In Touch Newsletter - December 2013

Using today to plan for tomorrow

It would probably be fair to say that over the last year most South Africans have, to varying degrees, felt the pinch of rising prices, high unemployment and a slowdown in local economic growth. Aside from tightening your belt and simply waiting for better days, this is the perfect time to really review your financial position and consider how you can make changes that will benefit you for the longer term. 

The pressure is on

Several factors are putting pressure on consumers’ disposable incomes:

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  • High unemployment - which means that the number of people who earn an income becomes proportionately smaller.
  • Rand weakness - weakness in 2013 (which may well persist into 2014) translates into higher prices for imported necessities like petrol. This in turn impacts motorists both directly in their pockets and indirectly through generally higher retail prices as transport costs increase.
  • Higher prices - administered prices like electricity and municipal rates have been increasing at rates much higher than the upper band of the inflation target (6%).
  • Rising debt - consumers are highly indebted, which means that a substantial proportion of their disposable income goes towards paying off this debt instead of other expenses. With the economy showing no signs of robust improvement, the debt trap shows no immediate signs of abating either.

A slowing economy

intouch02The pressure so many South Africans are feeling is mirrored by the extent of the slowdown in economic growth in the country. Growth slowed even more than was anticipated in the third quarter of 2013 (down to just 0.7% compared to the second quarter of 2013). This was, in large part, due to the negative impact of strikes in the motor industry and their knock-on effect to manufacturing in that sector. Weak consumer demand also impacted
manufacturing in other areas of the economy, and although mining production and agriculture improved slightly, it wasn’t enough.

For now, the consensus outlook for GDP growth in 2013 is around 1.9% - which is likely to be on the optimistic side. Thereafter, the South African Reserve Bank (SARB) is forecasting GDP growth for 2014 at a very optimistic 3%. The chances that we will reach this level of growth are slim due to the pressures consumers are experiencing, and are expected to continue into 2014.

So what’s next?

The good news is that there is no fear of the SA economy heading towards a recession in 2014. More likely is that we will see continued sluggish growth and very few jobs being created. For now, there are no indications pointing to inflation pressures, which mean the SARB should still keep rates on hold for a while.

Importantly, steady inflation and no change in interest rates means that the cost of paying off your debt will not increase. This provides a window of opportunity for anyone who has even just a little bit spare each month to make every effort to reduce expensive debt -and in the process, release some disposable income for potential saving and spending that would support economic growth.

If you find yourself in the fortunate position of having a little left over at the end of the month, you’d be wise to save or invest it in a way that will grow your wealth and enable you to achieve an important goal, such as funding your child’s education or building a retirement nest egg. A professional financial advisor is the best person to ask for advice about your financial needs and goals.

Source: Libertyliberty

 

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Take control and protect what’s important to you this holiday season

intouch04During the holiday period there is a surge of motorist on South Africa’s roads and most homes are left unattended as people are travelling to their holiday destinations. Statistics from Mutual & Federal indicate a spike in house-burglary insurance claims during this period. There is also an increase in claims for lost or stolen personal belongings such as jewellery, handbags and mobile communication devices (i.e. cell phones and tablets).

 

What should you do over the festive season to protect your assets?

Here are a few precautionary measures that you can take to protect your assets before you go away on vacation:

  • Test your alarm system, so that you have peace of mind that it does work and complies with your insurance cover.
  • Lock your doors, close your windows and make sure that all keys for your home and cars are kept in a safe place.
  • Make sure that you use reliable house sitters.
  • Stop the delivery of your newspaper during this period or make sure that someone collects the newspaper. This will prevent criminals from knowing that you are not at home.
  • Make sure that your postbox is cleared regularly.
  • Switch off your geyser and make sure that electrical appliances are unplugged.
  • Keep a list of important numbers such as your policy number, insurance company and your Financial Advisor’s telephone number.
  • Ensure your garage doors are locked.
  • Plan your trip, jotting down your stops so that the driver can take breaks during the trip, make sure your car is roadworthy by checking the tyres, window wipers, oil and water.

Do you know what your insurance policy covers?


intouch05Understanding your insurance policy and what you are covered for is critical to you taking control of your circumstances and potential setbacks. Speaking to your financial advisor will help you understand your policy wording which will result in you getting the right cover that will meet your needs.

For many policyholders, the shock and trauma that results from being a victim of crime is worsened when their All Risks and Household Goods cover claims are rejected, due to certain exclusions in their policies.

The Household Goods section covers the content of a home against loss arising from events such as theft and fire among others. There are two options available under All Risks cover namely General and Specified All Risks. General All Risks covers items such as clothing that a person would normally wear or carry. Specified All Risks covers items such as cellphones, tools, documents, leather jackets, bicycles and surfboards. Items that need to be specified will not be covered under General All Risks cover. Certain policies might exclude cover for computer equipment or accessories, such as laptops, palmtops, notebooks, iPads and tablets which will need to be specifically insured under a Personal Computer section.

Does your insurance cover also include value-added services?

Statistics from Mutual & Federal indicate that most short-term insurance customers are not aware of the value-added services that are offered by their policies. These value-added services offer valuable assistance in an emergency such as medical assistance, roadside assistance and home assistance.

Understanding your policy and value-added services will give you peace of mind knowing that you are adequately covered. So speak to your financial advisor, to help you turn your potential setbacks into comebacks.

Source: Mutual & Federalmutualfederal

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Make your pay-cheque last

intouch07The December pay cheque usually arrives early and many people forget that not only does it need to cover the additional festive season expenses, but it also needs to last until 26 January.

