How to Afford your Child’s Education

The cost of education in South Africa is at an alarming all-time high, and these rates are northwood-paying-for-your-childs-educationnot showing any sign of decreasing in the near future. Budgeting for your child or children’s education is imperative, and need not be too much of an overwhelming task.

We suggest seeking the assistance and guidance from a trusted financial planner to set a long-term strategy in place through the use of carefully considered unit trust funds.

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The Financial and Personal Implications of Paying Ubuntu Tax

The meaning of the word ‘Ubuntu’ is deeply rooted in African philosophy and ideology. A Nguni  term, ‘Ubuntu’ roughly translates to ‘human kindness’ and often encompasses greater aspects of humanity and human essence, largely in relation to other people.

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At Northwood Financial Services cc, we use the word ‘ubuntu’ with our clients to describe a situation that develops when our extended family expects us to be kind, even if their demands are unaffordable.

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Credit Scores for the South African Government are a Cause for Concern

When you or I ask a bank for money, the bank goes to a credit bureau and asks them how we conduct our finances.

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The bank will then assess:

  • Our income earned each month
  • The value of debt we owe
  • How we manage our debt (whether it is paid on time or whether debit orders bounce due to insufficient funds)

Following the assessment, the bank will then allocate a score to the client. This score will determine whether the client is eligible for a loan, and then they’ll determine the applicable interest rate.

The same process applies when a country applies for credit. The most popular credit rating companies for government credit applications are:

  1. Standard & Poor
  2. Fitch Ratings
  3. Moodys

The amount of debt that the South African government owes its international credit investors is a cause for concern. Between the years of 2008 and 2016, South Africa had doubled its debt, and at present, it costs our country a frightening fee of R150 billion to pay the interest on our debt alone. At this time, our Government Debt; expressed as a percentage of gross National Product; equates to 50.1%. Our neighbouring country Malawi owes 18% of their GDP.

To put this into context, if South Africa were to start paying back half of our debt, we would be able to give every university student in South Africa free education, just from the savings in interest payments.

While we have a temporary reprieve until December 2016, I am convinced that our cabinet has no idea of what we face if they don’t stop spending what we do not have. A further downgrade will not only lead to an increase in the unemployment rate and a hike in interest rates, but it will damage our economy further.

We have to show our Government that restraint is needed. We say to you, stop spending money on huge projects that we can no longer afford, and stop closing your eyes to corruption.

The Benefits of Paying UIF

As standard tax payers, we, as South African citizens contribute to UIF (the Unemployment Insurance Fund) every month.

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If I were to ask why do we pay UIF, most people would respond by saying that they would be able to get financial support in the event that they were to lose their job. In a nutshell, this is true, but what most people don’t realise is that paying towards UIF means so much more…

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Fees vs Commission Based Financial Planning for Property

Earlier this month, a representative from an insurance company (that will not be named) had sent me an email. Assuming that I was an Estate Agent, the email presented me with a sales tactic that would drastically increase my income from house sales had I been a property agent. Highlighting a paragraph from the email, this is how the information was presented, word for word:

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“Mr. Andrew (age 45) and Mrs. Adel (age 44) Smith have just bought a R 3 million house, and their request for a home loan has just been approved. So even through transfer has not yet happened, they have now met all suspensive conditions, and hence have become liable for the full purchase value of the home.   

At this time you could sit down and assist with a Mortgage Protection Cover for the Smiths.  Continue reading

Surviving Divorce By Planning for Financial Success

Going through a divorce can have devastating effects on your emotions, your children and your life in general. When a couple decides to separate, they are often unprepared for both the emotional and financial outcomes which follow.

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If you are currently going through the process of separating from a partner, the months ahead will be filled with many changes and challenges. The following might aid in coping with your process: Continue reading

Why is it so difficult to talk about money?

Money is a strange matter; it always appears to be on everyone’s mind, yet at a social gathering, or even in a private conversation, it always seems too much of a personal topic to discuss.northwood-talking-about-money-is-taboo

Money is taboo. When couples come for financial coaching, regardless of how long they have been married, I am always surprised at how difficult it is for them to speak about money. In some cases, we cannot have a joint meeting when we discuss budgets as the subject is simply too toxic.

From an early age, we are taught that it is impolite to talk about money. Even to close friends or family members, it is deemed as ill-mannered to talk about how much something costs or how much money someone earns. Quite simply put, money is a complex subject, and it can stir up many intense emotions when it features in a conversation.

The result of this sensitivity sees us not teach our children about money. For example, think of your own family:

When you were a child, how many times did your parents sit down with you and teach you about money and how to use it? Even if your parents didn’t talk to you about money, you would still have learned about money from them; as well as having probably picked up some bad habits, you would probably also carry the fear of talking openly about money.

Your silence hurts your children today. Whatever the reason for avoiding the subject; whether you feel that you have made too many mistakes, or that you are embarrassed, or that you are afraid of conflict; silence is never a long-term solution.

Silence hurts you: after all, without attention, money problems only tend to get bigger. It’s a powerful symbol representing many different things to many different people. It can symbolise the comfort of being taken care of and loved, as well as bring up issues of dependence and survival. It can symbolise power, control, adoration or seduction.

Money is a way to deal with anxiety and separation issues, while others believe a lack of money may be perceived as a threat to their safety and can give rise to depression and feelings of emptiness.

At Northwood Financial Services cc, we play a game called CashFlow 101 with our clients. In this game, people can become unemployed. We’ve noticed that if a client becomes unemployed more than once, they tend to give up and opt not to play any longer. Although CashFlow 101 is simply an exercise, we don’t have to option to opt out or give up when money troubles become too hard in the real world.

Our advice: ask for help. If, for example, you wanted to learn a new skill, you would seek the help of a tutor. The same principle applies to financial planning, yet few would consider asking for help to deal with money.

 

The Difference Between Fee-Based vs Commission Based Financial Planning

northwood-man-sitting-at-deskAt present, the majority of financial planners in the greater financial planning industry work on a commission-based system. Here, the financial planner works their personal fee into the total cost of the policies and packages to which he or she sells their clients.

 

Although a typical industry standard, a financial planner working in accordance with a commission-based system faces two challenges: Continue reading

The importance of planning and regularly reviewing your Last Will and Testament

Discussing matters of your death with your loved ones is never an easy conversation to have, nor is there ever an ideal manner in which to approach the topic. However, doing so can save your family, assets and estates in the long run. The following article discusses the critical importance of constructing, and regularly reviewing, your Last Will and Testament.

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A client of mine, Walter, married his wife in 2000. As good citizens, he and his wife made each others sole beneficiaries to each others possessions, and assigned their parents as the inheritors thereof in the event of their death.

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The benefits of creating multiple passive income streams

During the course of our careers, in our respective places of employment, we may receive a number of promotions and salary raises that will aid toward increasing our monthly incomes. Despite this, our incomes; or our costs to our respective companies; will never bring us wealth. Our employers will often award us a sum each month that allows us to be comfortable, or at minimum, survive the month. Wealth is created through making clever decisions and having strategic financial plans in place. To grow your wealth, you should seek to have more than one income stream, as it is those extra income streams that create wealth.

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