In it for the long haul? Start with financial advice
I always think about the long term - over dinner, when I watch my favourite team Orlando Pirates playing football, almost all the time.
It's a habit so deeply ingrained that I couldn't stop thinking of the long-term consequences of the feeble spending I've noticed over the festive season - everywhere I travelled. People were generally very happy to spend.
It's understandable because the celebrations were in line with the celebratory tone of the festive period. However, I couldn't stop thinking about what the spending meant for the long-term financial stability of the spendthrift families, especially if that spending wasn't planned or budgeted for properly.
To start off your long-term financial journey, I'd suggest you visit your financial adviser as early as possible. Treat it as one of the most important meetings this year, and no later than the end of February. Make sure your adviser is reputable, has a solid track record and, most of all, places your financial wellbeing first.
Other than the advice, you should view your budget as your most important weapon in your quest to win the war on financial instability. Create a budget reflecting all your income and expenses, including all the things we don't normally consider, like bank charges and interest on store cards and personal loans. Don't leave anything off.
You should stick to your budget and review it at least annually to assess if it's still in line with your (and your family's) financial goals.
Ask the hard questions and account for them in your budget, for example: Does your budget and your income still speak the same language? Do you have savings? Did your expenses increase because of a change in your family dynamics, such as a new baby, a new university student, a newly employed family member? Have you acquired or sold an asset? Have you retired and received a lump sum? Are you retiring this year and expecting a change in your finances and your lifestyle?
Address these kinds of questions at that all-important meeting with your adviser, the big idea being that both of you must agree on a new plan for the new year, which hopefully will be in line with that long-term plan.
Another thing to seriously consider, albeit tough considering that the markets were down 10% last year, is your investment portfolio. You may not be aware, but your portfolio could have lost some value last year. If it indeed did lose some value, there is no reason to be upset. The whole market was negative in 2018. But you must remember you're in it for the long haul.
Dips are all part of the long-term journey to future higher returns, as long as you have the right portfolio and are focused on sustainable long-term growth. However, if the portfolio has consistently delivered poor returns, it may be time to look at adjusting your portfolio and investing in other funds that may offer you decent long-term growth. A good adviser who also understands global investments should be able to easily adjust your fund selection if needed.
Other financial components that need your attention include reviewing your short-term insurance, life policies, retirement plans, and estate planning. Generally, you should contact your financial adviser to accommodate any changes in your life circumstances.
Key to financial success is patience. Here, the stokvel groups spring to mind. Well done on your patience and consistence over the years. A good move is to leave some money invested, maybe 20% in an investment account, for example when your investment pays out at the end of the year, take 80% for distribution and leave the rest invested. This is important in your long-term plan, as the more money you leave to benefit from compound interest, the better.
• Owen Nkomo is a director at Inkunzi Wealth Group
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