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Destiny Personal

wealth report 2014 Saving for life’s major milestones, working out a philanthropy plan and putting your cash into innovative investment opportunities – it’s all here! { “Don’t gain the world and lose your soul, wisdom is better than silver or gold.” } So sang Bob Marley and we’ve taken a leaf out of this insightful phrase for our Personal Wealth Report, brought to you by Nedbank Private Wealth. We’ve pulled together targeted advice for women at different stages of their careers – whether just starting out and thinking about taking out a home loan or “slashies” whose dynamic retirement needs keep them awake

at night or those looking to consolidate their nest egg and make that first million. Sit back and let the wisdom of an assortment of financial experts and advisers guide you to sustainable and far-reaching riches – both in terms of your relationship with “Madibas” and your bank balance.

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We may not all be at the level of multi-millionaires ( just yet), but it pays to have a wealth plan in place if you’d like to head in that direction. The experts at Nedbank Private Wealth and Nedbank provide targeted advice for women at different stages of earnings YOUNG EXECUTIVE Lerato* (43) is the recently-appointed Chief Executive Officer for a Pretoriabased mining firm. Her annual income is R1,5 million. As a single mother of three children (aged 21, 15 and 13), Lerato says saving for their education is a key concern. She has a bonded house (worth R1,7 million) and savings of R100 000 and she’s looking for a balanced investment strategy that will attract reasonable medium-term returns with relatively low risks over the next five years.

WEALTH EXPECTATION Lerato’s looking for an income with a balanced combination of investments that will lead to potential growth.

INVESTMENT RECOMMENDATIONS Conveniently, one Nedbank Private Wealth client relationship manager will manage all her legal entities and accounts (be they companies, trusts, endowments, RAs, living annuities or simple discretionary unit trusts), while a private banker will tend to all her banking requirements. Thus her investment planning, portfolio construction

WILLS AND ESTATES Lerato needs an estate plan which will include calculations to determine her liquidity, capital gains and estate duty position, while also addressing future growth. Assuming she has a sizeable provident fund, her surplus cash and bonus situation can easily be mopped up in order to grow by structuring a Personal Share Portfolio Retirement Annuity. This will reduce her income tax and estate duty tax, allowing for tax-free growth in the annuity. Similarly, she’ll have the opportunity to structure an endowment in SA and internationally, which will create further estate and tax efficiencies. She could also establish a South African and/or international trust during her lifetime to take transfer of all investments currently held in her personal name. She’d then be offered specialist advice on structuring a will to deal with her estate after her death. Nedbank’s fiduciary specialists can offer her tax advice relating to the establishment of the trust.

and management can be optimised on a holistic level, while taking advantage of the specific benefits each investment structure or vehicle provides. The advice of senior portfolio managers will guide Lerato and keep her abreast of international macroeconomic trends.

STAR PRODUCTS: SEGREGATED FUND PORTFOLIO OR STRATEGY SOLUTION Given Lerato’s age and career trajectory, it would make sense for her to create a segregated fund portfolio, whereby her investments will be allocated to various “best of breed” fund managers who we believe have the highest level of expertise for the relevant mandates they manage. In doing so, Lerato’s investments will be actively managed by highly respected fund managers, in a holistic structure that’s overseen by a client relationship manager. An alternative would be to invest in a strategy solution – namely, a tax-efficient blend of leading fund managers, rolled into a single solution which has the closest alignment to the Nedbank Private Wealth house view assest allocation, fund selection and security selection. Regardless of the

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option selected, Lerato’s personal relationship with her client relationship manager will be seamlessly integrated with that of her private banker, whereby her transactional banking requirements (including her bond facility, income requirements for her children’s education, as well as third-party payments) and her conventional finance requirements (including short-term finance and insurance) would be fully catered for.

INVESTMENT RECOMMENDATIONS As a baseline factor, Tanya should never allow her expenses to exceed her income. All expenditure should be budgeted for, whether regular monthly expenses such as rent, food and insurance, or savings towards a goal such as an overseas holiday. In addition, her monthly regular savings should provide for an emergency contingency fund for unforeseen events.

STAR PRODUCT: STOCKBROKING PORTFOLIO Should Lerato wish to have direct exposure to the markets, we could look to create a direct share portfolio, managed by one of our experienced stockbroking portfolio managers. Blue-chip stocks are high earners’ bread and butter and perform reliably well. As a starting point, always look for quality companies with good cash flow and growing dividends. Our research team is exclusively dedicated to our private clients, continuously looking for opportunities within this volatile and uncertain environment. Depending on various factors, we could look to diversify her portfolio to international markets, where she can trade on most recognised exchanges around the world seamlessly via her stockbroking portfolio manager or international wealth manager. Lerato would have real-time online access to her stockbroking account via the web or smartphone, which would allow her to access proprietary research and market information all the time and place orders by phone or via the web. Importantly, all specialists involved in managing Lerato’s account will have open communication channels, so as to ensure all aspects are being adhered to, holistically.

ENTREPRENEURIAL WEALTH Nicola* (40) is married with an eight-year-old child. She has R1,7 million worth of listed shares, in addition to R400 000 worth of unit trusts. Her annual income is R2,5 million. She runs a petcare export business. She needs advice on how to gear her business for export growth. There are two avenues she could explore to fund both local and global export growth: • A working capital requirement to fund growth in local sales could be arranged by way of an invoice discounting facility, which grows in relation to the growth in sales. This facility is basically a short-term borrowing tool that helps strengthen a company’s cash flow position. • A documentary credit facility (ie export letters of credit) could be arranged for the export sales, which papers could then be discounted by Nedbank – provided, of course, that the documents are issued by and drawn on a reputable overseas bank. Letters of credit refer to bank guarantees that a buyer’s payment to a seller will be received on time. If it isn’t, the bank will cover these costs.

