at the back of your mind.

But the virus has shone a spotlight on our mortality – many people have lost loved ones, or know of people who have.

Death is painful and traumatic on its own, but it’s even more difficult to deal with if your loved ones are left with all your financial problems. What happens to your assets and liabilities?

How much will be required to maintain your family lifestyle? What will happen to your busin ess if you’re not around to run it? Will your family still have an income? If you’re unable to answer these questions, you have some work to do. Again, speak to a CFP professional who will assist you in drafting a will and putting safety nets in place to manage these risks.

Lesego Monareng is a Certified Financial Planner and Managing Director at KLU Wealth & Legacy Management

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In spring cleaning your household finances, take inspiration from these pearls of wisdom from writers, celebs and financial gurus

WEALTH-WISE WAYS Wealth is not about having a lot of money; it’s about having a lot of options.

– Chris Rock (American comedian)

Every time you borrow money, you’re robbing your future self.

– Nathan W Morris (American personal finance expert)

When you understand that your self worth is not determined by your net worth, then you’ll have financial freedom.

– Suze Orman (American personal finance expert)

Rich people have small TVs and big libraries, and poor people have small libraries and big TVs.

– Zig Ziglar (American motivational speaker and author)

Annual income twenty pounds, annual expenditure nineteen pounds and six – result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six – result misery.

– Charles Dickens (English novelist)

An investment in knowledge pays the best interest.

– Benjamin Franklin (American scientist, philosopher and statesman)

The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.

– TT Munger (American investor)

Many people take no care of their money until they come nearly to the end of it, and others do just the same with their time.

– Johann Wolfgang von Goethe (German novelist)

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MONEY BASICS with MARTIN HESSE

The cost of having it NOW VERSUS LATER MASTERING your finances and building wealth, like mastering a sport or a skill, requires discipline, dedication and patience. One of the first disciplines to learn is that of delayed gratification.

It’s natural to want something straight away. Your neighbours have a new large-screen smart TV. You want one too, NOW! Your lounge suite is starting to look worn and outdated – a newspaper supplement

from a furniture chain is advertising a new one, to your taste and style, for just over R500 a month, which you can get NOW! Big companies with large advertising budgets rely on this “instant gratification” factor to market their products, and through the media they bombard us with messages that it’s okay to have everything NOW. But it’s not okay. In fact, those

big companies are deceiving you.

They have just one objective: to get richer.

The trouble is, you will get poorer. Instant gratification can cost you big time.

The cost of credit That lounge suite I mentioned above. You can pay it off over three years at R532 a month, which amounts to R19 152 in total. If

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The marshmallow test Research has shown that people who have learned the discipline of delayed gratification early in life tend to fare better in their careers and personal lives than those who haven’t.

In an experiment conducted a number of years ago, a group of four-year-old children were

given the following choice: eat a marshmallow now or wait 15 minutes before eating it and then be rewarded with another marshmallow.

The researchers found that about two-thirds of the kids could not resist the treat and ate their marshmallows within three minutes.

Only about 30% of the children could resist the temptation and wait for 15 minutes, after which they were rewarded with a second marshmallow.

More interestingly, the research team did a follow-up study of the children some 20 years later, when they were now young adults. How had they done at school and in their lives after school?

They found a high correlation between “high delayers” and success

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you pay cash, it’s R11 799. That’s a difference of R7 353. The interest rate charged, at 19.5% (according to the barely readable small print in the ad), is shockingly high, considering inflation is at a low 3%.

If you put away that R532 each month, taking into account that the lounge suite may cost a little more by then, you could buy the suite cash in two years.

You’ll have to live with your old chairs until then, but you will have saved thousands.

Let’s say you do that, but continue putting away R532 for another 12 months, as if you were paying it off, in an investment with a reasonable return of 8% a year. You would then have R6 615. Without contributing another cent, after 10 years your money will have more than doubled, to R14 281. Forget about it for another 10 years and you’ll have R30 832.

