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Caught in the middle

in Behavioural finance, Financial Advisory, Financial Coach Leave a comment
inthe middle
Surviving financially in the sandwich generation

Change is inevitable, but not always pleasant. Pre-retirees are finding that they are not only supporting adult children (sometimes even grandchildren) but their parents as well, neither of which was planned for. There are some fundamental changes to the norms and values in society that are causing these changes. Youngsters are waiting longer to marry, but cannot necessarily afford to move into their own home – or would rather live ‘rent-free’ and spend their money elsewhere. Marriages are failing at an unprecedented rate, and these split families can often not go it alone on one income. The incidence of ‘single parents’ is at the highest level ever. There is also the demographic issue that retirees are living longer, often much longer than they ever have and their retirement funds often run out, so they have to fall back on their children for support.

Whatever the reasons, at a time those would-be empty nesters should be ‘accumulating’ retirement funds, and have the mortgage bond paid off, they are having to incur expenses both to look after children and parents, both of which can have a devastating effect on their own pensions. There is no doubt that this trend will continue, and as longevity really kicks in, could get even worse.

This pressure of being financially sandwiched between children and parents needs to be planned for – both financially and emotionally. There are also some ‘soft skill’ changes that you can start implementing that don’t usually fall under the ambit of financial advice, but quite frankly they should.
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Wealth Lessons to be learned from the US elections.

in Asset classes, Behavioural finance, Economy, Financial Coach Leave a comment

Expect the unexpected: The polls in the USA got it seriously wrong – why? It is only a sample of the population and people lie! Few (sane?) people will publicly admit to endorsing the racism, bigotry and misogyny espoused by Trump but when it comes to the secrecy of the ballot box, it became obvious that there were millions of closet Trump supporters. This has ushered in a whole new world of uncertainty, just like the Brexit vote did, and just like Nenegate did here. It has taken us nearly a year to recover from Nenegate, and the UK is still shuddering. When it comes to your wealth – protect your risks, diversify every aspect of your wealth.
Populism is here to stay. The protest vote against the status quo in government is turning the tide everywhere, including here. Brexit is a good example (trust the Americans to one-up the Brits! This result is Brexit to the power 10). This outcome is a result of emotion and not reason. “We, the people” are sick to death of lobbyists, special interest groups, bloated government payrolls, erosion of real purchasing power and having to reskill into new jobs. The only voice that growing ‘disaffected’ group has, is to vote for something different, however nauseating that might be. The major threats? If you work for, or supply to, government- diversify and seriously reduce your risk exposure. Opportunities – Small business, the Health industry, Service industries, On Demand, Customisation.
It’s not cool to be clueless: Hillary’s email fiasco hit her hard and should be one of the biggest lessons anyone, of any age, needs to learn. If you refuse to climb on the technology bandwagon, and keep up with it you’re going to get hurt. As a retiree your banking costs will climb, but more onerous than that – you will open yourself up to being conned and taken advantage of. In your working life you will not be able to be as productive as someone who embraces technology – forced early retirement is calling! Most of the growing jobs and professions require a good understanding of technology. This is even more true of ‘passive’ income opportunities. Keep your work and home social media presence separate.

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The Myth of Passive Income

in Behavioural finance, Estate Planning, Financial Coach, Investment, Portfolio Management, Retirement Leave a comment
<Palm seeds
If it was that easy we’d all do it

Everyone clamours after passive income. The thought of having money flow into your account, day and night with no effort, is intoxicating. Thousands of bestsellers have been written about it, but don’t be fooled, it is also very hard to do properly or quickly. In one way or another, most of us trade our time for money. Time is finite, therefore the income that you can earn from it will also be finite. With true passive income you invest some time (often lots of it) and capital (often lots of that too) and come out with an invention on which you can earn royalties, a book or training program that earns you ongoing income or set up a website and sell ‘stuff’ that you buy cheap and mark-up and make a profit or start building a property rental portfolio. None of those are easy, and often the money you earn from it, unless you really have hit or spend a massive amount of time on promotion, is minimal for years.

The ‘on demand’ economy has opened up new avenues for passive income that are worth exploring. If you have a spare room and don’t mind the invasion of privacy, then AirBnB might work for you and bring in a couple of thousand rand a month. If you put that in your bond, you’ll pay it off years earlier. You can do the same by picking a house that has a cottage and renting it out. If you have a decent car, you could also become an Uber driver or hire someone to use the car while you are at work, or in the evenings (when demand is often higher) – delegation comes with it’s own problems of course.
Second jobs are not passive income, they are just more of ‘bartering your time for income’, instead of getting overtime at work. On the positive side though, some of them can be very rewarding. It is becoming increasingly easy to sell your crafts/art/hobbies. Distribution costs keep coming down and the value of handcrafted items going up. So while this might not be ‘passive’ income, it can be satisfying second income doing something you love and usually do for free.
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Financial Resolutions – 6 practical suggestions

in Behavioural finance, Financial Coach Leave a comment
Making an impact that lasts beyond the first week of the year

Many of our New Year’s Resolutions will have a financial impact in one way or another. One way to get a resolution to stick is to have some easy wins, so with that in mind here are some suggestions:

  • Cut at least one useless expenditure or debit order out of your budget, effective 1/1 so even before the hangover kicks in, you have already, permanently freed up some disposable income that can be turned into wealth. Subscriptions to anything that doesn’t give you value for money – whether it’s your fault or theirs. Gym, Loyalty programs, Credit cards (you only need 2, one Visa, one Mastercard – and one can be a debit card) professional memberships, magazines or newspapers, duplicate call-centre insurance like accident cover or cancer only cover (do it properly, get the right advice).
  • Put a debit order or scheduled payment in place, effective 1/1 for your emergency fund (if you don’t have one) or Tax Free Savings Account if you do. Even better, start one for your kids (way better than any ‘education endowment’).
  • Don’t assume your Group Life cover is enough to protect you. Ask HR for a copy of the policy for the holidays and read the small print when you can’t get to sleep. Warning, may give you nightmares. Put a copy of the policy and benefit documents in your ‘Redfile’ anyway. If you are the HR manager, please only read with a large glass of your favourite tipple, you’re going to need it. Give me a shout if you need help decoding the legalese and the implications on your employees (and the risk to you).

