The Wealth Guide to Not Going Broke_2016

1
WEALTH GUIDE
TO NOT GOING BROKE
Help! It’s my first payday and I have no idea what is going on or
what to do. Tax? CTC? Deductions? RA? What does it all mean?
ENTER

2
The foreword
Help! My first payslip…
Sample payslip: what is what and why?

Budgeting
How to work out if you can get that car or go to
that festival
Savings: Understand each deduction so
that you are able to make every cent
work for you
What is Cost to Company (CTC)?
Earnings vs deductions
Debt –The good, the bad and the ugly
Study loan tips
Good vs bad debt
Investing – tapping into your inner
Warren Buffet
Different investment options: Short term
Different investment options: Medium term
Different investment options: Long term
Online investing vs using an adviser
Retirement funding
Benefits
Benefits received from your company
My medical aid
Medical aid vs private
Money tips
The benefits of seeing a money doctor
(financial adviser)
Valuable money tips
Contents
Wealth Advisers(Pty) Ltd | (FSP no 4549, 15751 and 41974)

3
Startingyourfirst job and receivingyour payslip is an exciting
experience in anyone’s life. However, even the most qualified
professionals don’t fully understand what their payslip is
saying to them. We often hear – “why didn’t anyone teach us
about taxes, RAs and savings in school?”
Well, let’s just say – School is in! #YOLO
BDO Wealth Advisers has heard your cries and want to help.
The aim of this e-book is to provide young professionals (and
anyone else who may need it) quick snippets of advice on their
payslip, looking at elements such as – Cost to Company, a
sample payslip explanation, a real-time budgeting tool, savings,
debt, investing and usually confusing, topics. Understanding
these topics will go a long way in helping you to be a more
profitable and ‘saving inclined’ generation so that #OOTD can
keep updating and your wallet doesn’t fall behind.
We hope through this book the common myth that professional
financialplanningisjustaboutrecommendingfinancialproducts
will be busted. You will see that through their training and on-
the-job experience, financial planners can assist you with your
goals such as: buying a home; being able to support loved
ones financially; being free of common consumer debt; being
prepared for an emergency; retiring in the lifestyle that you
want; and successfully managing your finances to achieve your
life goals. In fact, consumers working with a CFP® professional
are more successful in sticking to their financial strategies and
are more knowledgeable about financial matters (according to
a study done by the Financial Planning Institute).
To make you feel even more secure with us – BDO Wealth
Advisers is an FPI Approved Professional Practice ™ - which
distinguishes us as a professional financial planning practice
offering financial services of the highest standard (a claim only
+/- 10 other companies in SA can have). We hope you find the
content useful. We are excited to share it with you and wish you
well on your financial wellness journey. You've just taken the
first step...
by Allan Heynen, Director, BDO Wealth Advisers
WHY DIDN’T THEY TEACH US THAT IN SCHOOL?
FOREWORD
I am so glad that
we learnt about
parallelograms in
school rather than
tax, it has really
come in handy this
parallelogram season.”
said no -one ever.
“

4
PRESUMPTIONS
TRUTHS
• Your payslip is a summary of your earnings, and how much your
employer owes you.
• A payslip is first and foremost irrefutable proof of a person’s
work service for any employer. It provides factual proof of the
jobs you have held and what you were paid.
• They hold a lot of weight with financial institutions.
What sort of information should you see on your payslip as per
the Basic Conditions of Employment Act: *see sample payslip
• Employer’s name and address [A]
• Employee’s name and occupation[B]
• Period for which payment is made[C]
• Total salary or wages[D]
• Any deductions[E]
• The actual amount paid[F]
• If relevant to the calculation of pay[G]:
• Employee’s pay and overtime rates
• Number of ordinary and overtime hours worked
• Number of hours worked on a Sunday or public holiday
• The total number of ordinary and overtime hours worked in
the period of averaging, if a collective agreement to average
working time has been concluded.
What kind of deductions would normally be found on a payslip:
• When looking at deductions, it is important to note that
personal/voluntary deductions cannot exceed 25% of a
person’s gross pay.Voluntary deductions include staff loans,
donations to charities, gym fees and in some cases union fees.
• Compulsory deductions include tax and unemployment
insurance (UIF). Deductions related to benefits like pension,
medical aid, life cover and income protection are usually
voluntary but can sometimes be compulsory depending on
your employer’s policy.
NB: It is good to remember that these are not standard amounts in
all industries and they can differ from company to company.
PAYSLIP
What is it and why?
WhatdoeachofthesetermsIseeonmypayslipmean:
Basic pay
Is the rate agreed between you and your employer as your set pay,
without any bonuses or overtime. For monthly paid staff, it is usually
1/12th of your annual salary.
CTC
Stands for Cost to Company and is a term for the total salary package
of an employee. It is the pre-tax salary and includes all benefits the
company is offering.
Employee number
Is assigned to each employee when they begin at a company and
serves as a unique identifier for each employee.
Gross pay / amount
Is the amount that you actually earn before deductions are taken off
your salary.
Net pay / amount
Is the amount that you will take home after deductions.This amount
is what gets paid into your bank account.
IRP5
Is the employee’s tax certificate. It is issued to you at the end of each
tax year detailing all employer/employee related incomes, deductions
and related taxes. It is used by you specifically to complete your
income tax return for a given year.
PAYE
Is employees’ tax and stands for “Pay As You Earn”. Your employer
will deduct PAYE from your salary on a monthly basis and pay it to
SARS on your behalf.The amount of PAYE which you will contribute
depends on how much you earn, and is calculated from tax tables
issued by annually by SARS.
SARS
Is the SouthAfrican Revenue Service and it is responsible for the
collection of all taxes in SouthAfrica.
UIF
UIF stands for Unemployment Insurance Fund and is another
deduction from your salary that is paid by your employer on a
monthly basis.
You have received your first payslip, online or in an envelope from your finance department.
You open the slip and realise you have no clue what is going on….