Let’s take this a step further and see what happens if you decided not to buy the suite at all, and put R532 a month into an investment from the start, stopping contributing after three years but letting the money sit there and grow.

After three years you would have R21 623. Ten years later it would have grown to R46 682 and 20 years later to R100 783.

You’re making compound interest work in your favour, instead of against you.

So giving more thought to what you want to buy, and then saving up for it (delaying gratification) instead of buying it on credit (instant gratification) are the biggest steps you can take towards attaining financial freedom.

in careers and relationships – in other words, those kids who could delay gratification during the marshmallow test tended to be more successful in their academic careers and personal relationships than the “low delayers”.

It was found that many of the “low delayers” struggled with life in general because of behavioural problems, which manifested in poor academic results, employee records and personal relationships.

You can train yourself to be a “high delayer” at any stage of your life. Of course, you need to keep a balance between present and future needs – it doesn’t mean never spending on yourself in the present.

But, as far as possible, avoid “robbing from your future self”, which is what you do when buying on credit.

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Are financial advisers WORTH it?

Financial blogger BRENDAN DALE explains what a professional financial adviser can and cannot do for you IT SEEMS that the biggest barrier to accepting good financial advice is trust. Part of the problem is the lack of clear distinction as to what a personal financial planner/adviser actually is.

Without finding someone who you can unreservedly place your trust in, you’ll always find yourself second-guessing your money decisions, or theirs. The unnerving part of it all is that the results of poor investment decisions are generally only felt many, many years later.

If there is one good example of where “spending money to make money” actually holds, it’s in paying for good financial advice. Personal financial decisions permeate almost all aspects of our lives: l Can we afford a house and how much it will cost over the next 20 years? l Do we have sufficient life cover? l Where are we investing our money? l Will our children be okay is

something happens to us?

There are limits, though, of what financial advisers can and cannot do for you. It’s good to understand these, and to also know your own limits.

What can an adviser do for me?

Not all advisers are equally qualified or experienced. Depending on an adviser’s skillset, he or she will be able to offer the following: l Guide you through complex income tax legislation to minimise your tax. l Comprehensively quantify the amount of life insurance, disability cover, and critical illness cover you need, and advise you on appropriate products. l Help you select appropriate medical aid and gap cover for your family. l Put together a holistic financial plan, including long-term retirement planning, goals, and strategies. A good adviser can fairly accurately quantify what your retirement financial needs are, and

how much you’ll need to save to reach that goal. l Rebalance your portfolio annually and help you stick to your investment plan. l Assist with drawing up your will. l Changing jobs, might leave you with a handsome pension or provident fund balance; something that an adviser can advise on. l Debt can easily become insurmountable. A good adviser can assist you with working your way out of a crippling situation. l High investment fees can decimate your long-term investing.

An adviser can find lower-cost investment products that meet your needs. l Risk is not to be avoided if you want any chance at a healthy longterm retirement balance. Rather, it should be managed. A good adviser will help you do this through the appropriate diversification. l Short-term insurance can be so complex, it’s sometimes useful to find someone who can explain things to you.

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l If getting money offshore is on your list of personal financial needs, an adviser can help you find investments that are suitable. l Importantly, advisers act as sounding boards when things get hairy.

What can an adviser not do for me?

An adviser cannot guarantee your investment returns. A good adviser will commit to nothing in so far as investment returns go, unless it’s specifically a guaranteed return and that guarantee is from a bona fide financial institution.

If your adviser claims to know what the market is going to do, you might want to consider finding someone else.

Paying for the invisible It is extremely important to

remember that in the course of your investing, there exist an infinite number of alternate realities, wherein you had an infinite number of investment decisions. You’ll never know what any of these might have yielded, and therein lies a noteworthy point of consideration.

We rely on financial advisers not just to do the measurable and observable items we’ve listed above, but to also help us stick to our well-thought-out investment plans.

