Latest / Strictly Business / It's My Money with Maria Smit

Transcript

It's My Money with Maria Smit · Strictly Business

• 0:00
  You're listening to Strictly Business Podcast with Lindsay Williams.
• 0:05
  This edition of It's My Money is brought to you by Brenthurst Wealth, your partner
• 0:11
  for global wealth creation.
• 0:13
  Welcome to It's My Money.
• 0:15
  It's My Money is brought to you by Brenthurst Wealth, South Africa's
• 0:18
  multi-award winning boutique wealth manager.
• 0:20
  With me this week is Maria Smit from Brenthurst Wealth and we're going to talk
• 0:23
  about the following.
• 0:25
  The headline is 10 Simple Money Tips for These Uncertain Times and underneath that
• 0:29
  it says the following.
• 0:31
  Don't wait for the perfect time.
• 0:33
  With interest rates easing, the RAND strong and life moving fast,
• 0:35
  here's how to take control of your finances today.
• 0:39
  Maria, that's always something that comes across in so many of the interviews and
• 0:46
  interactions I've had with you and your
• 0:48
  colleagues over the years.
• 0:50
  Don't procrastinate.
• 0:52
  Don't put things off.
• 0:54
  Do it now.
• 0:56
  Sit down and do it.
• 0:58
  It may be painful to start with, but goodness me, it eases a lot of potential
• 0:58
  pain in the future, doesn't it?
• 1:00
  Yes, it definitely does.
• 1:01
  And my father's a pharmacist, so he likes saying you need to measure something to
• 1:07
  know what's going on.
• 1:09
  And that's also one of the things that I think is so important regarding these
• 1:13
  tips.
• 1:14
  OK.
• 1:14
  And before we get on to the specifics, the tips, that is, I want to make one thing
• 1:19
  clear.
• 1:20
  I'd rather ask you if this is the case.
• 1:22
  It doesn't matter whether markets are doing well or doing badly or whether
• 1:26
  politics are irritating.
• 1:28
  and bringing the country down or they're boosting the economy of the country and
• 1:32
  therefore your finances.
• 1:34
  These tips apply during good and bad times, don't they?
• 1:37
  That's my impression anyway, Maria.
• 1:40
  Yes, that's definitely true.
• 1:42
  We see a lot of people who just want to invest as soon as markets are going up and
• 1:47
  the news looks good.
• 1:49
  But that's actually the worst time to invest.
• 1:50
  So having a game plan and doing a bit by bit by bit helps a lot.
• 1:55
  Very good.
• 1:55
  Okay, you've cleared that up for me.
• 1:56
  Thank you.
• 1:57
  The first one you say, the first of the 10 tips, protect your cash flow first.
• 2:02
  What does that mean?
• 2:04
  You need to know what is your income that you receive and what you spend it on.
• 2:09
  Don't guess and just like we saw all the memes in December of people saying,
• 2:15
  I'm not even logging into my banking app.
• 2:17
  I don't want to know what's going on there.
• 2:19
  It's important for you to know what goes on in your bank account.
• 2:23
  What are you using for essentials and what are you using for lifestyle
• 2:29
  takeaways and streaming services and upgrades and things like that?
• 2:34
  If you know that, you know how to start a game plan for your financial future.
• 2:40
  Because if you see you're using most of your funds just for lifestyle stuff,
• 2:45
  it's good to just drain it in a bit and then start from there.
• 2:51
  Okay, and one of the things you have to start from, or one of the things that you
• 2:57
  have to use the money for that you're not using
• 2:59
  frivolously for stuff that's not going to build your wealth, is an emergency fund.
• 3:01
  And you say build or strengthen your emergency fund.
• 3:05
  Define an emergency fund, if you would.
• 3:08
  I sort of understand it, but what do you understand to be an emergency fund,
• 3:13
  please?
• 3:14
  An emergency fund is like an extra savings account on your bank account.
• 3:19
  It isn't going to be exposed to any equities.
• 3:23
  It's just a buffer zone.
• 3:24
  So it's a fund.
• 3:26
  It's not going to shoot lights out.
• 3:28
  It's like a money market or a high interest savings account.
• 3:31
  It's a temporary account.
• 3:32
  You need to be able to access that money within 24 hours.
• 3:37
  This part of your money plan is not going to shoot the lights out.
• 3:43
  It's just there to give you a bit of interest.
• 3:47
  that money must be easily accessible.
• 3:49
  So that you'd rather draw that before you go and open a credit card to get to money.
• 3:55
  Yeah, the emergency fund is for things that you can't predict that are going to
• 3:59
  happen.