5
*SamplepayslipAll employees, as well as their employers, are liable for these
contributions. As an employee you pay 1% of your total salary
and your employer pays another 1% of your salary to the fund
every month. If you become unemployed after contributing to
the UIF, or your company does not pay for maternity leave, you
will have the right to claim from the UIF.
YTD (YearTo Date)
Is a period of time, starting from the beginning of the current year
and continuing up to and including the present date.
Which staff are not entitled to a payslip as per the Basic Conditions
of Employment Act:
- Independent contractors.
- National Defence Force.
- National Intelligence Agency.
- South African Secret Service.
- Unpaid volunteers working for charity.
Which staff are not entitled to see working hours on their payslip,
and are also not entitled to be paid for overtime:
- Workers in senior management.
- Sales staff who travel and regulate their own working hours.
- Workers who work less than 24 hours in a month.
- Workers who earn in excess of R205 433.30 per year.
- Workers engaged in emergency work.
DOTHIS
• It is important to remember that it is your responsibility to
ensure that the information contained on your payslip is
correct. So at the end of each month please remember to
check your payslip, check the deductions, and if you notice
anything out of the ordinary, then bring it to the attention
of your payroll staff member or HR staff member as soon
as possible to be sorted out.
• Keep copies of your payslip.
CREDITS: David Bass, Manager, BDO HRAdvisery
[A]
[D]
[G]
[E]
[F]
[B] [C]

6
BUDGETING
PRESUMPTIONS
TRUTHS
DOTHIS
• Budgeting is only for maths-inclined brains.
• Budgeting is only to reach a goal.
List all your income and all your expenditure, item by item.
Don’t leave anything out and make certain you include all
your fixed expenses.
Look at the bottom line – is there any money left after
all these expenses? Remember that “Fun money” is an
expense that has to be budgeted for. If your bottom
line is in the red, you have a problem. Go back to your
expenses and make some lifestyle changes.
Create this budget every month until it becomes second
nature and you have that feeling of power, knowing that you
are in control of your money from day one.
Making your salary work for you through the month is no
different to planning that great holiday. You have to:
• Decide what your expenses are.
• List financial commitments (Car/insurance payments, rent,
food, transport costs, savings etc.).
• List what you spend money on in order to live (clothes, airtime,
food, petrol etc.)
• Include fun money!
STOP ANDTHINK – How can I make this money last through the
month when I have some serious priorities?
• Buy that car!
• Attend the Oppikoppi Festival.
• Hit the town.
• Buy new clothes/shoes.
• Impress the girl/boyfriend.
What do you do before you go on holiday?
• Determine the destination.
• Sort out the transport.
• Book the accommodation.
• Provide for the “Fun money.”
USE OUR LIVE BUDGETTOOL
How to work out if you can get that car or go
to that festival
6
Budgeting
Now-goandenjoyOppi!
CREDIT: DavidCrossley,CFP®

7
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• That your CTC package is your basic or gross salary and that only
tax is deducted and you get your take-home pay or net salary.
• CTC structure allows you to earn some remuneration without it
being taxed.
• CTC package excludes the employers’ contributions to benefit funds
• CTC includes basic salary plus all perks and employer and
employer contributions to retirement funds, group insurance,
medical aid and other benefit funds.
• Most employers allow you the flexibility to structure your
package within the limits of your total CTC.You may therefore
choose to rather understand the benefits included in the CTC
from one employer to another.You can increase or decrease the
various benefits.
• CTC structures differ from one employer to the next.
Your take-home salary or net salary is calculated after the
following deductions from your CTC package:
• Employer contributions to your benefit funds, i.e. retirement
fund, medical aid, etc.
• Employee (your) contributions to your benefit funds, i.e.
retirement fund, medical aid, etc.
• Tax
• Other deductions, e.g. parking fees, social club fees, union
fees, etc
DON'T DOTHIS
• Accept a new job offer based on a higher CTC package, as each
employer structure is different and you may not end up with a
higher net pay. Rather understand the benefits included in CTC
from one employer to another.
• Reduce your group benefits to take home a higher net pay
without investigating the insurance cover and costs in detail.You
may pay a higher contribution rate in your personal capacity.
• Choose a level of benefits the same as your colleague, as their
situation and requirements and even stage in life may be
different to you.
DOTHIS
• Meet with your payroll administrator to have a better
understanding of your CTC package and how it is structured.
• Discuss the flexibility of restructuring your CTC package for tax
efficiency.
• Understand each deduction so that you are able to make every
cent work for you.
CREDITS: Desiree Raghubir,CFP®
Savings
Earnings
What is Cost to Company (CTC)?
What the company is spending to have you as their employee.