One could only guess the effects of a panicked sell when political uncertainty made you question your adviser’s recommendations, only for the situation to casually blow over, leaving just yesterday’s newspaper and your ill-conceived financial blunder as a reminder as to why we have structured and

well-thought-out investment plans in the first place.

Limiting your gauge as to whether or not the fees you paid your adviser was “worth it”, relative to the performance of your investment portfolio is not fair. To do this would require you to equally consider what your investment portfolio might have yielded had you gone off on your own tangent and succumbed to the human biases that make being human one of the biggest obstacles to long-term investing.

So are financial advisers worth it?

For some aspects of your finances, definitely! For everything, probably not.

Brendan Dale is a software developer and financial blogger at https:// takechargeofyourmoney.blog/

Money Quiz Test yourself on your financial knowledge 1. If you put R100 into an investment that offered compound interest of 10% a year, how much would you have in total after 10 years (rounded to the closest rand)? a) R110 b) R200 c) R223 d) R259 2. What is a beneficiary fund? a) A type of pooled investment b) A type of bank deposit c) A fund for widows and orphans d) A pyramid scheme 3. Sir Isaac Newton lost a fortune in what speculative investment failure? a) The Dutch tulip mania crash of 1637 b) The South Sea Bubble of 1720 c) The Wall Street Crash of 1929 d) The dot.com bubble of 2001 4. What is the repo rate? a) The rate you receive on a 12-month fixed deposit b) The rate banks borrow from the Reserve Bank c) The rate a bank charges its most credit-worthy customers d) The rate banks charge on property repossessions 5. What are you taxed on? a) Property transfers, subject to a threshold b) Alcohol and cigarettes c) Your estate, when you die, subject to a threshold

d) All of the above 6. From what age can you have a bank account? a) Any age b) 12 c) 18 d) 21 7. What can short-term insurers cover you for? a) Your vehicle b) Your personal belongings c) Your house d) All of the above 8. What is a living (inter vivos) trust? a) A fund for widows and orphans b) A family trust you establish during your lifetime c) A trust established through your will d) A type of unit trust fund 9. Which regulatory body regulates financial advisers? a) The Department of Trade and Industry b) The SA Reserve Bank c) The Financial Sector Conduct Authority d) The SA Revenue Service 10. What is the maximum amount you can save per year in a tax-free savings account? a) R10 000 b) R24 000 c) R36 000 d) There is no limit.

ANSWERS: 1d, 2c; 3a; 4b; 5d; 6a; 7d; 8b; 9c; 10c

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Rands & Sense Understand your credit profile If you’re ‘high risk’ your chances of accessing credit are greatly reduced, says Ayanda Ndimande

NOW more than ever, it’s critical to take control of your finances. Accessing your credit profile is one of the best ways to glean instant insight into financial pain points and opportunities.

In uncertain times like these, it is important to know where you stand with your personal finances. l What is a credit score? If you’ve ever taken out a loan, registered a bond or applied for a credit card, you’ll most likely have a credit score. Your score tells prospective financiers how much of a “risk” you are in terms of your past debt repayment behaviour and ranks you as low, medium or high risk. l What is it based on? It takes into account your total debt and debt repayment history: late or outstanding amounts owed, the frequency and type of credit you’ve applied for, any court judgments against you, and how much of your available credit you currently use. l Why should I care about my score? If you’re “high risk”, your chances of accessing credit are greatly reduced. You’re also likely to be charged a higher interest rate on credit agreements. And you may jeopardise future job prospects – some employers will check your credit score. l What if I don’t have any credit? If you have no active credit, you will have no payment history on record, which may result in a finance being declined as the creditor is unable to see if you are able to meet your financial commitments. l How do I check my score? You are entitled to a free credit report that shows your score and outlines areas for improvement. It’ll show you how much interest you’re paying on credit agreements and allow you to compare your rating against an average score. l If I’m high risk, what can I do about it? The best way to improve your credit score, or to maintain a good one, is to make sure that you pay off your debt on time and never miss a payment. A financial planner will be able to provide you with a plan to get you on a stable financial footing again. As a last resort, you may have to enter into debt review to pay off your outstanding debt.