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6 ways to recession proof your wealth

in Financial Coach, Financial Plan Leave a comment
white orchid
Don’t worry, make money

Recession? What recession? There never was a recovery… I think most of us agree, post 2008 there has been a new normal. The only sector significantly adding to their staff compliment is the government, and while that takes people off the streets, guess who is paying for it (and wait for more tax, probably more VAT next)? We are part of the ‘resource exporting’ block of economies that are being hardest hit by the slowdown in China, even the GDP in Oz is down to the 2% range. We have dipped into negative GDP for the last quarter, and a second dip will officially put us in recession. So, how can you protect yourself?

Protect your income: If you’re an employee, retrenchments are on the rise. Those retrenchments are coming from expected industries like mining ( if you’ve been watching the economy), but if you look offshore, some of those job layoffs are coming from unexpected sources. Deutsche Bank is shedding 23,000 jobs about ¼ of its workforce. Those jobs are coming from technology and back-office departments. Don’t put your head in the sand, is your job secure? If not, what can you do about it? Can you up-skill and make yourself indispensable? One of the best investments you can make is in yourself and your education, irrespective of your age. Should you get a really professional CV together and get it out there? If you’re looking to move job, download my free eBook HERE to show you how to protect your wealth when you do so. If you don’t have an emergency fund of at least 3 months expenses, start it now. This is a great place for your bonus, get your brain used to the idea of investing your bonus before you or your spouse mentally spends it.

Be flexible: One of the best ways to stay  financially flexible is to pay down your debt. Start with the most expensive debt first – usually credit cards – and once paid off, close them. It is often a good idea, especially if you travel, to have one Visa card and one MasterCard, but that Mastercard could be a cheap debit card like Capitec ( it works just fine overseas, it is all I use from ATMs to tills). Keep up to date with mainstream technology, today that isn’t just PCs it is tablets, apps and mobile technology too. There are classes available in all of those if you’re clueless. Let go of the assumption that you’re going to be in the same job for the rest of your life. Unemployed is one thing, unemployable is another – and that is probably your fault. If you’re putting a new investment together make sure it is flexible and that you can stop and start it immediately without penalty (yes, they still exist).

Stay curious: Whole new careers are being invented every week, being proudly clueless could be the death sentence to your job or your company. It is important to have a vague idea of what is going on in the economy, and a more than vague idea about your personal wealth portfolio, including your group benefits. Technology has been here for decades, it isn’t going away, and it can actually be fun (the economy – not so much). An app like 22seven (available in the iStore and Play store) is a great and fun way to keep ontop of all your bank accounts and investments on your smart phone or tablet.
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Too many financial specialists spoil the portfolio

in Behavioural finance, Financial Advisory, Financial Coach Leave a comment

How specialisation is impacting on your wealth

Specialisation is everywhere, niches are cropping up in places that didn’t exist 10 years ago – and much of that feeds the need of the market. It is somehow reassuring to think you are in the hands of a specialist – and when it comes to your wealth – what could be more important?

One of my favourite sayings is “When you have a hammer, everything looks like a nail”

The biggest problem that comes with the myopia of specialisation is the inclination that a solution will only be sought in that specialist area and everything else will be ignored. That’s fine when the whole financial ecosystem has been looked at in it’s entirety first, and the areas that need focussed attention are identified. This is one of the reasons that in the medical field the specialist has to be referred by a general practitioner first. In financial advisory that doesn’t seem to happen – especially with the higher net worth individuals. Everyone seems to have a rolodex of specialists involved in our personal wealth portfolios – medical aid, short-term, life, investment, tax, trust, estate. This has been supported by the financial services industry, and a certain element of snobbery has definitely crept in. Short term, life insurance and medical aid brokers are still tainted by the ‘smouse’ label – which is why you find a plethora of descriptions in those industries. For years it has been ‘cool’ to be an investment specialist.

So what? They are all separate disciplines aren’t they? Yes. But are they independent of each other? Nope. They can’t be put into silos, because if one goes bad, it is going to affect all of them. Not just that, but when each silo has it’s own manager and it is going to be the loudest and most persuasive specialist that gets your attention – and your bucks.

As soon as you have a specialist you can take the ‘independent’ out of independent financial advice. The specialist is only interested in you focussing on (throwing money at) their area of expertise, and unless you’re paying them a fee that is completely unrelated to how much business you place with them, you’re not going to get the whole picture. For example, an investment specialist probably won’t be tell you to place your R500k windfall into a rental property but rather into a stock or unit trust portfolio; a life broker will tell you to put it into an insurance platform investment; your medical aid broker gets such a small commission they won’t care (do you even know who they are?); your short term insurer would love you to buy more stuff they can insure and your spouse has already mentally spent it anyway.
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