8
SAVINGS
PRESUMPTIONS
TRUTHS
HOW IT WORKS
You need a Master’s inTax to understand the basics of what
constitutes taxable earnings and allowable tax deductions.
• You need a large salary to start saving and/or contribute to a
retirement fund.
• You need to have a high income to benefit from tax deductions.
• Utilising tax deductions is illegal or counter-productive to good
social morals.
• It is better and much simpler to earn your income/salary, pay your
taxes and then invest the remainder.
• There are not a lot of tax deductions available.
• For complicated earning structures it is not worth paying a
professional for tax advice.
• Retirement investing outside of your company pension/provident
fund is very restrictive.
• Investing for your retirement is not necessary when you are young
as it is too distant in the future, and you can always catch up with
your contributions in later years.
• The basics of what constitutes earnings and tax deductions is
relatively simple.
• Tax deductions should be utilised in full to get the maximum
benefit and for your investments to grow.
• It is not illegal or socially immoral to claim back as much as you
are legally allowed from SARS.
• Most accounting firms issue a tax handbook after the budget
speech each year that explains the basics of earnings and what
tax deductions are available, written in easy to understand
English.
• If you have a complicated income stream, e.g. offshore
earnings, trust income, etc., then it is advisable to utilise the
services of a tax expert and/or financial adviser, especially until
you understand what tax benefits you can receive.The benefits
will outweigh the cost.
• One of the best investment strategies to invest and save for
your future is to utilise the retirement tax deductions available
from SARS, as you will in effect be contributing up to an
additional 41% to your retirement savings (if you are at the
maximum tax rate).
• Get a basic understanding as to what constitutes taxable
income and tax deductions.
• Salaried employees get their PAYE deducted automatically each
month by their employer, based on their remuneration which
includes their salary, bonus and allowable deductions, e.g.
pension/provident fund contributions.
• Identify what tax deductions you can utilise.The main ones are:
• Contributionsto retirement funding, i.e. contributionsto
pensionor provident funds, or retirementannuities.You may
deduct 27.5%ofyourtaxable incomewithanoverall capof
R350 000 perannum.
• Donationsof upto 10%oftaxable incometo Public Benefit
Organisations.
• Home study expenses ifyou useyour study regularlyand
exclusively forthe purposeofyourtrade.
• There are other areas where you can use tax effectively, including
travel allowances from your employer for business travel.
• Another key area that is often overlooked by tax payers is the
annual Capital GainsTax (“CGT”) exclusion of R40 000 per
annum. Basically SARS allows taxpayers to deduct the first R40
000 of capital gains each year.
Earnings vs deductions
Savings

9
DON'T DOTHIS
- Avoid understanding the basics of your tax affairs, as it feels
overwhelming and you do not have the necessary expertise.
- Don't try and claim expenses that are not tax deductible – there
is a big difference between tax avoidance (legal) and tax evasion
(illegal).
- Don't only utilise the tax deductions your employer uses to
calculate your monthly after tax earnings.
- Don't only start utilising the available tax deductions once you
feel you are earning sufficient revenue.
- Don't delay the start of investing for your future.
DOTHIS
- Start investing earlyto maximisethe effectof compounding. Rather
start with small contributionsto get intothe habitof saving, and
increasethe contributions asyour salary increases.
- Utilise allthetaxdeductionsthat are legally available.
- Invest as much as you can afford in a retirement fund to fully
utilise the tax deductions that are available to you. You are
entitled to deduct up to 27.5% of your taxable income or a
maximun of R350 000 for contributions to retirement savings.
- Keep a check on the growth of any other investments so as to
utilise the CGT annual exclusion once your gains start exceeding
R40 000 per annum.
- For monies that you do not want to tie up until age 55, consider
opening a tax free savings account, especially if you have a
time horizon of more than 16 years. You can invest a maximum
of R30 000 per annum, to a maximum of R500 000 in your
lifetime, which means it will take you just over 16 years to get to
the maximum.The disadvantage is that you are using after tax
money (compared to the retirement funding which is pre-tax),
but your money is available if you require it. You can also invest
in a multitude of unit trusts and not pay any tax, especially CGT,
which could be quite a large number in 17 years’ time.
CREDITS: Hedley Lamarque,CFP®
NEVER SPEND MONEY BEFORE
YOU HAVE IT.
THOMAS JEFFERSON
“
9
Savings