Given her sizeable and probably growing bonus earnings, it would be advisable for Lerato to invest in a retirement annuity, so she could take full advantage of retirement saving contributions of 15% of taxable non-retirement funding income for the 2013/14 tax year. The Nedbank Private Wealth Personal Share Portfolio Retirement Annuity would allow her to invest compulsory savings directly into the stock market to create a bespoke portfolio in line with her needs, at a competitive rate. As her portfolio grows, Lerato could also make use of a stockbroking carry facility to borrow funds against the security of her voluntary savings share portfolio to free up extra cash as her needs change. Upon retirement, her retirement annuity would then be transferred seamlessly into a living annuity, without having to sell out of the underlying vehicle and buy back into the market again, ultimately ensuring full market participation throughout this transition process.

MATURE MOM Tanya* (50), a divorced mother of two adult children, is planning to retire in 15 years’ time. She’s seeking a longer-term, moderate-risk investment strategy. Financially responsible for her 21-year-old second-year student son and her elderly mother, Tanya earns R331 740 per annum. She has unit trusts worth just over R50 000.

WEALTH EXPECTATIONS Tanya wants to be able to retire comfortably through an income with a balanced combination of investments that will lead to potential growth.

All expenditure should be budgeted for, whether regular monthly expenses such as rent, food and insurance, or savings towards a goal such as an overseas holiday. In addition, her monthly regular savings should provide for an emergency contingency fund for unforeseen events.

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* Not their real names



Within an investment time-frame of up to five years, she requires investment solutions that guarantee a return through favourable interest rates and capital security.

STAR PRODUCTS: EasyAccess Deposit Nedbank EasyAccess Deposit offers the guaranteed returns of a fixed deposit combined with free access to up to 50% of your funds at a minimum of 24 hours’ notice. A great interest rate is guaranteed for an investment term of three, six, 12 or 18 months. You can withdraw 50% of the original capital with at least 24 hours’ notice. JustInvest (short-term) Nedbank JustInvest is a money market investment account that offers you extremely competitive interest rates and short-term accessibility (at least 24 hours’ notice). No transactional facilities are available. The minimum deposit is R5 000 and extremely competitive interest rates are paid, tiered according to your balance. MoneyTrader (short-term) Nedbank MoneyTrader is a money market investment account that offers you extremely competitive interest rates and short-term accessibility (at least 24 hours’ notice). Get great rates linked to money market conditions with a minimum deposit of R50 000. No transactional facilities are available. Green Savings Bond (long-term) Nedbank Green Savings Bond enables you to save while contributing towards a greener future. The capital raised from this innovative bond is earmarked for investment in various renewable-energy projects, such as wind farms and solar fields throughout SA, at no risk or cost to you. The minimum investment is just R1 000 and you can invest for 18, 24, 36 or 60 months.

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Investments with A DIFFERENCE From calculated offshore investing to urban property, we suggest ways to diversify and stabilise your portfolio Before investigating unique investment opportunities and pledging your life savings, “consider where the investment fits into your greater financial plan and how it relates to your short- and long-term goals”, advises Jason Bernic, Financial Planning Coach at Acsis. “Budget accordingly and ensure that an investment’s affordable and that you’re comfortable committing to it. Investment success takes time and patience and getting professional advice is always a good idea.” We offer three innovative investment ideas:

“As South Africans, we have the opportunity to invest in hard currency around the world like never before. This will not only protect and grow your asset base, but also expose your balance sheet to interesting opportunities globally.”

TAKE IT OFFSHORE Many people are unsure of the intricacies involved in offshore investing. However, it’s a sound strategy, since amassing numerous assets and investments in one country is no guarantee of lasting wealth. Says Clayton Stewart, International Wealth Manager at Nedbank Private Wealth: “SA’s GDP contribution to the rest of the world is, optimistically, about 1%. The Johannesburg Stock Exchange’s net asset value contribution to world markets is in similar territory. We’re an exceptionally small minority which is valued on a currency that was especially volatile in 2013. For diversification reasons alone, we should all have a percentage of our funds offshore.” That’s especially true if you’re looking to create a lasting legacy for your family, he continues. “In this case, you should be investigating using your discretionary allowance. This allows you to transfer R1 million offshore annually and a further foreign investment allowance that you can apply for, up to R4 million. As South Africans, we have the opportunity to invest in hard currency around the world like never before. This will not only protect and grow your asset base, but also expose your balance sheet to interesting opportunities globally.” “Stick to simple investment principles: spread your money, take the required risk, invest with reputable companies and in markets, jurisdictions and asset classes that help you achieve your investment goals,” advises Bernic. “As with local investments, you can invest in shares, unit trusts, property and bonds, and you can structure them to be tax-beneficial, depending on your personal circumstances. Some advisers advocate exposing up to 25% of your money offshore, which provides a nest egg.” “Entrusting experts to manage this money prudently and compound the growth is critical,” says Stewart. He adds that it’s wise to look carefully at which countries and markets to invest in. “With the UK’s equivalent of the South African repo rate priced at 0,5%, lending is attractive. That’s not to say there aren’t threats looming

in international markets, but history shows that those markets move in cycles. Given enough time, equity markets provide great inflation-busting growth, especially when not limited to a single country or economy.” According to Damian Hamp-Adams, Sales and Marketing Director of the Indian Ocean Real Estate Company (Iorec), Mauritius – which is seen as the gateway connecting Africa and Asia – offers the ideal investment opportunity for South Africans. Recent Central Bank statistics reveal that foreign direct investment in Mauritius rose by 16,1% in the first half of 2013, with SA being the second-biggest investment source. Investments were primarily in the real estate sector, where Hamp-Adams operates. “As a South African, you can automatically reside in Mauritius, as long as you hold property in an integrated resort scheme [IRS, which enables development and sale of luxury residential units to foreigners]. There’s no capital gains or real estate tax in Mauritius. You’ll only be subject to 15% income tax. “It’s also easily accessible to South Africans, with frequent flights and massive holiday appeal. Many South African entrepreneurs also have their corporate headquarters there. The island’s experiencing

