It’s not an easy thing to figure out. There are logistics to handle, habits to change, emotions to manage, and often it feels like there is never enough time in the day for any of it.
But successfully managing money together is key to creating a happy partnership, so here are four pieces of advice as you go through this process yourself.
1. Focus on Joint Goals, Not Joint Accounts
It’s tempting to get caught up in the logistics of joining your finances. How do you create joint accounts? Which accounts should you join? What if you want to keep some money for yourself? Does that mean your relationship is in trouble?
Ignore all of that. It doesn’t matter. At least not at the start.
What really matters are your joint goals. What are you working towards? What is your shared vision for the life you’re building together?
Start having conversations about what you each value and want out of life. Listen to each other so you can truly understand what’s important to the other person.
There’s a lot of financial advice out there. Enough that your head starts to spin when you try to take it all in, understand it, and figure out which pieces are relevant to you.
I’d like to make it a little easier for you by pointing out some things NOT to do.
Here are five of the biggest mistakes I see people making when they first start trying to improve their financial situation.
1. Obsess Over Investment Strategy
There’s often this feeling that if you can just find the perfect investment strategy, your financial success will be guaranteed.
So you read articles, listen to the experts on TV, and tinker with your investments, all with the hope of finding an edge that puts you over the top.
But here’s the truth: the returns you earn, good or bad, have almost no impact on your bottom line until you’re a decade into the process.
What does matter, a lot, is your savings rate. It may not be sexy, but simply saving enough money is far more important than any other investment decision
To help you manage your money and reach your saving goals:
Create a Budget
A budget is your plan for how you will spend money over a set period of time. It shows how much money you make and how you spend your money. Creating a budget can help you:
- Pay your bills on time.
- Save for unplanned expenses in the future.
- Prepare for retirement.
Consumer.gov offers more information about what to include in your budget, along with aspreadsheet (PDF, Download Adobe Reader) that you can use to create your own.
Consider Ways to Save
Saving money involves looking for deals and buying the items you need at the best price, using coupons or by shopping around. Check out MyMoney.gov’s spending tips for ideas. You can also set up a saving plan to help you save for emergencies and for short term and long term goals. MyMoney.gov offers tips on saving, including helping you achieve your saving goals.
Invest in Long Term Goals
You can save for long term goals, such as retirement (PDF, Download Adobe Reader) and college education, by investing. The U.S. Securities and Exchange Commission
The idea of the first challenge – to ‘go carless’ – was to walk/cycle/use the bus or Gautrain or a service like Uber to get to work instead of driving.
I took Uber to work for a week and each trip cost me about R130 one way. If I extended this over a month, this ended up being more than my average spend spend on petrol per month, which is about R100 per day. What worked better was carpooling with a colleague, allowing us to both save money on petrol.
As a young adult I have not been responsible for a lot of my transport costs and one of the things I realised is just how expensive it is to move around a city like Johannesburg. Transport costs add up quickly, and if you can do a bit of planning in advance, you can save a fair amount of your disposable income.
This was the next challenge and I was asked to cancel or reduce a subscription such as DStv, gym, magazines or data.
When my mother was picking up the bill, it was easy to start a whole
The value of the assets is based on their market value, which the executor is tasked with determining. When it comes to assets such as immovable property, an appraiser appointed in terms of the Administration of Deceased Estates Act will have to be used and the estate will have to pay this person’s fees.
Practically, the car’s value will be the book value, unless it is sold, in which case it will be the actual sale price. Note that the Master can insist on an appraiser valuing any property (not only immovable property) if he has reason to believe that the value provided by the executor is not reasonable.
- Are life insurance policies included in the assets as deemed property a) for the purposes of calculating executor’s fees; and b) for the purposes of calculating estate duty?
If a beneficiary has been nominated then the policy benefits will pay directly to the beneficiary and will not fall into the estate. The executor will therefore not be eligible to charge his fee on the amount and it will only not attract estate duty if one of the spouses is the beneficiary or if it is a qualifying
In looking at your situation, you are both doing relatively well from an earnings point of view, but the 15-year difference in age is a huge factor that makes planning much more difficult. You also started a family relatively late and as we all know, kids are incredibly expensive, especially in their teens and early 20s.