10
HOW IT WORKS
DEBT
PRESUMPTIONS
TRUTHS
• You can use a student loan to maintain a high standard
of living.
• Forget about the debt during university. Concentrate
only on passing.
• Some say avoid debt at all costs, do not consider a
study loan.
• Student debt will get so big it will become impossible
to pay off.
• Interest on study loans is zero-rated.
• Use student loan to support a high standard of living at your
peril. You may not be able to afford your standard of living
after graduation.
• It is a mistake to take out a student loan without considering
all the implications.To a large extent, your future career will
influence the decision. Continuously monitor your loan and
strive to minimise your debt.
• Don’t incur unnecessary debt. But if that means dropping out –
or not enrolling, then take that loan.
• Confidence in repaying debt is key. Be the master of your
money. Believe you can pay it off and find a way.There is
opportunity everywhere.
• Interest is usually linkedto prime (the ratedeterminedfromtime
totime by reserve bank.) andvaries accordingtothe providerof
debt -this can cause a large interest portiononthedebt.
• The value of acquiring tertiary education is well worth the
commitment of having a student loan.
DON’T DOTHIS
• Pick the first institution willing to grant a loan
• Forget about your loan and believe you will just settle it once
you start working. Constantly monitor your loan.
DOTHIS
• Do your research. Interest rates and payment options will differ
from lender to lender. Recognise which option is suited to your
individual situation.
• Have a payment plan. Be aware of what you owe and your
repayment plan. Put the peg in the sand, have a specific
timeline of your debt repay the debt as soon as possible.
CREDITS: LisaGriffiths, Financial PlannerandAndrewCross,CFP®
• There are two types of student loans
1. National Student Financial Aid Scheme which is managed
by the government.
2. Loans from private lenders including the big four banks
and other independent credit providers. All of these should
be registered with the National Credit Regulator.
• Investigate all options and select that which best suits your
specific needs and corresponding interest rates.
• Student loans can be used to pay for tuition fees, books,
equipment and accommodation (for full time students not
living with their parents).
• A new application per year is usually required. Check all the
conditions and ensure that you continually comply. Loans are
grown-up stuff and you would not want your finance to be
withdrawn on a technical issue.
• A surety (something/someone that will take on your debt if
needed.) may have to apply on your behalf if you are a full
time student without a current income.That surety would
need a disposable income and a clear credit history.This would
influence the loan amount.
The good, the bad and the ugly
From good, bad, lifestyle vs wealth creation, to study loans,
there is a lot of debt out there. Don’t let it get you down
Study loans: tips
10
debt

11
DON’T DOTHIS
• Use one credit line to pay off another credit line. Don’t use debt
to pay debt.
• Use your long term debt (like mortgage bonds) to pay for cars
or anything that does not appreciate in value over the long
term.
• Avoid micro loans … they are expensive and can quickly get you
caught in a debt trap.
• Don’t use a credit card to pay for your lifestyle. Buy your
consumables, what you use to live your life (e.g. food, clothes,
entertainment, etc.) with cash.
• Don’t be tempted to buy household furniture and appliances on
credit from retailers. What may seem to be an affordable way
of getting new stuff often turns out to be a very costly exercise
when you count all the costs, charges and monthly payments
you need to make.
• Don’t ignore your debt repayments. If you can’t meet a
repayment, speak to the lender early on so that you can make a
payment arrangement.
DOTHIS
• Be wise and use debt to grow your wealth over the long term.
• Before taking out loans or lines of credit, know how much you
can afford to repay monthly. Understand the costs of your debt
application, that is what your interest charge will be, how long
it will take to pay off the debt and what the total outlay will be
over time.
• Work out the impact of a 1% or 2% interest rate increase
on your minimum monthly debt repayments.Then pay
this increased amount every month.This will save you for
unexpected interest rate increases and will settle your debt a
lot quicker.
• If you are not able to meet your debt repayments, speak to a
debt counsellor as soon as possible. Don’t ignore the situation
and hope that it will go away. Debt never simply goes away!
CREDITS: RicardoTeixeira,CFP®
PRESUMPTIONS
TRUTHS
TRUTHS
• All debt is bad, never borrow money.
• It’s okay to use credit to fund my lifestyle, what I use and
enjoy to live.
• Pay off all your debt as quickly as possible before you invest.
• I don’t have to pay the monthly instalments on my credit
facilities if I can’t afford to.
• A bad credit history won’t really affect me. I’ll be able to
explain it away.
• Using borrowed money (or otherwise known as a ‘line of
credit’ or ‘debt’) wisely and for the correct purpose can be a
smart move to create wealth.
• Using debt to create wealth is a long term strategy and not a
‘get-rich-quick scheme’.
• Debt creates wealth if you’re buying something that increases
in value over time and that produces some form of income
while you own it. Such as a rental property.
• Debt repayment terms are matched to the type of credit line
extended. Match the right type of debt to the spend. Credit
cards and personal loans get paid over the short term (less
than 1 year), whereas mortgage bonds (property finance) get
paid off over the long term.
• When you invest your money, you will earn some form
of investment return. When you borrow money, you will
pay interest to the lender. Understand that there is a cost
to debt. You will always pay back more in total than the
amount you borrowed in the first place.
• Interest rates are variable. They will go up and down over
time. As interest rates go up, your monthly debt repayment
will also increase. To be conservative, always budget for an
increase in interest rates when applying for credit so that you
don’t get caught by surprise down the line.
• Start off by getting to know when to use the different kinds
of debt that are available:
• Credit cards – great to fund short term purchases from
one month to another. Always pay off your credit card
balance in full at the end of each month. This will avoid
you paying any interest. Beware, the interest charge on
credit cards is punitive.
• Mortgage bond – the best way to finance the purchase of
a house, a rental property or the purchase of a business.
This will be paid off over a long-term period, typically
more than 20 years.
• Short-term or personal loans – use this type of credit for
emergencies or really unexpected expenses or purchases.
Make sure that you can afford the monthly repayments
without getting into more debt.
• Student loans – used to finance your tertiary education,
typically repayable once you graduate. They need to
be repaid over a 5- to 10-year time period. Be sure to
budget for your student loan repayments from your first
salary. Refer to chapter above on study loans.
• Car finance – buying a car is not an investment. A car
will not appreciate in value. So make sure that you can
settle the purchase price over less than 5 years. This is a
very technical and complex form of lending, so be sure
to take the time to understand the finance facility before
you sign.
• Micro loans – don’t even consider this option … rather
delay the purchase or spend. The interest charges on
micro loans are typically exorbitant and way more than
a personal loan from a reputable bank.
• Every time you receive a loan or new line of credit, your
repayment pattern is recorded and forms part of your credit
history. Meeting the terms of repayment of your debt will
ensure that you have a clean credit history. Credit history
impacts on the availability of future loans as well as how
much a lender would be willing to charge you.
Good debt vs bad debt
11
debt