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“Mauritius offers the ideal investment opportunity for South Africans.”

Andrew Fleming, Senior Researcher at the Cape Town Partnership, a non-profit organisation focused on fuelling the urban regeneration of Cape Town’s Central City, discusses the success of the UDZ tax incentive

astronomical growth with a new airport, new highways and constant development.” • For information on Iorec’s Azuri IRS, email:

STAMPS OF APPROVAL Stamps probably aren’t top of mind when you’re contemplating how you’ll ever afford that private jet, but they’re actually a stable and lucrative – if somewhat quirky – investment to make. “In their own way, fine stamps constitute a near-perfect investment opportunity due to a finite supply and an increasingly active and ever-growing international demand,” says Doreen Royan, Chair of professional philatelists Doreen Royan & Associates in Johannesburg. “We’ve never seen rare stamps in their original, perfect condition lose their value.” “There won’t be any more fine and rare stamps from a particular period coming out; you’re primarily looking at stamps from 18401970, as the printing process was different in those days and only a specific quantity was ever produced,” explains Kris Fawcett, Director of Doreen Royan & Associates ( Interestingly stamps with printing errors are some of the most valuable ones, as they’re incredibly rare. While stamps have a steady value, don’t expect overnight returns once you build your portfolio, caution Royan and Fawcett. “We look at trying to achieve 10% interest per annum. That might not happen immediately, though,” says Royan. “It’s like owning a house [but

The UDZ extension – which will continue until 2020 – creates new opportunities for property owners/ developers to activate the tax incentive. Ideas here could be to convert empty C-grade office space in the CBD into residential properties, or to retrofit existing buildings with more cost-effective and environmentally friendly equipment, thus saving tenants and owners a great deal of money. It’s a longerterm investment, as tax savings are repaid over a longer period, However, they’re quite substantial, so they make a significant difference to the overall cost of projects.”

without the market fluctuations]. Your capital’s growing.” While stamp trading is huge overseas, especially in the UK, in SA the market’s relatively small. “It’s a very under-the-radar investment,” explains Royan. “There’s no capital gains tax on stamp investment as it is considered a hobby.” “That’s because it’s too complicated to police,” explains Fawcett. “Stock markets are traded daily and their prices fluctuate, according to supply and demand. With stamps, there’s a limit to the supply. Their value is tracked in annual Stanley Gibbons catalogues, not on a daily platform.” Doreen Royan & Associates also runs a Rarities, Errors and Varieties Club which encourages members to make small, monthly investments (with no interest charged) to pay off stamps. “Stamp investments aren’t limited to the wealthy; anybody can invest, as long as they ensure they’re investing in the right stamps, in the right condition, with a respected dealer,” says Fawcett. Rare stamps are traded internationally and dealers can help you decide when the time’s right to sell privately or through a public auction. “Ensure your dealer is a member of one of the professional stamp regulatory trade bodies,” advises Fawcett. The South African Philatelic Dealers’ Association is the local regulatory body. • For a full list of dealers, visit:

FUND URBAN RENEWAL There are ample opportunities and tax incentives in local property. “Look for value when purchasing your first investment property,”

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Photographer: Shaun Mallett. Galloimages/

“Inner-city rejuvenation has been very successful in Cape Town, with an increasing number of people using the city for purposes other than business, such as residential, leisure and tourism. In our recent online survey, 72% of businesses said urban renewal efforts result directly in renewed interest in the CBD as a business destination. This shows that the idea of making the CBD a great place for people is just as important for economic growth as anything else,” says Fleming. “Cape Town’s UDZ is situated across the entire metro, so it can be seen as a strategic tool to link up various nodal economies.




Ac c e s s i n t e r n a t i o n a l m a r k e t s . S p r e a d y o u r p o r t f o l i o a c r o s s t h e b o u r s e s . G e t i n s i g h t i n t o t h e u p s , t h e d o w n s , t h e r o u b l e s a n d t h e r i ya l s . M a k e a s i n g l e l o c a l c a l l t o e x p l o r e t h i s a n d m o r e – c o n t a c t N e d b a n k P r i va t e We a l t h o n 0 8 6 0 1 1 1 2 6 3 . O r v i s i t n e d b a n k p r i va t e w e a l t h . c o . z a .

