Sticking to financial new year’s resolutions is easier
By Andró Griessel
21 Dec 2019
I hope that you are reading this with your toes in the sand, from underneath an umbrella and with a cocktail in hand. 2019 has come and gone, and I am certain that many resolutions have been long forgotten.
As I am writing this, I am considering signing up for a prenatal class or attending a CPR course in order to maintain my Vitality status… Proof that my own resolutions have also not come to fruition as planned.
Unlike resolutions to consume less sugar or alcohol, or to improve that work-life balance or to visit the gym more often, resolutions to reach your financial goals are actually much easier to achieve.
The former requires a daily sacrifice and constant slogging. However, with regard to financial affairs, I see countless people who get left behind, while it is relatively easy to rectify shortcomings early on with minor adjustments and solve the problem once and for all.
Make sure to straighten out the following aspects of your financial planning in the coming year to make sure that you are not left behind.
Do the calculation
To measure is to know. I am still astounded by how many people approach their planning like a New Year’s Eve party, i.e. “Let’s see what happens”.
You cannot reach a destination, if you do not know how far it is, what you have to do to get there and for how long you will have to do it.
Most people mistakenly think that there is still lots of time to get their ducks in a row. The longer you wait, the harder it is to get your affairs in order.
If you have never done so before, or haven’t reviewed it for some time, make sure to ask your adviser early in 2020 to point out where you are in terms of your main goals in your financial planning.
Do not invest too conservatively
In my opinion, most people invest too conservatively. If you are 35 years old today, and you aim to retire at age 65, and expect to live until age 90, then a difference in return of “only” 2% will double the amount that you will be able to withdraw at retirement compared to someone who achieved 2% less in returns.
Review your portfolio carefully and make sure:
Also carefully consider the concept of investing too conservatively AFTER retirement. You can possibly live for 30 years or longer after you have stopped working. The long-term performance of your portfolio still plays a major role in the execution of your planning, even AFTER retirement.
Plan to live a long life, not to die early
Many financial plans that I have seen are feasible only if the person dies early. It is not a smart plan, for more than 1 reason.
It is easy to test if your plan is going to fail from this viewpoint. Express your annual projected life insurance premiums as a percentage of your projected savings at retirement. I will be bold in saying that if that percentage is more than 10%, there is a reasonable chance that your planning will fail. Premiums will simply become too expensive if you become very old.
Life insurance is not an investment strategy, so do not treat it like one.
Your partner should not be left in the dark
Many families still regard financial affairs to be the male’s domain, and not something that women should worry about.
Nothing can be further from the truth, because who ultimately ends up having to deal with the planning? It is well-known that women outlive their husbands in most cases.
I recently saw a client who’s plan depended heavily on his ability to withstand major market volatility. He was able to do so since he had a financial background, but his wife had never dealt with investments before. She wouldn’t know the difference between cash in the bank and shares.
In his absence, and especially if his wife has not established a relationship with a trusted adviser, his plan is likely to fail once he passes away. The first market movements will send her running to the bank, to the safety of a fixed deposit. And that will ensure the failure of the plan, since she will not be able to generate sufficient after-tax returns in this way.
If your spouse/partner has not been involved in your financial planning with your financial adviser, encourage him / her to start attending these meetings from 2020. It is for their own good.
By the way, people who have no faith in financial advisers, and handle their affairs by themselves should also seriously consider this reality. What will happen if you are no longer there?
I find it ironic how the majority of men leave their wives in the financial dark for decades and then leave 100% of his estate to her in his will.
Do not confuse movement with progress
In 2019, many investors, once again, despite all the warnings, made the mistake of switching their investments from equity or high-equity balanced funds to cash or income funds.
If you are inclined to drop investments like a hot potato, and you (or your adviser) frequently chop and change your portfolio, then you are a danger to yourself.
In my experience, portfolios that are constructed within a certain mandate, which is simply rebalanced and tweaked over time, performs a lot better than your attempts to predict the future.
All the best for 2020. It may be wishful thinking, but I think this year will hold much to smile about for most of us.
Andró Griessel is a certified financial planner and managing director of ProVérte Wealth & Risk Management. Contact him at firstname.lastname@example.org
Although all possible care was taken in the drafting of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone planning on taking any financial action based on this document, is strongly advised to first consult with their personal financial advisor. ProVérte Wealth & Risk Management is an authorised financial service provider with FSP no. 5966.
True to company culture, Samuel strives to build solid long term relationships with clients and has a meticulous way of identifying needs, defining goals and compiling an executable plan to reach one's goals. He firmly believes that one has to be a specialist in one's field to be able to add value, and continuous training & education is therefore paramount. To be objective and to have an independent approach to a client's planning is critical to make a difference.
Born & bred on a farm in the Montague region, Samuel matriculated in 2001 from Montague High School. He completed his BComm Honours degree in Business Management as well as his Postgraduate & Advanced Diploma in Financial Planning. Samuel is a CFP charter holder. Apart from a short stint at an agricultural company Samuel has spent his whole working career with ProVérte. Samuel is a shareholder and valuable member of the board of directors of ProVérte.