12
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• It is safer to have all your savings in cash investments in the bank.
• I will wait until I am paid a lump sum before I start to save.
• I have many years ahead of me to start saving.
• It will get easier to save as years go by as my income will increase.
• It is recommended that you have approximately enough in a
bank account to cover 3 months of expenses in an emergency.
• Interest paid by the bank for “holding your cash” is usually
lower than the rate of inflation, which means that the value of
your investment reduces each year.
• You need to “pay yourself first” which means having the
investment/saving deducted on the same day as your salary is
paid into your account because the temptation of spending it is
too great and there may not be any left over for saving.
• As your income increases so do the claims against it and as
your lifestyle improves – it becomes more difficult to start the
discipline of saving the longer you postpone it.
• It is important to have your eggs in more than one basket to
spread your risk – you need exposure to risk to outperform
inflation and the market.
• Compare different accounts and offerings at different banks
to see which pays the highest interest rate. Investigate these
different options in order maximise to your returns.
• Open a separate account for your emergency cash fund so that
you are not temped to splurge in a weak moment.
• You will receive interest on the investment and it is important
to re-invest this and not spend it as this will give you growth-
on-growth or compound growth.
• You may choose to diversify future savings and the way you
invest future money, once you have reached the targeted three
month's emergency savings to cover your expenses.
DON'T DOTHIS
• Invest for a fixed term as you will not have any flexibility and
access to your capital in an emergency. Rather invest into a
money market account.
• Wait until next year or next month or next week as that never
comes.
• Think that someone else will do the saving for you – father/
husband/wife.
Tapping into your innerWarren Buffet
Short term:
You dont need to be a billionaire to invest.
INVESTING
DOTHIS
• Find out which account has the best interest rate and
flexibility for your emergency funds – it is usually a money
market account. However, one might need to save for a while
to achieve the minimum balance required.
• Calculate how many salary payments you will receive in your
lifetime and start saving from the very first month you are paid.
CREDITS: Sue McLennan, Financial Planner
investing

13
PRESUMPTIONS
TRUTHS
HOW IT WORKS
Mediumterm investments aredesignedto caterfor unforeseen and
planned eventualitiesthat mayoccurover atwoto seven-year period.
Typically,this mediumterm accumulation catersforthings like:
1. Deposit on a motor vehicle or replacement of that motor vehicle.
2. Planning the deposit on that first dream home.
3. Making sure that a honeymoon destination is a memorable one.
Looking at the characteristics of equities (JSE) and offshore
investments, these asset classes historically have performed the best
but are also typically the most volatile over short periods. Looking
at options available for investing for the medium to short term, this
asset class on its own will not be suitable for such investments.
When you want to invest for the medium term, you can have a
portion of your investments exposed to equities or property, but
limited to no more than 40% of the total portfolio.This exposure
should be reduced closer to the maturity term in order to reduce
volatility and to avoid possible short term downside movement.
When markets experience downside movement, you will have to
wait for such downside movement to recover and it might take
longer than the term left towards your initial investment term.
Investing in a combination of equities, property, cash and bonds,
you will have more stable return over the medium term and the
probability of capital losses reduces drastically over the short term.
These portfolios give you more consistent returns, even though the
returns may be lower than equities or property shares.
Medium term:
DON’T DOTHIS
Let emotion change your investment term
- Wait for tomorrow
- Fail to plan, otherwise you plan to fail
DOTHIS
- Plan your future and stick to your plan
- Understand your investment plan and term
CREDITS: Johan Roux, CFP®
13
Investing
• A medium term investment by definition should incorporate an
element of conservatism in the investment structure – remember
the watchword – the shorter the investment term, the more
careful you want to be!
• So then, what sort of investment instruments should we use for
this medium term investment provision?
1. Bonds –These include Corporate Bonds, Government Bonds and
Retail Bonds – they offer a lower rate of interest, but incorporate
a capital guarantee, provided you undertake to leave the money
where it is for a minimum term of 5 years.
2. Equities – Best to look at a good UnitTrust with a conservative
Equity outlook – whilst your capital is not guaranteed, you can
minimise some market volatility over a seven-year period.
3. Property UnitTrusts –These can give you a relatively good return of
the medium term but once again, your capital is not guaranteed.