SOUTH AFRIC A | UNITED KINGDOM | UNITED ARAB EMIRATES | JERSEY | GUERNSEY | ISLE OF MAN N e d g ro u p P ri va t e We a l t h ( P t y ) L t d ( Re g N o 1 9 9 7 / 0 0 9 6 3 7 / 0 7 ) , t ra d i n g a s N e d b a n k P ri va t e We a l t h , i s a n a u t h o ri s e d f i n a n c i a l s e r v i c e s p rov i d e r, a re gi s t e re d c re d i t p rov i d e r t h ro u g h N e d b a n k L t d , a n d a m e m b e r o f J S E L t d t h ro u g h N e d g ro u p P ri va t e We a l t h S t o c k b ro ke rs ( P t y ) L t d .


advises Ricardo Teixeira, Management Consultant at Acsis. “Understand the type of property you’re buying, the area it’s in and the potential growth and income you could realise. Weigh these factors against the risks before making a decision.” A unique way of making money through property is by investing in urban development zones (UDZs), demarcated in 2003, which offer tax incentives aimed at encouraging private investment in and rejuvenation of inner cities. “The UDZs of SA’s inner cities have been taken up by private enterprise and private-public partnerships and there are numerous successful projects currently underway,” says Teixeira. One such project is Propertuity’s thriving Maboneng Precinct, which has revitalised Jo’burg’s city centre with cuttingedge residential property, exciting office spaces and premier innercity markets and entertainment hubs. “UDZs give you a tax deduction that’s substantial enough to significantly affect the investment,” says Jonathan Liebman, Propertuity’s founder and CEO. “Thirty percent of the purchase price of a sectional title unit can be written off as a form of accelerated depreciation over five years. UDZs have been extended to 2020 to allow for future tax savings.” It’s important to note that in order to benefit, investors must use property for business (trade or rental) purposes. “There are opportunities for investors across the board,” says Teixeira. “Property developers and those able to purchase entire buildings are best positioned to profit, but smaller investors may

find a jewel worth renting out. If you can find a corporate tenant, all the better.” In addition to UDZ tax benefits, urban renewal is attractive to investors. “The best returns lie in taking a view of a whole area, so that you don’t just upgrade the building itself, but the entire neighbourhood,” says Liebman. “Look for property that has high rental demand and is very central.” Investing in a small unit in the Maboneng Precinct would require a deposit of about R10 000, he says. “The bank would finance the rest, provided you had a good credit record and a job. Rental returns in the first year for investors are currently 10%. Capital gains have proven to be, on average, 13% annually over the past five years. Maboneng’s a long-term plan, as we have 35 buildings to develop.” UDZs are demarcated in 16 South African cities. Durban has a significant one of 771ha in the CBD, yet despite the success of places like uShaka Marine World and Point Development, widespread urban renewal has been slower there than in Jo’burg, according to Stephanie Miller of Urbanize Properties & Letting. “There are no rate incentives for existing owners in the area, so many are reluctant to sell,” she says. Yet there are numerous opportunities for investors and significant spaces in the inner city have been, or are being, revamped. Consider that you need to keep the property for at least five years to benefit from the UDZ tax incentive. • Email: or visit:

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With total consumer debt soaring over R1,44 trillion, according to Statistics SA, sustaining a business or managing personal finances is a challenge. We speak to a woman who’s learnt from her setbacks and is rebuilding her personal wealth of people seeking protection from their creditors by going under debt review,” he says. In light of these facts, it’s never been more important for consumers to tighten their belts and make every effort to secure their financial future.

THE ROAD TO DEBT RECOVERY Before the National Credit Act took effect in 2007, consumers’ access to credit wasn’t reined in and many South Africans were taking on debt that was beyond their means – with far-reaching consequences. According to Pretoria-based Cawood Attorneys: “Consumers tend to wait until they’re in dire straits before they confront their debt problems and are usually needlessly ashamed of their predicament. They should rather seek the help of a debt counsellor as soon as they fall behind with their monthly payments.”

The firm explains debt counselling as “a simple process of working with a registered debt counsellor to restructure your monthly debt repayments to an amount you can reasonably afford”.

HOW DEBT REVIEW WORKS According to Cawood Attorneys, a client’s total debt and necessary monthly living expenses are calculated. If approved, based on those figures, a new repayment structure is formed to avoid an income deficit each month and improve your cash flow. Creditors can’t repossess your assets or take legal action against you while your debt review application’s being assessed. By working with a debt counsellor, you’re proving to creditors that you’re putting a plan in place to pay your debts off, even though it will take longer. Current interest rate increases won’t apply to you and are even lowered, in extreme cases.


According to the findings of four major reports, the number of South Africans in crippling debt is set to rise. Neil Roets, CEO of leading debt counselling firm Debt Rescue, says reports by the International Monetary Fund (IMF), the World Bank, the South African Reserve Bank and credit information company TransUnion indicate that consumer debt levels are increasing exponentially. The TransUnion Consumer Credit Index found a 5,6% increase in the number of civil summonses for debt and a rise in consumer loan defaults, while the South African Reserve Bank’s quarterly bulletin concluded that consumers owed up to 75,6% of their income. Roets says one in four South Africans is out of work and the number of borrowers with over three payments in arrears has increased by almost 50%. “We’re already seeing a dramatic growth in the number

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The National Credit Regulator prescribes debt counselling fees and process costs, which are deducted from the monthly repayment structure in order to avoid incurring extra expenses for the client. When you’re undergoing debt counselling, you’re not permitted to enter into any new credit agreements. You’re also registered at the country’s credit bureaux as being under debt review, so if you incur any more debt, the process will be terminated and creditors can take legal action against you immediately.

