04 May Building financial resilience for the future
In light of all that’s happening globally and here at home with the coronavirus pandemic, our finances have really been put to the test. I think the question most people are asking themselves now is – “how do I become financially resilient for the future?”
This makes me think of some of the highlights from the budget speech in February (it seems like It’s something that happened so loooong ago…, we’ve been through so much in a couple of months, OK!)
- Tax-Free Savings Account
A tax-free savings account (TFSA) is an investment vehicle in which as of 2020, you can contribute up to R36,000 per year (an increase from R33,000 previously). The beauty of a tax-free savings account is that both the growth and income you receive on your investment are completely tax-free; no capital gains tax and income taxes are levied on the dividends and interest received.
To really enjoy the benefits of a TFSA, the ideal investment period should be more than 14years. If you are planning to save for the long-term, TFSAs are ideal or you can use a TSFA to supplement your retirement income.
During the lockdown, you will most likely not be travelling, which means that you will be saving on transport costs, which makes up a big part of our budget. Think about how you can potentially redirect these funds either to your savings or to paying off some of your debts.
- Transfer duties
Purchasing a house is a big decision that will affect your finances. If you want to own a property, perhaps now is the best time to come up with a ‘how to plan’.
- How will you get your finances in shape to be granted a bond?
- How will you save for a deposit and other related costs?
- What can you comfortably afford?
Also think about the fact that if you purchase a home for less than R1 000 000, no transfer duty will be charged. When you are buying a property, think about the cost of ownership as well, remember when you own a property, it’s not just the bond you pay every month, there are rates and taxes, electricity, maintenance, etc that you need to budget for.
- Sin Tax
For most of us, the lockdown has given us a time to take a look at our budgets and spending habits; a drink with the girls here, a coffee in the morning before work, a payday purchase, a bottle of wine there, etc.
Although the increases in sin taxes might seem small, like most expenses in our budgets, it all adds up to blowing up our budget. Remember it’s normally not the big and obvious crack that sinks a ship; it’s the small leak that goes unnoticed that does!
- Income Tax adjustments
The truth is that as your income increases, your wants and needs will also increase. Buying a new car, moving out of home or taking care of your extended family etc… BUT it requires discipline and commitment to not increase your lifestyle to the very last cent of your income. Lifestyle creep steals any hope of financial resilience. If you make a lot of money and spend every last cent of it, you will remain broke and never experience financial freedom.
You will be stuck in a job you probably do not like and be forced to work even when you desire a break.
Discipline yourself to live below what you earn and invest the increases you get overtime.
I think now more than ever, we realise just how important it is to have a solid financial plan. That’s why having a good financial adviser is an invaluable asset that can help you navigate your finances. Think of them as your accountability partner who can ensure that you are on the right track and help you secure your future financial resilience.
Download the infographic on the budget below 👇🏾👇🏾