14
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• I only need to start investing when I get older and earn more.
• I need to get the highest possible investment return.
• I can invest anywhere as long as I do not touch my investments
for a long time.
• My employer will provide for me in my old age.
• The sooner you start investing the higher your chances of
accumulating a significant amount of capital. You need to make
the power of compound interest work for you.The benefits of
compound interest are felt the most over very long investment
periods.
• A long-term investment return of 8% above inflation is actually a
very good investment return.
• Chasing the highest possible investment return is often a "wealth
hazard". Many people switch between different investments in
an attempt to get the “best” return on their money. In doing this,
they often end up with less money than if they had stuck with a
reasonable investment return.
• It is essential to invest in growth assets. Growth assets are mainly
property and shares, with cash providing the lowest return over
the long term.
• Relying on your employer to provide for you in your old age
is a very risky thing to do. Your employer is not attempting to
replace your full pre-retirement income, but to provide you with
some savings towards retirement.
• You’re never too young to start investing. If you start investing a
percentage of your earnings on a monthly basis and continue to
invest this percentage through to your 50s or 60s, you will never
have to worry about having enough capital in your retirement
years. If you delay starting your investment programme by
even five years you will find it very difficult to catch up the lost
growth.
• Your first objective in long-term investing should be to beat
inflation.Thereafter, you should try to get an additional
return above inflation which will boost the amount which
you accumulate. By beating inflation, you are preserving the
purchasing power of the amount invested. In getting a return
above inflation, you are creating the ability to fund more with your
money. Buying and selling investments at the wrong time will
destroy your investment results.
• Investing your money in a bank account for a long time is a
more risky investment than investing in property or shares.This
is because your chances of beating inflation, on an after-tax
basis, are far less than with property or shares. Cash is only a
good investment where there is little or no inflation.
• There is only one person who will provide sufficient money
for you in your old age - and that is yourself. Your employer
retirement fund can be taken into account in your investment
planning, but it cannot replace your own investments.
DON'T DOTHIS
• Delay investing until you can afford it
• Chase after the “best” returns and switch investments on a
regular basis
• Invest in safe investments such as cash.Cash is only for
emergency funds.
• Leaveyourplanningforretirementtoyouremployer.
DOTHIS
• Start investing from your very first pay cheque. Set yourself a
target, say 10% of every pay cheque.
• Invest with a reputable investment manager with a good track
record and stay with them unless there is a fundamental
reason to change
• Make sure you invest in “growth” assets such as property
and shares
• Take your employer’s retirement fund investments into
account but do not rely on this as your sole source of
retirement funding. Do not cash in your retirement fund
when changing jobs
CREDITS: Peter Harten,CFP®
Long term:
14
Investing

15
INVESTING
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• I can learn for myself what an adviser can tell me.
• I do not need to pay for advice for something that I can easily
do by myself.
• Financial planners are too expensive.
• I am in complete control of my finances.
• I am fully aware of the impact investment fees have on my
investment performance.
• Online investing is not equipped to provide detailed, in-
depth financial planning services.
• Online investing platforms may explain advantages/
disadvantages of different investment vehicles and
portfolios, but will not be able to explain how they will fit
into each person’s individual circumstances.
• Certified Financial Planners have the necessary education,
experience and expertise to construct holistic, tailor-
made financial plans comprising financial products and
investment portfolios based on the individual’s specific
goals and objectives.
• Certified financial planners® are able to explain and
disclose all expenses involved in the process of investing.
The individual is in a position to know exactly what and
why they are paying certain fees, and how these may
fluctuate going forward.
• Direct human contact and forming a relationship with
somebody you trust is extremely important to prevent
the individual from making emotionally driven money
decisions in the short term, which can be detrimental in
your long term investment plan. Objectivity is key when
implementing financial strategies.
• Financial planners offer comprehensive investment
analysis, better investment selection and diversification
based on individual investment horizons and risk tolerance.
• Financial planners will work with you through various life
transitions, ensuring that you transition emotionally
and financially.
• The first few meetings with a financial planner allows them to
get to know you as a person, understanding your relationship
with money and your life goals.
• When both you and the planner are confident enough to
continue the professional relationship and understand
what is expected from each other, the planner will do
more detailed analysis your financial situation and use this
information to develop a holistic financial plan based on the
your specific situation.
• A fee for services will be agrees to in advance. Full disclosure of
what you are paying for the advice must be documented.
• The plan and all necessary transactions will be described to the
client and once that has happened, the plan will be executed.
• The plan will be continuously reviewed to make sure the client
is still on track.
Online investing vs using an adviser
DON'T DOTHIS
• Do not underestimate the importance of a professionally
qualified financial adviser.
• Do not make rash, emotional decisions regarding your
money.
• Do not delay the decision to invest money because of your
reluctance to use a financial planner and your uncertainty
regarding the investment process.
DOTHIS
• Find a financial planner who is suitably qualified to give
holistic financial advice.
• Be in a position where you feel comfortable with the
financial planner. All financial planners are different people
with different personalities. Choose one with whom you
feel you will be able to enjoy a long term professional
relationship. You should be able to trust this person with
personal financial matters and believe that he/she is acting
with your best interests at heart.
• Be prepared to work interactively with your financial
planner. Be involved in your financial decisions and ongoing
analysis over time together with your financial planner.
• Be prepared to be honest with yourself and your financial
planner. In order for you to plan your future you should be
100% clear on your present.
CREDITS:AndrewCross,CFP®
debt