ON THE MEND When actress Pamela Nomvete, who portrayed super-bitch Ntsiki Lukhele in SABC1’s Generations, was so financially beleagured by debt that she was reduced to living out of her car in the city streets, she knew she’d hit rock bottom. Clawing her way back up into solvency was gruelling, but she managed to come out on top again. She readily admits that she’s never had a good relationship with money, which she finds a constant source of anxiety. “I’m not a good budgeter and tend not to respect money, so I find it hard leading a financially sustainable life,” she says. The fact that her profession involved contractual work made it even more difficult to save. She credits the role Donovan Marsh created for her in SABC1’s Castle Lite Crossroads as a major lifeline. She used the money earned from the show to return to London and try to piece her life together, a move that posed numerous challenges. “During my first year there, I was penniless and living with an old friend and her husband. I was now a black actress in my 40s and none of the old acquaintances I’d had were around any more, so my work prospects weren’t very good,” she recalls. However, she eventually became a regular on the theatre circuit and then landed a role in the immensely popular British soapie, Coronation Street, in 2012. She also penned an autobiography, Dancing to the Beat of the Drum (AuthorHouseUK). She says the hardest part of turning her life around was re-establishing her self-belief. However, her faith as a Nichiren Buddhist encouraged her to keep moving forward. She concedes that she’s still learning about responsible budgeting, but her attitude towards money has changed. “At least I’m beginning to recognise its main purpose in my life, which is enabling me to create work that will make a difference and empower others,” she says.

6 PRACTICAL STEPS TO AVOID DEBT Rene Roux of Sanlam Personal Finance shares tips on how to get shortterm debt relief, pay off what you owe and work towards living debt free. However, partnering with a financial adviser is the best way to create longer-term financial strategies DRAW UP A REALISTIC MONTHLY BUDGET Prioritise your spending and differentiate between wants and needs. However, factor in a few modest “nice-to-have” expenses, as you’ll be likely to stray from an overly strict budget Get used to saving and develop a nest egg for unforeseen expenses such as car repairs, home maintenance and medical emergencies. Start with as little as R200 per month

PAY EXPENSIVE DEBT FIRST If the interest rate on your debt is high, paying it off is more expensive. Credit card, store card and personal loan debts can involve up to 20% interest, so pay these off first, but don’t ignore what you owe other creditors either.

BE A FINANCIAL WISEGUY Spend smart. Look for good deals and shop around for better prices. Avoid a big spending spree after payday so that you’re not forced into your overdraft by mid-month.

LIVE WITHIN YOUR MEANS If you can’t pay cash for something, it’s unlikely you can afford it. Avoid buying expensive brands or items. Don’t over-reach when buying a car. Go for an affordable, previously-owned vehicle and finance it over the shortest period possible

USE CASH INSTEAD OF CREDIT Stay out of trouble by drawing cash or paying with a debit card, whenever possible. This way, you’re spending money that’s actually yours. If you do use your credit card, pay it off in total at the end of each month to avoid incurring interest charges.

NEGOTIATE TO PAY OFF DEBT SLOWER If a situation like retrenchment makes paying off your debts impossible, don’t panic. Ask your creditors to work out more realistic payments. This will protect your credit record and reduce stress. And never avoid taking calls or responding to letters of demand from creditors: honesty is always the best policy. If you’re upfront about your situation, most creditors will be willing to negotiate a new arrangement with you. • For more information from Cawood Attorneys, visit:

“Prioritise your spending and differentiate between wants and needs. However, factor in a few modest ‘nice-to-have’ expenses, as you’ll be likely to stray from an overly strict budget.” In association with

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AT A TIME Picture-perfect weddings, holidays in exotic locations, homes in secure communities and sending our children to top-performing, private schools are common dreams. The right investment choices – mapped out here – will help bring these to fruition


ou’ve worked hard to get ahead socially and in your career. And you believe your resourcefulness should equal a life without financial anxieties. Sound familiar? However, financial experts say many South Africans are living beyond their means and until there’s commitment to financial planning and adjusting of spending habits, only a few will realise financial freedom. Find your focus on the following important milestones.

LoboLa and weddings In ideal circumstances, the parents of the bride pay for a white wedding, while the groom’s parents pay for the couple’s traditional wedding. Nowadays, however,

most couples have to foot the bill for these ceremonies themselves. According to wedding planning website, an average South African wedding costs R70 000R80 000, while the luxury ones screened on TV programmes can cost as much as R100 000 (or even R1 million for the wealthy and celebs). Once a couple has agreed how much they want to spend on their nuptials, they’re advised to set aside an additional 10-15% of their total budget for unforeseen costs, such as the relatives needing lastminute accommodation and transport, at the newly-weds’ expense. Most brides don’t have to worry much about lobola, besides whispering to their

uncles not to overcharge their fiancés so that they’ll have enough left over for the wedding. However, if you have the kind of parents who expect R60 000 for lobola because you hold an MBA (a not uncommon scenario), you may have to rethink the Carolina Herrera wedding gown, unless you and your man have already been saving for three to five years ahead of the big day. Tshepo Ditshego, Stanlib Retail’s Head of Project Management, says: “It’s important to map out how your wedding will impact your finances in both the short and long term. For example, if you’re planning to get married in three years’ time in a wedding that costs about R100 000 in current rand terms, expect that figure to have increased

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HOT TIP: SHARES While there’s a wide variety of investment options to raise money for your big day, according to the Johannesburg Stock Exchange, investing in shares still trumps bank deposits and property and affords the investor a good chance of beating inflation. However, there are risks involved, so it’s crucial to do thorough research and scrutinise the published share prices before choosing a company to invest in. For more information, visit:

BUYING A HOME A home is one of the biggest and most expensive purchases you’ll ever make, so a lot of thought needs to go into it. Before planning the decor and garden of your dream home, find out whether you qualify for a home loan. Rhys Dyer, CEO of bond originator Ooba, recommends that first-time buyers save up enough to put down a considerable deposit before visiting show houses. “The more money you put upfront as a deposit, the less you’ll owe on the full cost of the house and the more inclined a bank will be to take a risk on you,” he explains. “However, don’t just snap up the first bond offer you receive from the first bank to which you apply. Another bank might offer you a better deal. A reputable bond originator will apply to multiple banks for your home loan simultaneously, ensuring you get the best deal with the least hassles and paperwork,” he adds.

