In Touch Newsletter - June 2014

When life throws you a curveball…….

pic1So you’re cruising along at work having yourself a great day when out of the blue something happens that completely wreaks havoc on your next pay cheque, your upcoming bonus, your access bond…..we all had this happen to us at some stage – the fridge stops working, the washing machine packs up, the car breaks down and the only thing that will breathe life into it is a major engine overhaul……and there is no EMERGENCY Fund to turn to.

pic2Liberty Advisory Services discusses the benefits as well as the Do’s and Don’ts of an Emergency Fund.

The rule of thumb for an emergency fund is that you should have at least three months’ of living expenses saved. This creates an important financial buffer against major financial shocks such as retrenchment.  While a major financial shock like losing your job can be a catastrophe it is often smaller, more frequent events that land us in financial difficulty.

If this month you had a medical emergency and your bills were not covered in full by your medical scheme, would you have the cash to pay? If you are in a car accident, do you have enough savings to cover the excess?

The reality is that most people view their credit cards as their emergency fund so whilst on one hand they are paying off their debts, if anything happens they are forced to take on more debt. It is this fear of having to fund an emergency that makes people afraid of cutting their credit ties. Most people who are over indebted will tell you that an unexpected financial event tipped them over the edge.  Even if you are focused on paying off your debts, you should at the same time be building up an emergency fund so that you do not go back into debt.

pic3If you have no emergency savings, it will take a long time to build up three to six months’ of living expenses - so start small.  Dave Ramsey, author of The Total Money Makeover, recommends starting with just R1000 and then focusing on building that to R10 000 before you start to increase debt repayments.  Once you have paid off your short-term debts then you need to focus on building up that emergency fund over time. Any additional money, especially a windfall such as a bonus or tax rebate should first go to topping up that fund.

THE EMERGENCY ACCOUNT

The aim of an emergency fund is to create a financial buffer, not to grow to fund your retirement; therefore you would have a very different investment strategy than you would for longer term savings.

AVOID TEMPTATION

Your emergency fund needs to be in a separate account so that you are not tempted to spend it on lifestyle “emergencies” like a holiday or a new outfit for a party.

ACCESSIBILITY

While you do not want the funds to be too readily available they do need to be accessible within a day’s notice so putting it into a long-term fixed deposit also does not make sense. If you are still building up your emergency fund you will be limited to accounts with low minimum balances such as a savings account with your bank. Make sure there are no monthly fees on the savings account as this will eat away at your emergency nest egg.

HIGH INTEREST

Once you have built up a sizeable amount, around R20 000, you could consider a money market unit trust that pays a better interest rate than your savings account. Your funds are still easily accessible and paid out within 24 hours.

YOUR ACCESS BOND

Some people may consider keeping their emergency funds in their access bond. While this makes sense financially, as you are not paying interest on your bond for that amount, it does blur the lines if you are also trying to pay off your mortgage over a shorter time period. How much of the capital is part of your repayment plan and how much for emergencies? If you do decide to save into your mortgage ensure that the funds are accessible, not all mortgages are access bonds. Also keep in mind that if you do lose your job the bank is allowed to change your loan conditions and could retain the funds in your access bond.

Source: Liberty Advisory Services liberty

 

Reviewing your Will

pic5It is important to review your Will from time to time especially if there has been a birth of a child, marriage, divorce, death of a beneficiary or executor, inheritance that is not part of the existing Will, etc.

If you are looking to update your Will, it is probably a good idea to take note of the following tips: 

  • If you wish to leave your assets to your spouse and children, it is not a good idea to divide them amongst them equally– except if your estate consists of cash only. To transfer a home into the names of both the spouse and children's names, may lead to practical problems and family disputes, especially if the children should marry. To transfer a motor vehicle into the names of four people for example is also not practical.
  • It is not advisable to include funeral arrangements in your Will. The reason for this is that your Will is typically only read after the funeral. Rather inform your family about your funeral wishes beforehand.
  • If you have minor children, you should consider, in the absence of a guardian after your death, appointing someone as their guardian in your Will. If you are divorced and paying maintenance, you should keep this responsibility towards your former spouse and children in mind when drafting your Will.
  • It is very important to identify the person you wish to appoint as executor of your Will. It is the task of the executor to administer your estate in accordance with the stipulations of your Will and to look after the best interest of your heirs.
  • Keep your Will up to date by revising it regularly.
  • Make sure your Will is valid. The Wills Act stipulates exactly what a Will should conform to. Ask an expert if you're unsure.
  • Avoid commands such as that all assets have to be sold.
  • Make provision for the protection of heirs such as minors and spendthrifts. A testamentary trust is an ideal solution in most instances.
  • Heirs must be clearly identified by full names, surname, relationship and, if available, identity number.
  • Please note that certain monies such as annuities, pensions and group insurance paid outside the estate by the Board of Trustees of the fund/scheme do not form part of an estate. The same goes for a ceded policy or a policy with a nominated beneficiary. Your Will only disposes of assets that forms part of your estate.
  • The word “wish” in a Will must also be used correctly so that the testator's intentions are very clear to the executor. If, for example, the testator expressed the wish that his estate assets be sold, doubt could sometimes arise, depending on the exact wording, as to whether it is a directive or only a wish. If the word “direct” is used, and depending on the exact wording of the specific bequest, there should be no doubt that the executor has to carry out such directive and sell the assets.

Source: Sanlam Trust sanlam

 

Don’t become a victim of Internet Fraud

pic6Hackers operate around the world and range from complex groups targeting major banking chains and corporations to politically-motivated organisations targeting government websites and sensitive information. High net-worth individuals are also very much at risk for their personal, and particularly financial data.

The scale of hacking on a global basis is mind boggling: consider that 600 000 Facebook accounts are hacked each day, that in one year alone, some $1 trillion in intellectual property was hacked and stolen worldwide and that, in 2012, 90% of businesses suffered some sort of computer hacking event.

If hackers gain access to your computer through malicious software, they can cause untold problems by obtaining your saved personal information and using your email address for spamming, spreading viruses, phishing and other harmful activities.

Follow these guidelines to up your level of personal security on the web:

  • Never click on a link in an email that takes you to another website. If you do, never enter your personal details either in the email or on the website.
  • Use up-to-date antivirus software and Personal Firewall Protection
  • Avoid using internet café’s or computers that are available for use by the general public; they may have spyware installed on them to capture your login credentials without your knowledge.
  • Place sensible limits on your accounts and review them regularly.
  • Close any email or social media accounts you don’t use. Unused accounts are prime targets for hackers.
  • Create passwords that are difficult to guess.

Did you know?

  • pic73 in 4 people use the same password for multiple accounts.
  • Password was the most common password of 2012, followed by 123456, 12345678, abc123 and qwerty.
  • 92% of the top 100 paid apps on iOS have been hacked.
  • 100% of the top 100 paid apps on Android have been hacked.
  • 10 minutes is the amount of time it takes a hacker to guess a password comprising six lowercase letters. It takes 23 days for a hacker to guess a password made up of seven lowercase and uppercase letters and 463 years for a password comprising eight lowercase, uppercase, numbers and symbols.

Statistics: Cloud Computing

Source: Standard Bank std bnk

Contact us:

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

- Tel: 031-7172700
- Cell: 0825620572
- Fax: 031-7172701
- Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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