• 3:59
  You sit down and you make a plan and you think that's great.
• 4:02
  And unfortunately, that plan is going to be temporarily scuppered sometimes by an
• 4:09
  event, as I said,
• 4:11
  beyond your control.
• 4:13
  So the emergency fund, very important.
• 4:15
  What about debt?
• 4:17
  Now manage debt aggressively.
• 4:19
  Debt can really get on top of you, can't you?
• 4:21
  I saw an interview with a student in the United Kingdom yesterday, and she had a
• 4:22
  student loan,
• 4:24
  and she's now in her 30s, and she said the student loan interest has just about been
• 4:29
  managed over
• 4:31
  the 10 years since I've stopped being a student, but I've still got the debt that
• 4:34
  I had.
• 4:34
  So debt is terribly important to look after, isn't it?
• 4:38
  It's terribly important, and also in the South African context, We have...
• 4:44
  higher interest rates than most of the world so our debt is a lot more expensive
• 4:51
  than you would get somewhere
• 4:53
  else in the world so look at things like your credit cards your overdraft your
• 4:58
  personal loans
• 5:00
  Service them first because they are the most expensive.
• 5:02
  And then look at the other type of debt that you have, car loans and stuff like
• 5:08
  that.
• 5:08
  So first, those high interest, the stuff that's really expensive are credit cards
• 5:15
  and personal loans and
• 5:17
  overdraft in your bank account.
• 5:19
  Once you have serviced them well, so as soon as your emergency fund is full,
• 5:23
  take that bit of extra money that you have and put it in these expensive debts.
• 5:30
  Right.
• 5:30
  Debt.
• 5:31
  Yes.
• 5:31
  Debt is a four letter word.
• 5:32
  Let's not forget that, Maria.
• 5:34
  Diversified beyond South Africa is something that I hear all the time, again,
• 5:41
  with your colleagues and yourself over the years.
• 5:43
  And at the moment, as we discussed in an interview a couple of weeks ago, again,
• 5:47
  with one of your colleagues,
• 5:49
  everyone's saying, oh, well, the rand is sub 16 to the dollar, which it was at the
• 5:54
  time.
• 5:54
  So therefore, I should bring all my dollars back.
• 5:56
  back and the RAND is going to keep on going.
• 5:57
  It's going to 12 or something like that.
• 6:00
  Doesn't always happen, does it?
• 6:02
  It's a strange beast, the RAND.
• 6:06
  Yes.
• 6:06
  So your offshore portfolio shouldn't just be focused on the RAND.
• 6:13
  It is about getting exposure to equities that we don't have in South Africa.
• 6:18
  If you think about it, every one of us buys a phone.
• 6:21
  Let's say you buy an iPhone.
• 6:23
  Now, if you don't invest your money offshore,
• 6:25
  one of these days you're not going to be able to afford that iPhone that you bought
• 6:32
  because those equities
• 6:34
  offshore keep rising and you need to stay up to date with offshore inflation,
• 6:37
  not just South African inflation.
• 6:40
  So having a bit of offshore exposure always helps.
• 6:43
  At the moment, it's great to take some money offshore because you are getting it
• 6:49
  at a lower rent
• 6:51
  than you would have gotten it a year ago.
• 6:53
  And don't be fixed on the thought that the round is going to stay strong.
• 6:59
  You never know what's going to happen.
• 7:00
  As a country, we aren't exporting technology.
• 7:04
  So we can't continue to strengthen against other major currencies.
• 7:11
  And also, it's not just about the currency factor.
• 7:12
  It's to do with the fact that diversification, and particularly
• 7:18
  geographical diversification, is very important.
• 7:20
  I mean, the overseas stock markets.
• 7:21
  sometimes outperform the JSE Securities Exchange.
• 7:25
  Last year, the JSE did well.
• 7:26
  This year, it might not do so well.
• 7:28
  And the New York Stock Exchange might overtake it.
• 7:30
  Or the Nikkei Dow.
• 7:31
  I mean, the Nikkei Dow in the last couple of days has been up about 6%, 7%.
• 7:36
  So it's not just a currency diversification.
• 7:40
  It's a diversification in geographical areas as well.
• 7:44
  Right.
• 7:45
  I've spoken too much.
• 7:46
  What about this one?
• 7:47
  Don't stop investing.
• 7:48
  Adjust your expectations.
• 7:50
  You'll have to explain this to me, Maria.
• 7:52
  I see a lot of people sitting on a bunch of cash at the moment because they don't
• 7:57
  know what Trump is going to do.