HOT TIP: HOmE lOAnS South Africa’s four major banks – Absa, FNB, Nedbank and Standard Bank – offer home loans that range from 20 years upwards, depending on an individual’s financial needs. First make sure that you can afford the monthly repayments using

the online home loan calculator offered by the banks and bond originators. Also find out about any hidden costs. For more information, visit

EDUCATION Given the poor state of public education in SA, private schools have become a necessity, rather than a luxury. However, first-class education costs a fortune. Wanita Isaacs, Production Development Analyst at Allan Gray, estimates that educating a child from nursery school to university today could cost as much as R2,4 million. She urges parents to investigate appropriate savings vehicles and commit to them as soon as their first child’s born. “Comfortably affording your children’s school and tertiary education fees requires

“Comfortably affording your children’s school and tertiary education fees requires careful budgeting. As with any investment plan, the sooner you start putting money aside, the longer it will work for you. Even if you start investing late, the money you put aside can still ease the burden of the more expensive later years of education.” careful budgeting. As with any investment plan, the sooner you start putting money aside, the longer it will work for you. Even if you start investing late, the money you put aside can still ease the burden of the more expensive later years of education,” she explains. Instead of paying school fees from your salary or taking out a loan, Isaacs suggests you make a sacrifice early and reap the rewards at a later stage, when your investments adequately cover the overall costs of education.

HOT TIP: UnIT TRUSTS There are various good traditional education policies available, but Isaacs recommends unit trusts as a compelling investment vehicle. These comprise the pooled resources of thousands of people

who invest in blue-chip shares, with the assistance of management companies. Banks and other financial service providers offer a wide variety of unit trusts. Before you commit to any investment, though, explore the other options available to you and compare costs, restrictions, expected returns and product features, as well as benefits, cautions Isaacs. For more information, visit:

HOLIDAYS After a long working year, a family holiday is not only a chance to unwind, but an opportunity to spend quality time and reconnect with loved ones. However, it comes with a hefty price tag – especially if you want a luxury break in an upmarket establishment or an overseas trip. When saving for a holiday, you need to have immediate access to your finances if a great special deal comes up. Saving for a dream holiday requires a great deal of discipline and commitment, or you could end up in a two-star lodge and return home even more exhausted and dispirited than you were when you left.

HOT TIP: mOnEY mARKET ACCOUnTS When saving for holidays and other shortterm goals, money market accounts are highly recommended. Available at most banks, they’re very versatile and in the past have consistently delivered higher returns than call accounts and other immediateaccess deposit accounts, explains Sean Segar, Head of Product at Nedgroup Investment: Cash Solutions. “Money market accounts spread their exposure between banks and other highquality counter-parties, so the risks are lowered. These can be used to park cash or diversify an investment portfolio,” he adds. For more information, visit:

LIFE INSURANCE Death and disease may be traumatic realities – but when planned for properly, their impact is lessened. While funeral policies remain popular, there’s a stigma associated with taking out a life policy on your partner. Jenny Gordon, Senior Legal Adviser at Alexander Forbes Financial Service, says women need to start


by about 6% then, due to inflation. The need to save is even more important for those who have to pay lobola, in addition to the costs of the actual wedding. As a first step, couples should shop around for advice and a savings vehicle that’s aligned with their goal. South African banks and investment houses have various products that can be used to save for short-, medium- and long-term goals, such as unit trusts, savings accounts, fixed-deposit accounts and money market accounts.”

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playing an active role in securing their future finances. “We always rely on the men in our families to take out life cover. But wives also need to take out life cover for their husbands, their children and themselves, including policies for dread diseases and loss of income due to disability or accident. With people living longer nowadays, there’s a bigger chance that they’ll suffer a dread disease, so it’s important to have something to supplement your lifestyle. If something terrible happens to someone in your family, at least you know you’ll have the finances to cope with it,” she explains.

HOT TIP: LIFE AND DREAD DISEASE COVER Most insurance underwriters offer a wide variety of these covers. However, it’s crucial to consult a financial adviser and carefully investigate the options. “Many wives are reluctant to ask questions about money and insurance, but this is a mistake. I’d advise brides to say their first ‘I do’ at their wedding ceremony and the second one when their husbands ask whether they intend becoming involved in financial matters,” says Lara Warburton, MD of Imara Asset Management SA. For more information, visit:

“We always rely on the men in our families to take out life cover. But wives also need to take out life cover for their husbands, their children and themselves, including policies for dread diseases and loss of income due to disability or accident.” In association with

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According to the latest Old Mutual Savings and Investment Monitor, 50% of South Africans aged 18-30 have a pension or provident fund, yet only 13% of them have some form of retirement annuity. This illustrate the largely blasé attitude a large portion of young people in this country have towards their retirement. Even more alarming results come out of the deVere Group/Fin24 survey, which shows South African women’s lack of preparedness for retirement. Women represent less than 25% of the retirement planning sector, with only 12% of women approaching retirement age (51-60) currently seeking retirement planning advice. Prem Govender, Chairperson of the Financial Planning Institute, says the tendency of young people to delay saving for their retirement is very worrying. According to the 2013 Sanlam Benchmark Survey, 51% of South African pensioners are failing to make ends meet predominantly because they started saving for retirement too late in life. Ideally, young people should start saving for retirement no later than the age of 23. At this stage of your life, financial advisers say, you probably have little debt, lower overheads and expenses and will pay comparatively less in premiums. Personal financial consultant Tessa Nkukwane (31)