Given your family situation, it counts in your favour that your husband plans to work until age 71. We fully support people carrying on their working lives while this is still fulfilling, and the additional economic contribution it provides increases your chances of being financially independent in retirement. If it is possible for your husband to continue to earn some money for another few years beyond age 71, this again would be an enormous help.
Before going into the specifics of your situation, there are a few considerations to bear in mind when considering the investment case for physical property against an investment in a balanced portfolio:
- Property can be leveraged, balanced unit trusts should not.
- You will receive a capital gain from the property and also earn an income once you have retired.
- Liquidity in real estate can
I understand your frustration. As a business owner and entrepreneur, every financial decision you make for the business has its opportunity costs. Holding money in a current account, or any savings and investment vehicle, where you earn below inflation, let-alone no yield, exposes you to the following risks:
- Cost risk – which is the erosion of your capital due to costs and fees incurred to maintain the account.
- Inflation risk – which is not being able to grow your capital or funds in excess of inflation and eroding your purchasing power over time.
- Asset allocation risk – which is your capital not being exposed to an optimum mix of asset classes through different investment cycles that can offer the optimal return for a given level of risk.
Like an individual investor, a business should be clear on articulating their short-, medium- and long-term financial objectives and the quantum of funds needed to achieve these. In other words, be clear on how much cash flow is needed to meet the daily operational expenses of the business as well as what potential capital expenditure is required for future projects. These should be invested differently.
Depending on your business’s cash
I would like to congratulate you on your decision to use your tax-free savings account as part of your retirement planning. The biggest saving the tax fee savings account offers an individual is that you pay no capital gains tax when you withdraw money, and having a tax-free income can have a big impact in your retirement years.
The R500 000 that you are currently allowed to invest in a tax-free savings account during your lifetime is equal to investing R30 000 a year for 16 years and 8 months. The good news in your case is that if you plan to retire at age 65, your annual allowance will be invested for just more than 22 years before you start using it. That means it will be compounding during that time, and you will not have to pay any tax on the gains.
In order to maximise your return on your investment over time, however, you need a clear investment strategy to guide your decisions over time. You appear to appreciate this, as you mentioned that you do not want to make emotional decisions about your underlying investment funds.
You also realise that the
Let’s face it: we all want the lifestyle of our wealthy friends, neighbours or celebrities even when our own lives might be on the right track. We never seem to have enough, unless of course we decide to change the way we think and how we measure our own success. That starts by living within our means – something that is not an easy decision for most of us to do.
I recently met investors who should have been very well off during retirement as they have managed to save more than R 20 million. Unfortunately, their lifestyle costs are so high that their money will only last for ten to 12 years after retirement. They need to make drastic changes to their spending habits or retirement is going to be a difficult time for them.
How did this happen?
My sense of these investors is that they earned a great income and never once budgeted to save. Their saving was an accident and something that happened on an ad hoc basis because they never had a spending plan. Your budget is in constant competition with your lifestyle unless you keep it under tight control. Life is
For many parents, money is an uncomfortable subject. Discussing finances with your children is either too scary or too personal for many people.
However, a panel of experts at The 2016 Money Expo agreed that this is one of the most important subjects any parent has to manage. Preparing your children for their financial futures is one of the greatest gifts you can give them.
Nikki Taylor from Taylored Financial Solutions said that the earlier parents start on this journey, the easier and more effective the lessons will be.
“For me, it’s about starting them early,” said Taylor. “How do you teach children manners? You don’t wait until they are 15. You start when they are really young.”
Brand manager at Emperor Asset Management, Lungile Msibi, said that even two- and three-year olds can appreciate the lessons of delayed gratification and working towards a goal.
“Start kids when they are young with goal-based savings,” she advised. “If they want a Barbie doll, for instance, show how they can save towards that goal. That’s important because later in life they will understand that you can’t invest if you don’t have a goal.”
A lot of people who get a bonus or once off additional income for whatever reason, tend to ‘blow it’ as you have pointed out. It is therefore a very good idea to try to think of better things to do with the money. I would, however, suggest that you consider not only your immediate or short term needs but also the long term potential of any extra income you receive – no matter how small.