Anything else to be aware of? With identity theft on the rise, it’s vital to check your credit profile often.

It’s the best way to ensure that no one has used your identity to open a credit agreement in your name. If this has happened, report it to the police immediately.

Sanlam and other financial institutions can provide you with a free tool to help you understand your credit profile and ensure that you are aware of your credit standing to make the best financial choices.

Ayanda Ndimande is Business Development Manager, Retail Credit at Sanlam

Information

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Here are sources that can help you with financial education, give you more information on savings and investments, and afford you recourse if you have a consumer complaint or a complaint against a financial services provider.

FINANCIAL EDUCATION Financial Sector Conduct Authority MyMoney Learning Series https://www.fscamymoney.co.za South African Savings Institute #WaysToSave https://waystosave.co.za/ OMBUDSMAN & REGULATORS BANKING Ombudsman for Banking Services ShareCall: 0860 800 900 or phone: 011 712 1800 Email: info@obssa.co.za www.obssa.co.za CONSUMER ISSUES National Consumer Commission Toll-free: 0860 003 600 or phone: 012 428 7000 Email: complaints@thencc.org.za www.thencc.gov.za

FINANCIAL ADVICE Ombud for Financial Services Providers phone: 012 470 9080 or 012 762 5000 Email: info@faisombud.co.za www.faisombud.co.za INVESTMENTS Financial Sector Conduct Authority ShareCall 0800 110 443 or 0800 202 087 Email: info@fsca.co.za www.fsca.co.za LIFE INSURANCE Ombudsman for Long-term Insurance ShareCall 0860 103 236 or phone: 021 657 5000 Email: info@ombud.co.za www.ombud.co.za

Consumer Goods and Services Ombud ShareCall: 0860 000 272 Email: info@cgso.org.za www.cgso.org.za

MEDICAL SCHEMES Council for Medical Schemes MaxiCall: 0861 123 267 Email: complaints@medicalschemes.com www.medicalschemes.com

CREDIT AND DEBT Credit Ombud MaxiCall: 0861 662 837 or phone: 011 781 6431 Email: ombud@creditombud.org.za www.creditombud.org.za

RETIREMENT FUNDS Pension Funds Adjudicator ShareCall: 0860 662 837 or phone: 012 346 1738 Email: enquiries@pfa.org.za www.pfa.org.za

National Credit Regulator ShareCall: 0860 627 627 or phone: 011 554 2600 Email: complaints@ncr.org.za or (debt counselling) dccomplaints@ncr.org.za www.ncr.org.za

SHORT-TERM INSURANCE Ombudsman for Short-term Insurance ShareCall 0860 726 890 or phone: 011 726 8900 Email: info@osti.co.za www.osti.co.za

TAX Tax Ombud ShareCall: 0800 662 837 or phone: 012 431 9105 Email: complaints@taxombud.gov.za www.taxombud.gov.za PROFESSIONAL ORGANISATIONS Fiduciary Institute of Southern Africa (FISA) phone: 082 449 2569 Email: secretariat@fisa.net.za www.fisa.net.za Financial Planning Institute of South Africa (FPI) Phone: 011 470 6000 Email: info@fpi.co.za www.fpi.co.za South African Institute of Tax Professionals (SAIT) Phone: 012 941 0400 Email: info@thesait.org.za www.thesait.org.za

FINANCIAL DATA ◆◆ For the latest financial market indicators, go to https://www.iol.co.za/business-report/ market-indicators ◆◆ For the latest quarterly unit trust performance, go to https://www.iol.co.za/ personal-finance/collective-investments ◆◆ To look up performance of a particular unit trust fund go to https://www.iol.co.za/ personal-finance/fund-look-up