Category: Budgeting

Debt – coaxing the monster out from under the bed

Debt – coaxing the monster out from under the bed

Financial monsters: As a Financial Advisor, I can sense the palpable fear and desperation when some people come to see me for the first time. It takes courage to come and, like the dentist, I am avoided until the pain of debt and fear of financial ruin become too much.

Dealing with the Financial Implications of Divorce

Getting married and starting a life with the person you love is a marvellous new chapter to begin, unfortunately, most marriages do not last. The divorce rate has increased by 5% and statistics from 2012 show that of the 161,112 marriages that took place in South Africa, 22,000 of those marriages resulted in divorce.

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In most instances, the wife almost always ends up in a position of disadvantage. After experiencing a divorce, she will be forced to deal with emotional trauma and extra financial implications, and too, face the challenge of dealing with getting herself back to where she used to be and figuring out where she wants to be. Continue reading “Dealing with the Financial Implications of Divorce”

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.

Continue reading “How to Afford your Child’s Education”

The Financial and Personal Implications of Paying Ubuntu Tax

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.

Continue reading “The Financial and Personal Implications of Paying Ubuntu Tax”

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.

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 “Surviving Divorce By Planning for Financial Success”

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 Difference Between Fee-Based vs Commission Based Financial Planning”