The situation is worse for commission earners or the self-employed as they experience a drop in income in January and therefore need to plan for their December salary to last for two months.

If you don’t want to start the New Year in debt you need to have a plan in place:

The January budget

Write up a proper budget for January and put away the money you will need. This is the time of year when we are hit with annual expenses like school fees, books and uniforms, annual subscriptions and membership fees.

Pay forward

Plan for these expenses before the festive season begins - not at the end when you have already spent your money. Ideally try and pay your January bills early for peace of mind. If you are going away around the end of December, paying your bills early will also mean you don’t pay late and incur penalties.

Revise your annual budget

You will also be notified about annual increases in school fees and general services so you need to factor those into your annual budget. Also remember other expenses for the year like an extra pair of school shoes or new clothing for your children.

Buy practical gifts for January

Give practical gifts in December that also lessen the financial burden on your family in January. How about school shoes or a really funky school bag?

Opt for a 13th cheque

Even if they don’t pay an annual bonus, many companies allow you to structure your salary to include a 13th cheque. Speak to your employer as this is a great option to force you to save for the end of the year. If you do use this option, make sure you use it wisely.

Source: Libertyliberty

 

Just 8% of People Achieve Their New Year's Resolutions. Here's How They Do It.

intouch08Let me guess: You want to lose weight in 2014, or maybe just eat healthier. Perhaps you want to spend less money or spend more time with your friends and family.

I know I do.

Self-improvement, or at least the desire for it, is a shared American hobby. It’s why so many Americans - some estimates say more than 40% - make New Year’s resolutions. (For comparison, about one-third watch the Super Bowl.)

But for all the good intentions, only a tiny fraction of Americans keep their resolutions; University of Scranton research suggests that just 8% of people achieve their New Year’s goals.

Why do so many people fail at goal-setting, and what are the secrets behind those who succeed? The explosion of studies into how the brain works has more experts attempting to explain the science behind why we make resolutions—and more relevantly, how we can keep them.

Keep it Simple

Many people use the New Year as an opportunity to make large bucket lists or attempt extreme makeovers, whether personal or professional.

That’s a nice aspiration, experts say—but the average person has so many competing priorities that this type of approach is doomed to failure. Essentially, shooting for the moon can be so psychologically daunting, you end up failing to launch in the first place.

So “this year, I’m keeping my resolution list short,” says Chris Berdik, a science journalist and the author of “Mind Over Mind. “I think my earlier laundry lists made it easier to abandon.”

And it’s more sensible to set “small, attainable goals throughout the year, rather than a singular, overwhelming goal,” according to psychologist Lynn Bufka. “Remember, it is not the extent of the change that matters, but rather the act of recognizing that lifestyle change is important and working toward it, one step at a time,” Bufka adds.

Make it Tangible

Setting ambitious resolutions can be fun and inspiring, but the difficulty in achieving them means that your elation can quickly give way to frustration. That’s why goals should be bounded by rational, achievable metrics.

“A resolution to lose some weight is not that easy to follow,” notes Roy Baumeister, a social psychologist.

“It is much easier to follow a plan that says no potato chips, fries, or ice cream for six weeks.”

And be specific. Don’t say you’re “going to start going to the gym” in 2013—set a clear ambition, like attending a weekly spin class or lifting weights every Tuesday or Thursday.

“We say if you can’t measure it, it’s not a very good resolution because vague goals beget vague resolutions,” says John Norcross of the University of Scranton.

Make it Obvious

Experts recommend charting your goals in some fashion, although there’s no universal strategy for success. For some, making a clear to-do list is enough of a reminder; others rely on “vision boards” or personal diaries.

An emerging tactic: share your goals with your friends and family. It’s another way to build accountability, especially in the Facebook era.

For example, after a woman named Anna Newell Jones ran more than $23,600 into debt, she made a New Year’s resolution to work her way out of it–and publicly. As part of that effort, Newell Jones launched a blog, And Then We Saved, to chronicle her attempt to go from shopaholic to spendthrift; in less than a year and a half, she’d paid off her debt.

My friend Rivka Friedman, who authors a cooking blog called Not Derby Pie, used a similar tactic several years ago: She posted her “kitchen resolutions.” You can still see them on the right-hand side of the blog, as Rivka either crossed off her accomplishments or hyperlinked to blog posts, like her efforts to learn how to “make kimchi” or “ fillet a fish (properly).”

Sharing the resolutions “was a good way to hold myself to them,” Rivka told me. And “in our increasingly [public] lives, social media can be used as a motivator,” she argues.

Keep Believing You Can Do It

To be clear: Simply setting a goal does raise your chances of achieving that goal, significantly.

But within weeks or months, people begin abandoning their resolutions as they hit bumps in the road that throw them off their stride.

intouch09.jpgMore often than not, people who fail to keep their resolutions blame their own lack of willpower. In surveys, these would-be resolvers repeatedly say that if only they had more self-determination, they would’ve overcome any hurdles and achieved their goals.

But writing at the Los Angeles Times, Berdik points to an emerging body of research that willpower is malleable. In one study led by a Stanford University psychologist, scientists gauged whether test subjects believed they could exhaust their willpower, and sought to convince them otherwise. The researchers found that people “performed better or worse [on tests] depending on their belief in the durability of willpower.”

You have as much willpower as you think you have, essentially. Which means that on some level, your journey toward self-improvement will be a self-fulfilling prophecy.

Source: Dan Diamond (Contributor), Forbes.com

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Feel free to contact me if your circumstances or needs have changed and your financial plan needs to be updated.

I look forward to hearing from you!

ROYAL UNION FINANCIAL SERVICES

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Bernadette Dickson

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