Alexander Forbes Financial Planning Consultant, Rita Cool, offers some important financial advice on how to see out 2017.
- Update your financial goals & requirements
Your personal circumstances could have changed during the course of the year. Maybe you had a baby and you need to start saving for education, or you divorced and need to separate your finances and sort out your maintenance or your own independent health insurance.
Cool says you need to make sure you are covered for your current situation. “Perhaps you finished paying off your home and no longer need that bond cover. Disability cover is also important because who will provide an income for you if you can’t work any longer due to an accident or illness. Be aware that you should never drink and drive – otherwise your disability cover might not pay out.”
- Review your short-term insurance
This time of year is not only festive for you, but also for criminals. Before you depart on holiday, review your insurance policy and make sure you’ve taken photographs of large items and noted serial numbers for iPads and computers.
“If your insurer feels you were under insured they will pay you pro-rata for what cover you had,” Cool adds. “Ensure your items are covered when removed from the house if you are taking them away with you. Know the terms and conditions of your policy – read through your contract and make sure it will do what you want it to do.”
- Finalise your personal taxes
The deadline for personal tax is November 24 – make sure that, if you still have to file, you do it before this date or you will face a penalty.
- Update your will
People don’t like to think about death, but accidents happen.
“If you die without a will your estate is distributed in terms of the Intestate Succession Act,” says Cool. “If you have children under the age of 18 they can’t inherit assets so their inheritances will go into the government Guardian’s fund. The assets in this fund are conservatively invested and might not suit your family’s needs when you are gone.
“Rather set up a will where you can specify who gets what and you can set up a trust fund for your children. Tell your family where they can locate a copy of your will should anything befall you.”
- Make your bonus work for you
Those who are lucky enough to receive a thirteenth cheque, or bonus, should carefully consider how they will best put it to use, says Cool.
“If you have debt, pay off that with the highest interest rate first. Most schools offer discounts on fees if you pay upfront at the start of the year so your bonus could be used to pay for this. Then you can save the monthly school fees during next year to pay as a lump sum in the year thereafter and so on.
“After you have looked at reducing debt, investing a portion of the bonus is a sensible use for this money, as you can make it work for you in the years to come.” Cool cautions people not to create more debt during the festive season.
- Maximise your savings contributions
Before the end of the tax year in February, see if you can contribute anything additional into your retirement annuity, pension or provident fund – up to 27.5% of your taxable annual income can be invested tax free.
“Find out how much you contribute to your employer’s fund, and if you can make additional contributions into this fund to save on ongoing fees,” says Cool.
“Set up a tax-free savings account, in which you can invest up to R33 000 each year, as conservatively or as aggressively as you choose. This money is also easily accessible should you need it. The benefit is that you don’t pay Capital Gains Tax, tax on interest or dividend’s tax so over time you will reap the benefits.”
- Prepare your monthly budget for 2018
It is important to know how much money you have each month, what your expenses are and what your debts are so that you can base your financial planning on this information.
“Write down your average recurring monthly expenses and don’t forget to include sundry expenses like beauty treatments, birthday gifts and car licence fees that happens once a year.”Cool suggests paying the non-negotiable accounts first like a bond, so that you do not lose that asset.“Make sure you don’t spend more than you earn as you will end up in in a debt spiral.”