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Busting common myths about having a Will.

Your Will forms an important cornerstone of your Estate Plan, but your Will is not your Estate Plan. Your Will is your final instructions on how your assets should be divided when you pass. There are, however, some common myths around Wills.

The first myth, what happens if you die without a Will?

When you die without a Will, your assets will not go to the state. They will be distributed in terms of your family bloodlines in accordance with the Intestate Succession Act. If you are married and have children, they are the first to inherit. Where you do not have a spouse or children, your parents are then considered, and if they are no longer alive, it follows to your brothers and sisters etc. People who were financially dependent on you also have a right against your estate. It is complicated and may cause fighting amongst your family, but the worst part is that an Executor, who is appointed by the government, will administer and divide your assets.

The second myth – You need to have more than a certain amount of assets to have a Will.

This is simply not true as our legislation allows everyone, even if you just own your clothes, to have a Will. Your Will must however comply with certain minimum standards as set out in the Wills Act.
This includes that your Will must be in writing and every page must be signed by you. Your Will also needs to be dated and witnessed by two competent witnesses. A competent witness is anyone over the age of 14 who is of sound mind and who does not inherit in terms of your Will. Please bear in mind that should your Will be disputed, the witnesses may be called to testify in a court of law.

The third myth – The executor decides what happens to your assets. 

The Executor’s role is to ensure that your assets are distributed according to your wishes. The Executor must report to the Master of the High Court. When you pass away, the executor will be appointed by the Master. A letter of Authority will be issued, and the Executor will take control of your assets for the purpose of distributing them in terms of your Will. Once all your assets have been distributed, the Executor needs to submit a liquidation and distribution account to the Master.

It is important that you keep an originally signed Will in a secure place and more importantly let your family know where it is kept. Make sure your Will is current. You can change your Will as often as you want – you do however need to make sure that is properly signed and dated.

If you need advice on drafting your Will, or you require assistance with your estate plan, use the Contact Us button to speak to us for more information.

5 Steps to design your spending plan

The article, Why you do not need a Budget, clearly discussed why you do not need a budget, and we discussed certain types of spending. We encouraged you to rather plan your spending than setting up a budget. Today I am discussing the top 5 tips for designing your spending plan.

As humans, we often downplay things when it comes to our money. A great example of this is the age-old consumerism trick where they advertise something for R 999 because, in our minds, we automatically think that it is less than R 1 000, so it’s cheap, or now I can afford it. We do the same when it comes to planning our spending. We look at the first one or two numbers. So, for instance, if a debit order is R 1 499, we typically say it’s R 1 400, and then we are confused when all our money is gone at the end of the month.

Step 1: Use the data

Most of us swipe or tap our cards for just about everything, including parking. When you design your spending plan, start by using your bank statement from the previous month and slot the figures into the right category. Once you have completed this the hardest part is over. You have started and now you already have some sort of an idea of where your money goes. Do not use the bank statements for abnormal months, like months where you were on leave, where it was an important birthday or something big happened. Remember we are creatures of habit, and starting on a skewed view will only complicate the process further down the line.

Step 2: Create your overall categories.

In Why you do not need a budget, we categorised spending into four categories, namely fixed spending, necessary spending, social spending, and luxury spending. You now need to classify each of your main categories in step 1, into these four categories. Remember to be honest with yourself. There is no point in classifying a spending item as necessary spending when it is not. It will only complicate the process further down the line when you need to make decisions based on your spending.

Step 3: Determine where you need to cut your spending.

Compare your spending to your income. If you are spending more than what you are earning, start by cutting down on your luxury spending. If that is still not sufficient, see if there is any of your social spending that you can cut back on. You want to avoid cutting back on your necessary spending as far as possible since this will have the most impact on your survival.

Step 4: Breaking it down

For luxury and social spending, it is very easy to overspend as it generally happens in the spur of the moment. By breaking these expenses down into smaller pieces, like weekly units, you will be able to create a control mechanism for yourself. The difficulty in this is changing your behaviour. If you have overspent in one week, you need to ensure and commit to yourself that you will spend less the following week. The opposite is also true, where you are underspending one week, does not mean that you have to overspend the next week. The idea is to get you to spend less and save more.

Step 5: Tracking your spending.

Because your fixed spending will not change, that is one area you do not need to track. Your necessary spending will have certain of those expenses that will only occur once a month and therefore you will be able to track that easily. The other expenses, including the necessary expenses that happen more than once a month, for example, your groceries, etc. will have to be measured in weekly or bi-weekly hurdles to ensure that you are keeping track the way you should. The easiest way to ensure that you do it and that you keep yourself accountable is to send yourself a calendar invite to remind you. This will not only help you schedule time in your diary, it will also be a reminder for you to do it.