Picture Credits:

Gone are the days of working for a single employer for years on end. Here’s a handy job-hopper’s guide to prepping for your golden years

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According to the 2013 Sanlam Benchmark Survey, 51% of South African pensioners are failing to make ends meet predominantly because they started saving for retirement too late in life.

advises against putting retirement savings into unit trusts or annuities because she believes that what you get out of them is insufficient. “By the time people reach retirement age, they never have the money they thought they’d have. Their retirement savings fall far short of what they need to live comfortably,” she says. However, she does maintain that having some sort of savings plan for retirement – preferably through non-traditional methods – is crucial. Nkukwane puts her money into a high interest-bearing savings account. Candice Bailey (29), a senior journalist at the Sunday Independent, disagrees with Nkukwane’s viewpoint. “I already belong to a provident fund, but a friend advised me to get a retirement annuity plan as well so that I don’t find myself cash-strapped in my old age. She told me that the earlier I started, the less

I’d pay, so I began about two years ago. I only pay an extra R300-odd a month, which is what I might have spent on drinks,” she says. Having changed jobs five times in 10 years, Bailey says she sees the benefit of transferring her provident fund from job to job because she’s able to keep track of its growth over the years. More importantly, she says, not having access to it has prevented her from “splurging it on nonsense”. Nkukwane, on the other hand, cashed out her pension fund in her mid-20s when she left her former employer. She admits blowing some of the money on good living, but the balance did help pay her rent for 18 months while she struggled to find a permanent job. Govender warns that this approach can only be taken if you’re in your early 20s and in specific circumstances, like needing

In association with

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FOOT-LOOSE, BUT FINANCIALLY SECURE Govender’s advice to young adults inclined to play the employment field is to talk to a financial planner about the various retirement annuity options available. “If you’re going to be job-hopping, you should buy into a very flexible unit trustbased retirement annuity. It shouldn’t be underwritten retirement by an insurance company because if you opt to reduce premiums or stop the plan completely, there’ll be heavy penalties attached,” she cautions.

BIG RETIREMENT MISTAKES TO AVOID 1. Operating without a goal. 2. Procrastinating. Don’t put off saving for retirement: even if you can only afford to start with 1% of your salary, you can increase your payments over time. Katie Brewer, LearnVest Planning Services’ Chief Financial Planner, says: “Putting away 10% now will be a lot less painful than putting away 50% later.” 3. Approaching retirement with outsized home loan costs. 4. Being unaware of whether you have employer match. Although many companies are going the cost-tocompany route, some offer to match a percentage of retirement plan contributions. 5. Putting your kids before your retirement. It’s tough love, but in order to avoid having to move in with your children in your 80s, you can’t afford to sacrifice your retirement savings. (Source: The Daily Muse)

RETIREMENT ANNUITIES VS UNIT TRUSTS • The biggest advantage of a retirement annuity is the tax rebate you’re able to claim from your deductions. However, should you access your funds before the age of 55, you face heavy tax penalties on your lump sum, with just R22 500 of your total amount saved tax-free. • The biggest disadvantage of a retirement annuity is that if you suddenly find yourself retrenched and unemployed for an extended period, you Leon Daniels, Nedbank Head of Funding, says cultivating a regular savings discipline is a mindset and the first step to securing your retirement future. “A smart approach is to allocate part of one’s savings to a savings instrument that makes provision for 24-hour withdrawals and part to an instrument that yields a higher return but which, to account for the higher yield, may not be withdrawn for a certain period. “The proportional allocation decision hinges on several factors, not least of which is your risk tolerance and the number of years scheduled to elapse prior to your retirement,” he says. While life often has a way of throwing unexpected curveballs and expenses our way, Daniels says it’s important to resist the urge to use retirement savings that you’re unlikely to replace. “Forge a keen awareness of how crucial it is to put some of your income aside, to invest the surplus in the avenue most advantageous to your unique circumstances and stay the pace. Keep your eye on the ball of the future,” he says.

aren’t able to dip into those funds. • With unit trusts, there are no tax deductions or tax benefits, but the advantage is that you’re able to access the money immediately if you need it. However, warns Govender, if you’re not a disciplined individual, the unit trust option isn’t for you. “Another option is to split it. Put some money into select investments or unit trusts and the rest of the money into a retirement annuity for the best of both worlds,” she advises.


to settle high interest-bearing debt, or a student loan. Nobody older than 30 should even entertain the idea of cashing out their retirement savings. “You’ll only be shooting yourself in the foot because you’re only allocated one once-off R22 500 tax-free lump sum. You can say you just want the R22 500 when you leave your job and transfer the rest to your new employer’s pension fund. But if you change jobs again the next year, you can’t ask for another R22 500 tax free. Ultimately, blowing that money will come back to haunt you because when you reach retirement age, the first R315 000 is tax free, but you’ll already have reduced that amount by R22 500,” warns Govender.

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HIGHLIGHTS TOP REASONS FOR GIVING – Care about the cause – Want to make a difference – Want to give back to my community – Religious beliefs – Family tradition

91% of HNW individuals gave money, time or goods in 2012, slightly down from 94% in 2010.