If you have a need for extra monthly income, which might be the case if you are currently using a credit card or overdraft because your expenses are close to or more than your current monthly income, then I support your idea of putting the money in a vehicle that will allow you to supplement your income for the next two years.
A two year term, however, is a very short time horizon for an investment and I assume you intend to be drawing the full amount over the two years. In other words, you will be left with nothing at the end.
If so, you will need access to the money and very little, if any, risk. With
The current environment is an extremely testing one for fund managers. There is so much uncertainty on so many levels, that selecting appropriate investments takes both a lot of analysis and a lot of courage.
However, Paul Bosman, the co-manager of the PSG Balanced Fund, says that even in times like this it is possible to build robust portfolios that allow both the fund managers and investors to sleep well at night.
“Regardless of whether times are rosy or stormy, the three key mistakes to avoid remain the same,” Bosman says. “Don’t pay significantly more for something than it’s worth; don’t buy something just because it looks cheap; and don’t build highly correlated portfolios.”
To do this, however, you have to be able to look past the short term noise and appreciate the longer term fundamentals of what you are buying.
Understand the risks
Bosman points out that it is possible to manage risk by trying to work out what is already in the price of an asset. And when quality assets sell off, that doesn’t make them more risky, but less so.
“Even the worst of news can be priced into
This time of year sees both children and adults preparing their wish-lists for the upcoming festive season. But as many South Africans continue to grapple with rising debt, now is a good time to shift the focus from giving material items to providing future financial well-being.
Giving a child an investment as a gift will not only promote a culture of saving from a young age, but will also show them how you can make money grow.
There’s a powerful story of one customer’s commitment to leave a legacy for his family, and the value of sound financial advice. In November 1968, a customer made an initial deposit of R400 into the Old Mutual Investors’ Fund and 48 years later, his investment is today worth over R600 000.
More precious than the value of his money, however, was the culture of saving and the legacy that he passed on to his children and grandchildren. On special occasions such as Christmas and birthdays, he invested a set amount of money on his children’s or grandchildren’s behalf. With this investment, his daughter was able to provide for her daughter’s schooling.
If South Africa is to develop a generation of
Many parents find it very difficult to talk to their children about money. Either the topic is seen as too sensitive or they just feel that they don’t know enough to give good advice.
However, the worst lesson that any parent could ever give a child about money is not talking about it. Children learn the most from the example that they are set, and that is why it is so important to show that money is not something to be scared of or anxious about it. It is something that should be made to work for you.
This is why it is best to expose children to the idea of saving sooner rather than later. From a young age they should see that they can have control over their money.
Here are three easy ways to get them thinking the right way about saving:
Give presents that mean something
Of course children love toys and having something to play with, but not every present they receive has to give them instant gratification. Putting money in a unit trust or stock broking account might not sound like the most exciting gift in the
The death of a spouse, friend or relative is often an emotional time even before estate matters are addressed.
And truth be told, death can be an expensive and cumbersome affair, particularly if estate planning was neglected, the claims against the estate start accumulating and there isn’t sufficient cash to settle outstanding debts.
People generally underestimate the costs related to death, says Ronel Williams, chairperson of the Fiduciary Institute of Southern African (Fisa). Most individuals have a fairly good grasp of significant expenses like a mortgage bond that would have to be settled, but the smaller fees can also add up.
To avoid a situation where valuable assets have to be sold to settle outstanding debts, it is important to do proper planning and take out life and/or bond insurance to ensure sufficient cash is available, she notes.
The costs involved in an estate can broadly be classified as administration costs and claims against the estate. The administration costs are incurred after death as a result of the death. Claims against the estate are those the deceased was liable for at the time of death, the notable exception being tax, Williams explains.
No pain, no gain
Watching a YouTube flyby of the race course last winter — a video with calming music and breathtaking scenery —I thought it looked like a great thing to do. Having done it, and having had the chance to recover for a while, I know for sure that it was. While I was doing it, though, it was painful. Like, how-the-heck-did-I-get-into-this-mess painful. Going through the pain was what I had to do to make progress.