16
RETIREMENT
FUNDING
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• I am nowhere near retirement age.
• I will not reach retirement age.
• I have my own retirement annuity.
• Thetruthismanysituationsmayariseinyourworkinglifetime-
• Youcouldgetretrenched.
• Youwillprobablylivetobe100yearsormore.
• Youwilllikelyberetiredfor30ormoreyears.
• TheaverageSouthAfricanretiresonabout20%oftheirincome–
couldyouliveon20%ofyourincome?
• Thetaxmanincentivisesyoutosavebygivingyouataxdeduction
onyourcontributions - upto 27.5%oftotalincomewillbe
allowablesubjecttoamaximumofR350000.
• Theearlieryoustartthebetterbecauseofthecompoundingeffect.
SeethechapteronLongTermInvesting.
• Your employer deducts the contributions from your salary and
invests this in the Group Retirement Fund.
• As it is done on a group basis you benefit from the economies
of scale – it is an extremely cost effective way of saving.
• If you leave your employer you can access the money in the
savings account – this can really help if you get retrenched.
DOTHIS
• Start saving now for retirement – save at least 15% of
your gross income towards retirement funding.
• When changing jobs –preserve this benefit.
• Speak to your employer’s financial adviser – get a
different viewpoint.
• Put together a financial plan for retirement benefits.
DON’T DOTHIS
• Never “cash out” your retirement savings when
changing jobs.
CREDITS:Cindy Frantzeskos,Corporate BenefitConsultant
I made my money the old-
fashioned way. I was very
nice to a wealthy relative
right before he died.
–Malcolm Forbes
“
16
Benefits

17
BENEFITS
Benefits received from your company
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• I am too young to have life/disability cover.
• Nothing is going to happen to me, I am a healthy person.
• I willonly need life/disability coveronce I am married with children.
• You need to prepare for any eventuality in life, whether death or
disability.
• Group benefits cover you for a number of illnesses/conditions
because they look at the group and not individuals. It doesn’t
matter if you have a condition already.
• Suicide is covered under the group life cover benefits.
• With income disability benefits you don’t have to be totally
disabled to receive the benefit.
• Grouplifebenefitsprovide24-hourcoverandhavecreditorprotection.
• Companies cover employees for life cover according to a
multiple of their annual salary. For example, if your annual
salary is R100 000 and your cover is 3 times your annual salary
then your beneficiaries will receive R300 000 "dutiable".
• Life cover payments do not form part of your estate provided
dependents/beneficiaries are nominated.
• Disability benefits cover you for 75% of your monthly salary for
permanent or temporary disability whether it is due to sickness
or accident, until you recover/die/reach normal retirement age.
• Life cover and disability benefits are often paid free of tax,
though there are some expectations to the rule.
DON'T DOTHIS
• Exclude your group benefits when looking at your total
financial plan.
DOTHIS
• If you have any policies in your personal capacity, have
these assessed by your adviser to ensure that you have
enough cover and that you are not over- or under-insured.
• Find out if there are any other additional benefits under
your group cover such as a benefit which covers the
education of your children in the event of your death.
• Disability benefits could also include cover for medical aid
contributions for up to 12 months.
• Speak to your company’s group benefits provider for more
details regarding the group cover.
CREDITS: Lesego Mpete,Corporate BenefitConsultant
Yes you do get more than just a salary from the company you work for.
Make sure you understand what you are getting.
17
Benefits

18
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• I am too young, I don’t need a medical aid.
• I have a hospital plan that will cover me.
• My medical aid will cover me fully.
• Accidentsandillnessescanhappenatanytimeandyouneedaccess
toprivatehealthcareassoonaspossible.
• Makesureitisahospitalplanfroma“proper”medicalaid.Medical
insuranceprofessestocoverhospitaladmission,butoftenthecover
isinsufficient.Getprofessionaladvicesoonerratherthanlater.
• Considergap/top-upcover–medicalaidsnolongerfullycoverthe
specialist’scostinhospital.Gapcoverpoliciesaredesignedtocover
theshortfalls.
• Membership of a medical aid is vital in South Africa. If you are
healthy, it is easy, but if you are unhealthy with pre-existing
conditions there may be waiting periods and exclusions. If you
are over 35 years then late-joiner penalties may apply.
• Joining through a company scheme generally means no waiting
periods, exclusions or late-joiner penalties.
• Several medical aids provide “Wellness Benefits” which offer
incentives for healthy members.
DON'T DOTHIS
• Don’t delay joining a medical aid – make it a necessary
part of your monthly budget.
• Don’t join any scheme just because it is cheap.
DOTHIS
• Get professional advice on which is the best plan for
you.
• Understand what is covered by the medical aid.
• Apply for gap cover – these policies cover the gaps on
all medical aids.
CREDITS: SueCogswell,CFP®
MEDICAL AID
Medical aid vs private
18
Medicalaid

