PLANNING POINTS
By Ryan McCaughey
Investors’ anxiety has been heightened by several factors recently, which has resulted in investors and asset managers rightly questioning and reviewing their investment strategies. The recent factors include the war in Ukraine, geopolitical tensions, Covid-related hard lock down in China, impending rate rises by the global reserve banks, global inflation concerns, supply chain pressures and a global economic slowdown.
I know sticking to your long-term financial plan is easier said than done. However, during times of uncertainty, the best course of action for investors is to maintain a calm stance during the crisis, ensure their investments are adequately diversified, and maintain an exposure to long-term themes. Investors need to look beyond near-term news and gain exposure to industries benefiting from longer-term growth trends.
Keep perspective
In times of uncertainty, one often tends to fixate on all the negatives and short-term news. Nine times out of 10 this kind of behaviour results in an emotional decision which often ends up being wrong call. Instead, we should remove ourselves from the “noise”, take a deep breath and review the situation in an informed manner. In order to approach the situation in this manner you either need a bullet-proof structure to follow or someone in your corner that can guide you through the situation - effectively someone that understands you as a person and your ultimate goal.
A Certified Financial Planner (CFP) professional is a partner who is well versed in the financial services industry and will be able to guide you through these unprecedented volatile times, ultimately keeping the ship steady and on track to meeting your long-term financial planning goals.
The year-end is fast approaching, with less than four months to go before we all start winding down for some well-deserved time off. In the lead up I suggest that you review the following key “allowances” and financial considerations:
Offshore allowances
South African residents over the age of 18 have two allowances under which they can transfer money out of South Africa:
1) The Single Discretionary Allowance of R1 million per person. No tax clearance is required.
2) The Foreign Investment Allowance of up to R10 million per person in good standing with SARS – a tax clearance certificate in respect of foreign investment is required.
Both allowances start and end with the calendar year and not the tax year (which runs to the end of February). The allowances are on a “use it or lose it” basis, which means that they do not carry forward to the next calendar year.
Reviewing your financial plan
As we enter the final quarter of the year, now is a good time to “spring clean” your financial plan to ensure that you are on track to achieve the goals set out at the beginning of the year. Reviewing your financial plan ensures that the expected outcomes are continually adjusted for changes in personal circumstances and market conditions.
Reviewing your will
The week of September 12 - 16 is the Law Society of South Africa’s National Wills Week. It is traditionally held every year in September where participating firms offer basic will-drafting for free. With that in mind I encourage you to review your will or have a new will drafted. Effective estate planning should always form an integral part of any financial planning process. This is because the provisions of your will significantly impact the devolution of your assets, which has a longer-term impact on your beneficiaries
Holiday savings plan
If you haven’t started already, now is the time to start saving for those end-of-year expenses. A holiday is the perfect opportunity for you all to take a break from work, reset and spend quality time with your family and friends. Start by identifying your destination and cost considerations, and figure out how much you need to set aside monthly to achieve your ultimate holiday.
This year has been a challenging and unusual year for us all. For the last quarter my advice is to focus on what you can control and not focus on things that are out of your hands. These are what often distract us from the important aspects of life. Try to focus on the positives and finish the year off on a high!
If you don't have an adviser and would like to set up an appointment, visit www.fpimymoney123.co.za for a list of CFP professionals near you.
Ryan McCaughey, CFP, is Financial Planner of the Year 2021/22 and a director of Hewett Wealth.