• 7:59
  They don't know what's going to happen in the markets.
• 8:01
  But sitting out of the markets actually causes you a lot more damage than going
• 8:05
  into the markets.
• 8:07
  If you think about it, if you're not investing at the moment, that money is
• 8:11
  probably sitting in an interest bearing account.
• 8:13
  That interest you are going to get taxed on as soon as the tax year ends.
• 8:18
  So if you invested into equities, instead of just staying out of the market because
• 8:25
  you are afraid,
• 8:27
  you are getting a perk with tax because now you are in a capital asset,
• 8:30
  which means you'll only pay capital gains tax the day you draw it.
• 8:34
  And also you are looking at your long term goals.
• 8:38
  if you are keeping your funds safe.
• 8:40
  because you are afraid of market cycles, you are losing out on the growth.
• 8:46
  So even if you're not comfortable doing it all at once now, then take out a bit every
• 8:53
  month,
• 8:53
  invest a bit every month instead of staying out of the market and panicking.
• 8:58
  Good advice.
• 8:59
  And you mentioned the word tax.
• 9:01
  Tax is a three-letter word and we have to pay tax.
• 9:04
  It's the law to pay tax, but you can be efficient with tax, can't you?
• 9:08
  You don't have to ignore it.
• 9:10
  It's almost an asset class on its own, isn't it?
• 9:12
  You can be efficient with your tax affairs.
• 9:16
  Yeah, start small.
• 9:17
  Ensure that your tax-free savings account is filled up every year.
• 9:21
  We saw that article from 91 where they said they have their first tax-free
• 9:28
  savings account millionaire.
• 9:30
  So start small.
• 9:32
  Invest in a tax-free savings account.
• 9:33
  Next up, do your RA.
• 9:34
  If you don't have a pension fund with your employer, do a...
• 9:38
  RA in your personal capacity through an advisor and invest like that.
• 9:44
  As soon as you do that, your tax bill will lower.
• 9:48
  And then also important, if you have investments, ensure that they are tax
• 9:54
  efficient.
• 9:56
  If you just have a bunch of money in an interest bearing account,
• 9:59
  that interest bearing account is going to be taxed at your marginal income tax rate.
• 10:05
  If you are afraid at the moment of the markets and you do a withdrawal out of the
• 10:10
  markets,
• 10:11
  that's going to realize a capital gain.
• 10:13
  So look at the things before you just make irrational decisions to ensure that taxes
• 10:21
  play a role along with choosing which investment vehicle that you choose.
• 10:27
  Keep liquidity for opportunity.
• 10:29
  This tip almost goes against what you've just said, because you're saying here
• 10:35
  invest in the market,
• 10:37
  don't be out of the market at any time.
• 10:38
  But you say cash in the bank means options.
• 10:40
  So what you're saying, we need an emergency fund for emergencies, things
• 10:45
  that we can't control.
• 10:47
  We've discussed that.
• 10:49
  But this is for something else.
• 10:51
  You want cash in the bank.
• 10:53
  You're keeping liquidity for opportunity.
• 10:55
  And that's because if something extraordinary comes up and you haven't got
• 10:58
  the money to take advantage of it, then you're missing out.
• 11:00
  Is that what you're saying?
• 11:02
  Yeah, and that's also another thing.
• 11:04
  If you invest through a good financial advisory company,
• 11:07
  they're probably going to have a separate account that they use for when markets
• 11:13
  fall,
• 11:15
  they'll take some of the cash that you have and invest it into the markets.
• 11:18
  So that is, I think, goes hand in hand with getting an advisor because we are the
• 11:24
  ones sitting in front
• 11:26
  of our computers the whole day tracking the market.
• 11:27
  And if we see there's an opportunity.
• 11:30
  Take some of the money that you already have that has not been invested,
• 11:35
  fixate and use it for those opportunities.
• 11:40
  Here's something to avoid, lifestyle inflation.
• 11:42
  I don't know what that is.
• 11:43
  Please tell me.
• 11:45
  As South Africans, I think the biggest problem is this,
• 11:49
  and that is that as soon as you get that increase, immediately your lifestyle
• 11:56
  increases as well.
• 11:58
  As soon as you get that increase, you buy that bigger bucky.
• 12:00
  you do the painting of your whole house.
• 12:03
  So instead of doing that, when you get that increase from your employer or that
• 12:09
  bonus from your employer,
• 12:11
  instead of having the biggest car or the biggest house in the neighborhood,
• 12:16
  take that money and save it.
• 12:18
  I think all of the advisors in our office agree.