Ever had to reallocate your portfolio in the middle of market hysteria? Buy stocks when they are down 40%? Buy bonds when stocks are up 40%? It can make you a little ill to stick to your plan in times like that, but that discipline is what makes you successful.
How about going through the painstaking process of tracking exactly how much you spend? Asking your financial planner how much his management fee plus the underlying fund fees are costing you? Asking your insurance agent about the actual costs of that whiz-bang annuity he’s pushing?
These can be difficult tasks and conversations. If you’ve done them and seen the payoff, however, you understand that doing hard things financially is often
Part of the reason we accumulate debt is that there are so many distractions in our lives — things we want to buy but don’t need. But we also ring up debt because we simply don’t understand the flow of our income and expenses, so we can’t accurately estimate how much money we have available to spend.
I’ve struggled with this myself. A few years ago, I put in place a “Money Flow” system to help my family track our spending. You may have heard of a system like this before, but follow along on this tour, because it really works.
Putting the pieces in place
1. Set up two free checking accounts:
- One to pay fixed expenses (such as the mortgage, car payments and utility bills).
- One to pay variable expenses (groceries, gas, clothing and so on).
2. Set up a high-yield online savings account.
We call this our “curveball” account. It’s an emergency fund for use when life throws us curveballs — large medical bills, a job loss or reduction in income, major home repairs, that kind of thing.
3. Make a plan for big-ticket items.
My husband and I agreed that
Have you ever felt pressured to buy a house? Maybe from your friends, your family, your co-workers, or even yourself? Like you haven’t actually made it as an adult until you own your home?
It’s a common feeling, but the truth is that buying a house ISN’T always the right decision. In some cases renting is a smarter move, both for your wallet and your lifestyle. Here are four reasons why.
Life changes fast. That great new job you just started might turn into an exciting opportunity in a different city. That big family you planned on having might turn into a smaller one.
Renting gives you the ability to quickly change your living situation to best match the new realities of your life. That flexibility can be the difference between seizing an opportunity and having to pass on it.
Proponents of buying like to say that when you’re renting, you’re essentially paying off someone else’s mortgage. So why not buy and make sure that money is going towards yourself?
There is some truth to that, if you stay
Social Security Survivors benefits are paid to widows, children, parents and ex-spouses of covered workers.
The Social Security program actually consists of three benefit programs that make payments for various reasons. They are:
- Retirement benefits,
- Disability benefits,
- Survivors benefits.
This post covers number 3, Survivors benefits. These are not the same as the benefits commonly referred to as spousal benefits.
If a worker, who is covered by Social Security, dies and leaves family members behind, they are the “survivors” and are covered under the Survivors benefits program. Social Security will use the deceased worker’s record to calculate payments for his / her family.
There are four eligible parties that may receive payments after the worker’s death. They are the widow (or widower if the wife dies first), children, parent, and ex-spouse. Each has detailed rules for eligibility.
A widow(er) will get benefit payments if:
- They are age 60+, or
- Age 50+ and disabled, or
- Any age and caring for a worker’s child under 16 or disabled and entitled to benefits on worker’s record.
A child will get benefit payments if:
- They are under age 18, or
- Between 18 and 19 and still in secondary school, or
- Over age 18 and
While the EPS captures the media headlines and is the most-sought-after metric, it is only part of one of the three major components of a company’s financial documentation that is necessary to understanding both the company’s performance and its financial condition. The other two major financial statements are the balance sheet and the statement of cash flows.In the upcoming weeks, I will highlight each of the individual financial statements. The objective of this series of lessons is to provide the necessary tools to ascertain financial information and understand those reports without having to possess a CPA (certified public accountant) or CFA (chartered financial analyst) designation. (However, it is the role of the CPA to audit and certify the financial statements that will provide the independent account.)This week, let’s kick off this multipart examination of financial statements by looking at the annual report and 10-K for a lesson on financial and regulatory reporting.
As is often the case with any research project, we start by aggregating information and materials that will provide the basis for our financial investigation. This prompts the questions: What should I look for? and where can I find it?Here is our