19
PRESUMPTIONS
TRUTHS
HOW IT WORKS
• It is impossible to find a reputable financial planner.
• Financial Planning is not a regulated industry.
• A financial adviser is the same as an insurance broker.
• There are a number of reputable professional organisations
such as the Financial Planning Institute and the Institute of
Financial Advisers that have databases of qualified Financial
Planners that can be called upon to assist.
• The financial services industry is subject to stringent rules and
regulations.
• Financial Planners have to be registered with the Financial
Services Board.
• In terms of the Financial Advisery and Intermediary Services
Act, financial planners are required to give you details of who
they are and what they do, before you agree to do business.
• Not only will the adviser give you a copy of their declaration
and disclosure document, but they will request that you sign
acknowledgement for receipt of this document, which is
designed to safeguard you and ensure that you are dealing with
a reputable individual.
• They should then offer to undertake a full financial needs’
analysis, taking all aspects of your financial situation into
consideration.They may charge you for this but they will tell
you in advance.
• Once you have received and studied your financial needs’
analysis, you may choose to do business with the financial
planner, in which case appropriate quotes will need to be
presented to you.You will need to approve these by signing them.
• Once all these aspects of your transaction have been
concluded, your financial planner should present you with a
comprehensive record of advice.This is a document that will
detail your meetings, what transpired in the meetings, any
advice that was given to you and what actions you chose to
initiate or ignore.
• Your financial planner is also obliged to ensure that they update
you annually on your financial planning in order to keep pace
with your changing needs.
DON’T DOTHIS
- Not ask about the Financial Planner’s background.
- Think it is okay if they don’t call you at least once a year.
- Not check with the FSB if they are licenced.
- Not ask if they are a CFP®.
DOTHIS
- If you are not given a record of advice within a few days of the
transactions taking place, ask for it. If you do not receive it, then
consider putting your decisions on hold until you do.
- You do not have to sign the record of advice, but the fact that
you receive it is evidence enough.
- If you are aware of your rights and obligations, not only in
the provision of financial advice but in any consumer related
transaction, you will not only feel reassured in your dealings
with people and organisations, but you will always gravitate
towards professional, well-qualified people when doing
business in any form.
- Make sure they are a CFP® (Certified Financial Planner)
- Make sure their organisation is a Financial Planning Institute
Approved Professional Practice™ - meaning they have to uphold
the highest professional standards and will be accountable to
the FPI should they not.
CREDIT: Lisa Griffiths, Financial Planner
The benefits of seeing a money doctor
FINANCIAL ADVISER
Moneytips

2020
MoneyTips

21
Valueablemoneytips

22
CONTACT US
JOHANNESBURG
22 Wellington Road, Parktown, 2193
Private Bag X60500, Houghton, 2041
Tel: +27 (0) 11 488 1700
PRETORIA
Riverwalk Offi ce Park, Building C, 41
Matroosberg Road, Ashlea Gardens,
Pretoria, 0081
PO Box 95436, Waterkloof, 0145
Tel: +27 (0) 12 433 0160
DURBAN
Rydallviews Building, 5A RydallVale Office
Park, 38 Douglas Saunders Drive, La Lucia
Ridge, 4051
PO Box 47, La Lucia, 4153
Tel: +27 (0) 31 514 7000
CAPETOWN
2nd Floor, Block D,The Boulevard, Searle
Street,Woodstock, 7925
PO Box 3883, CapeTown, 8000
Tel: +27 (0) 21 460 6300
Any information herein is not intended nordoes it constitute financial, tax, legal, investment, orotheradvice. Before makinganydecisionortakingany
action regardingyour finances, you should consultaqualified FinancialAdviser. Although BDOWealth hastaken careto ensurethatthe content inthis
book istrueandaccurate, BDOWealth cannot be held responsible forany inaccuracies inthe information herein.
BDOWealthAdvisers (Pty) Ltd (FSP number 4549) isa Registered Financial Services Provideranda SouthAfrican companyand isanaffiliated companyof
BDO SouthAfrica Inc, a SouthAfrican company,which isa memberof BDO International Limited, aUK company limited byguarantee, and forms partof
the international BDO networkof independent member firms.
View our team
Book a 'Wealth check-up'
www.bdo.co.za
/company/bdo-south-africa
/bdosouthafrica
/ bdosouthafrica
/bdosouthafrica HOME

The Wealth Guide to Not Going Broke_2016

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (13)

Ähnlich wie The Wealth Guide to Not Going Broke_2016

Ähnlich wie The Wealth Guide to Not Going Broke_2016 (20)

Mehr von BDO South Africa

Mehr von BDO South Africa (6)

The Wealth Guide to Not Going Broke_2016