Giving most commonly targeted social and community development causes (hospices, children’s homes, support for the aged).





Most (63%) gave less than R25 000 in value (2010: 50%). At the high end, 7% gave more than R100 000 in value (2010: 6%). 63%

Implementing institutions (non-profit organisations) were the most popular beneficiary type.


VO 4% 4%

Political parties and advocacy groups were the least popular.




More than half of givers have neither a strategy nor a budget for giving. Larger givers follow a more formalised approach to giving.

Nearly three-quarters (74%) of givers provide general support.

1 2 Reputation 3

Alignment with personal interests



POST-DONATION BEHAVIOUR Half of givers expect no follow-up after making donations. The most common expectations were a thank you letter and ongoing communication.

TRENDS – Slightly fewer HNW individuals gave in 2012 (91% compared to 94% in 2010). – Value of giving was marginally lower (63% gave less than R25 000, up from 50% in 2010). – Religion was a significantly more common motivation for giving in 2012 (cited by 37% versus 19% in 2010). – Givers are taking a longer-term approach to their donations: 45% have been giving to the majority of their beneficiaries for more than five years (2010: 33%).

MEASURING SUCCESS 70% of givers do not measure the impact of their donations.

S O U T H A F R I C A | U N I T E D K I N G D O M | U N I T E D A R A B E M I R AT E S | J E R S E Y | G U E R N S E Y | I S L E O F M A N N e d g ro u p P ri va t e We a l t h ( P t y ) Lt d ( Re g N o 1 9 9 7 / 0 0 9 6 3 7 / 0 7 ) , t ra d i n g a s N e d b a n k P r i va t e We a l t h , i s a n a u t h o r i s e d f i n a n c i a l s e r v i c e s p r o v i d e r a n d r e gi s t e r e d c r e d i t p r o v i d e r t h ro u g h N e d b a n k Lt d , a n d a m e m b e r o f J S E Lt d t h r o u g h N e d g r o u p P r i va t e We a l t h S t o c k b r o k e r s ( P t y ) Lt d .

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Your bank balance may not quite match Warren Buffett’s yet, but it’s never too early to consider ways to use your growing capital to uplift the lives of others “Going back to its semantic roots, philanthropy really means ‘for the love of mankind’, so anyone can be a philanthropist, regardless of what they’re able to give,” says Anna Vayanos, Head of the Philanthropy Office at Nedbank Private Wealth. While the fulfilment that comes with giving back is unquantifiable, having a strategy for doing so is essential, she adds.

deduction for giving is limited to 10% of a donor’s taxable income in SA,” explains Vayanos. “Once this ceiling’s reached, the value of your total donations which exceed this is lost as a deduction. The proposed changes will enable a donor to carry over that part of the donations which exceed the limit into future tax years, making it more attractive for donors to make larger donations. While our research shows that donors aren’t solely motivated to give by potential tax savings, better tax benefits would motivate many of them to give more.”


HOW TO SET UP A PHILANTHROPIC FOUNDATION experience in this and look to use it to best effect, providing services to the benefit of the sector through advising donors on their philanthropic endeavours and investing in the organisations themselves.”

GAINING THROUGH GIVING Whatever your reasons for giving back, there’s no doubt that sharing your earnings is a significant feel-good factor. “The report shows that HNW donors, in particular, are motivated by caring about a cause. There’s also the obvious neediness that we confront in SA every day,” says Vayanos. “Interestingly, in both Nedbank’s Giving Reports, religion came through as a significant motivation for philanthropy, with ‘religious causes and institutions’ as the second-most popular cause to fund.” There are also financial benefits to philanthropy that our government’s looking to increase, since SA lags far behind countries like the USA, where tax deductions can extend to as much as 50% of the donor’s income. “The available tax

• Get the right advice. You need to know how to structure your foundation in order to achieve your objectives and so that the legal and taxation requirements are fully complied with too. • Consciously explore your personal and family values and whether these lead you to a particular cause. Is it the environment, education, healthcare or the well-being of children? Would you like your foundation to give locally or internationally? • Seek advice on or research the cause and organisations you want to benefit through the foundation and what the most effective solutions would be. • Calculate how much money ultimately needs to go into the foundation to enable its objectives to be fulfilled and then ensure that the funds are invested accordingly. • Involve your family and choose your trustees carefully.


While The Giving Report II, Nedbank Private Wealth’s recently released second study (which surveyed giving in 2012), reveals that 91% of high-net-worth individuals (HNWIs) are involved in some form of philanthropy, this figure’s also down by 2,5% from the previous study which surveyed giving in 2010, revealing the impact of the financial crisis. There’s a renewed upward trend, though, says Vayanos, but more structure is needed. “The report shows that only about 40% of givers in this category have a strategy or budget,” she explains. “Implementing a strategy forces a donor to think consciously about what they’d like to achieve through their giving, allows them to track the impact of their donations and see long-term change, and helps ensure that they take advantage of the tax breaks available and use those savings to augment their giving. “We always work more effectively in something we’re passionate about, so by having a strategy you can plan exactly what you’re determined to make a difference in and how you’re going to do it.” Nedbank Private Wealth’s Philanthropy Office helps donors do just that. Having been involved in charitable investments for over 150 years, the bank’s committed to helping clients make an impact in this sector. “We have a wealth of knowledge and

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DESTINY Personal Wealth Report 2014  
DESTINY Personal Wealth Report 2014  

Saving for life's major milestones, working out a philanthropy plan and putting your cash into investment opportunities - it's all here!