In conclusion, if you want to be in control of your money, you have to start somewhere and take action. If you do not change your behaviour, you are not able to change the direction to where you want to be heading. Tracking your spending on the items that you are more likely to overspend on, is the simplest and fastest way to start taking control of your finances.

The right asset class for your investment term.

The right asset class for your investment term.

Since 2008, the financial world has been in turmoil and this led to distrust in the financial world. The various asset classes have produced returns greater than expected, however most consumers still avoid risks, and it is hurting their financial planning and wealth creation.

Financial Planning has various asset classes that serves different roles in a financial plan. We will consider the short-, medium- and long-term asset classes and why they are the best for your various financial planning goals.

The short term.

Most of your short-term goals, are for a period of one to three years. These goals will require a higher level of commitment so ensure that you achieve this goal, because your only have a short period to rectify any of your deviations from the plan. For this reason, you should therefore consider less riskier investments. For this you would typically consider a bank deposit with a notice period. Banks often offer higher interest rates for accounts that requires notice, as they have a longer, more certain timeframe in which they can use the money for their other operations. You could also, should your goal have a time horizon of longer than a year, consider a money market unit trust fund. They usually have a steady growth rate and regular income distributions. They invest in asset classes like bonds, to help them generate the returns.

Reviewing your short-term portfolio should be done at least every six months so that you can track the progress and make the required changes when you need to, sooner rather than later.

The medium term

In the medium term, typically three to five years, you would need to consider some risk in your portfolio. With these goals you have a bit more time to achieve your goals, and you have the time to correct any deviations from the plan to achieve your goal. You have probably head of diversification, or do not invest all your eggs in one basket. For your medium-term investments, you need to do just that. You need to expose some part of your portfolio to higher risk asset classes, such as listed property and equity, but majority of your funds will still be invested in money markets and bonds. The equity component of a medium-term portfolio will be an equity fund with a lower level of volatility.

Reviewing your medium-term portfolio should be done at once every year, so that you can make changes to ensure that you stay on track to achieve your goal when needed.

The long term.

Your long-term goals usually longer than five years, will need your money to work for you. This means that you need to take some risks, to achieve your goals. The problem is that we are emotional when it comes to our money, and we want to see it grow. With equity exposure to your portfolio, you might experience short term losses and long-term gains, also known as volatility. The key with long term investment having most of your investment exposed to equities, is to remain invested. In 2020, we have seen a significant slump in the market when the initial hard lockdown was announced, however, by the end of 2020, most investments recovered especially where the investors remained invested.

With your long term investments, you should definitely have a professional to assist you and manage your behaviour and ensure that you do not react to the short term losses that will help you provide the long term gains that you require to achieve your goals.

In summary

For short term investments, you should have little risk in your investment portfolio and review at least every six months.

For your medium-term investments, you should have some risk in your investment portfolio, and review at least once a year.

For your longer-term investments, you should have more risk in your investment portfolio, and have a professional to help you manage your emotions and guide you along the way.

Why you do not need a Budget.

A budget is based on estimates and most seems like a tedious task. A spending plan can help you divide and priorities your spending.

Deciphering a world of Financial Terminology

I often listen to money programs and read articles about money and the one thing that always gets to me is all the jargon. As a client of some financial institution, the documents provided to you are also built on financial jargon. Sometimes, I even must do some research on the acronyms used in documents and proposals to make sense of the information provided to clients.

The problem, for human beings in general, is that we do not like reading documents that we do not understand, or we read them with such a low level of comprehension that we never really understand what is explained to us and what we sign for.

Whilst financial service providers are aiming to make great strides in trying to, as they call it. “plain language” their documents, there is still a lot to be done. As a financial planner and life coach, I have realized that people trust easily, and sometimes the explanations are not always as forthcoming as they should be. It will also lead to you not understanding what you are buying. The problem is when you need a financial product to solve a need, it is then when this creeps up on you and you have no where to turn to.

Introducing the Jargon buster for financial services.

For consumers that follow us on social media, we will be helping you to decipher (to a point) the jargon used in financial documents and schedules. We will weekly post a specific term, its commonly known “alias’ as well as a short explanation. In doing this, we are trying to equip you to read financial documents with a bit more comprehension.

As the great Arnold Glasow said: “An idea not coupled with action will never get any bigger than the brain cell it occupied”, we will also recommend an action for you to take concerning the specific term. Not only will this help you remember the meaning better, but it will also empower you to make better decisions with regards to your money. After all, it is not how much money you have, it’s how you make your money work for you that will help you gain financial control.

We have also created a Jargon Buster dictionary, that will be regularly updated. You can view the Jargon Buster here.

Got a term that you need help with?

Click on the Contact Us page, send us your request and we will add it to our Jargon Buster.