• 12:21
  Our office looks out at the parking lot.
• 12:23
  And as soon as you see that client driving in with a big car, you know you're going
• 12:29
  to have a tough time.
• 12:31
  talk about retirement planning.
• 12:32
  So don't drive the biggest car.
• 12:35
  Don't go on that luxury holiday.
• 12:37
  First save and then you can enjoy all of that later.
• 12:41
  I've got this image of everyone at Brenthurst Wealth just before a meeting
• 12:47
  having a look in the car park.
• 12:49
  Review your insurance.
• 12:51
  That's an interesting one because if you do buy the bigger bucket after you've got
• 12:55
  the bonus and you do buy bigger house after getting the
• 12:57
  promotion, whatever it is.
• 12:59
  You're not insured for that, are you?
• 13:01
  You've got to upgrade your insurance all the time.
• 13:03
  Yeah.
• 13:05
  So I think it's one thing that a lot of South Africans,
• 13:07
  they take out their insurance once and then they never go through it again.
• 13:10
  So have someone go through your insurance at least annually to say,
• 13:15
  but my insurance company, I'm paying so much.
• 13:18
  How can we lower this a bit?
• 13:20
  And most of the time, you can get a bit of a lower rate.
• 13:25
  Compare two companies with each other.
• 13:28
  And then also important, disability protection, life cover.
• 13:34
  If you have children or if you have debt,
• 13:37
  make sure you have life cover that can take care of your children or finance or
• 13:44
  cancel the debt if you
• 13:46
  pass away.
• 13:48
  Something as simple as income protection or disability protection.
• 13:50
  Your income that you're receiving from your employer is so important.
• 13:55
  If a young person comes to me, the first thing I tell them is, make sure you have
• 14:01
  income protection because when you're young,
• 14:03
  it's cheap.
• 14:05
  So take it out.
• 14:07
  If something happens to you and you can't work anymore, you have that protection in
• 14:11
  order.
• 14:12
  That's such good advice.
• 14:13
  I know it's expensive and it's especially expensive when you get older.
• 14:16
  So good advice to it when you're young.
• 14:19
  Final thing is stay informed, but not obsessed.
• 14:22
  So I think what you're saying here is maybe listen to Lindsay Williams
• 14:28
  occasionally, but don't believe him too much.
• 14:30
  She said, read the news, sure, but don't get lost in it.
• 14:30
  Go on.
• 14:31
  Go on with that point, if you would, Maria.
• 14:34
  Yes.
• 14:35
  So if you let's take a simple example.
• 14:38
  Last year in April, Trump had this big tariff where he put tariffs on everyone.
• 14:43
  And if you reacted on that day because you were informed on the news and you saw
• 14:47
  that.
• 14:48
  You would have lost money by now, but if you just read it and thought, oh, it's
• 14:53
  just Trump, I'm just going to stay invested,
• 14:55
  your portfolio would have grown by 14%.
• 14:57
  So it's read the news, know what's going on,
• 15:01
  but don't react to every single piece of news you're getting.
• 15:05
  Interest rates are going to change.
• 15:07
  Currencies are going to move and markets are going to fluctuate.
• 15:12
  But if you have a long term goal and your portfolio is in line with that, just stay
• 15:18
  focused,
• 15:20
  but don't obsess about your portfolio daily.
• 15:22
  And I'll give you tip number 11.
• 15:23
  Keep in touch with your financial advisor all the time.
• 15:26
  not just about what the particular stock portfolio is doing,
• 15:33
  but also how your life has changed.
• 15:35
  Don't be scared, I think, to sit down and say, well, actually, I'm doing this now.
• 15:40
  I've started this new monthly debit because I need this particular product,
• 15:46
  whatever it is.
• 15:48
  You have to keep people in touch, particularly financial advisors, because
• 15:53
  your portfolio is a living, breathing being, isn't it?
• 15:55
  Yes, and the relationship is ongoing.
• 15:56
  So your portfolio doesn't stay the same from the day you did it when you were 25
• 16:03
  and now you're 55.
• 16:05
  Now you're seeing an advisor again.
• 16:07
  Every year we try to review all our clients, go through their portfolio, sit
• 16:10
  down, have a chat.
• 16:12
  If there's any changes, we won't know about it unless you inform us.
• 16:14
  Maria, thanks very much for informing us today.
• 16:17
  Maria Smith is from Brenthurst Wealth and that was It's My Money.
• 16:20
  It's My Money was brought to you by Brenthurst Wealth.
• 16:22
  an award-winning boutique wealth management company.