Are you thinking about starting to invest your money? Many potential investors are tentative to pay for financial advice; perhaps you received some bad advice in the past? This is entirely understandable, but the reality is, can you afford not to seek professional advice about your investments? Not everyone has the experience and financial savvy to manage their own investment portfolios. If you already have an investment portfolio, when was the last time it was evaluated?

For first-time investors, please find explanations about investment management below. It’s worth reading as a refresher course for those of you who have investments, but you can scroll down to the investment evaluation section if you’d prefer.

What is investment management?

Investment management is the creation and maintenance of a financial portfolio. It can consist of various types of investments such as annuities, unit trusts, property and offshore investments.

Investment management also includes following and/or adapting an investment strategy, buying and selling investments, and managing the portfolio’s asset allocation. The different types of asset classes in which you can invest are:

• Stock or equities
• Bonds or other fixed-income investments
• Cash or cash equivalents, such as money market funds
• Real estate or other tangible assets
• Futures and other financial derivatives

 

What are investment managers?

An investment manager is an individual (or company) that manages an investment portfolio for you. Investment managers develop an investment strategy to meet clients’ financial objectives and implement it to determine how to divide the portfolio among the different types of asset classes, such as stocks and bonds – the percentage of asset exposure will depend on the fund in which you’ve chosen to invest. The manager buys and sells those investments for you and monitors the portfolio’s overall performance.

How can I open an investment account?

Step one: Define your financial goals

Before you open an investment account, make sure that all your financial goals are defined. E.g. What is the purpose for investing, what’s your risk appetite and what’s your time horizon – are you saving for your child’s education, your retirement or an emergency fund? The answers to these questions will determine which type of investment will suit your needs.

For example, if you’re saving for retirement, consider a retirement annuity and complement it with a tax-free investment account. You have peace of mind that contributions to your RA will reap the rewards of compound interest, and a tax-free investment account allows you to save a tax-free amount of up to R500,000 in your lifetime. If you’re saving for an emergency fund, you will need the money to be easily accessible. In this case, consider investing in a Money Market – the funds earn interest and can be withdrawn immediately.

 

Step two: Speak to an independent financial adviser

Does all the above mentioned information sound overwhelming? No problem. Speak to an independent financial adviser. They are experts at looking at your financial situation from a holistic perspective and will help you draw up a financial strategy tailored to suit your needs.

 

Do you already have investments? Examine their performance to make sure they are meeting your objectives

Once you have an investment portfolio, you must examine your investments’ performance to ensure they align with your financial strategy. It’s suggested that you evaluate your portfolio annually to have a well-rounded view of its performance; based on this, review your decisions and think about making revisions if they no longer support your financial goals.

Here are three tips to help you determine the performance of your investments.

Evaluate your financial goals

Your financial objectives will change alongside personal circumstances. Perhaps you’re planning to marry and/or have a child. In these cases, you may need to access funds for the wedding and/or want to start saving for your child’s education. These personal milestones are the perfect time to re-evaluate your goals.

 

Compare your personal benchmarks with investment performance

Whenever looking at your investment portfolio, ask the question, ‘what are my financial goals?’ Your financial objectives define your personal benchmarks. Investments also have performance benchmarks, so you need to decide whether both are in sync with each other.

Let’s use unit trusts as an example.

Each type of unit trust (e.g. equity fund or balanced fund) has a benchmark that lets you judge how your investment performs against the intentional goal. Unit trusts are investment vehicles that require commitment over the long term; funds carry differing degrees of risk, e.g. an equity fund has the potential for higher returns in the long term but is more susceptible to market fluctuation. Therefore, short- term performance dips are more likely than those invested in a lower-risk fund such as a balanced fund. So, instead, assess your investments over a time horizon that is suitable for the specific unit trust and your financial goal.

 

Think logically, not emotionally

When it comes to investing, one of your best assets is to keep a level head and avoid impulsive decisions such as panic caused by short-term underperformance of your investment. It’s important to note that investment fluctuation is not a risk in itself; it exists on paper. The real loss of your investment only becomes a reality if you made a drastic decision such as withdrawing your investment because you were emotionally overwhelmed at the prospect of It losing its value.

As mentioned earlier, if you require any assistance in making financial decisions, speak to an independent financial adviser (IFA). It’s their job to guide you along your journey of financial wellbeing.

When you retire, don’t you want to know that your finances are in order so you can enjoy a comfortable life after work? The best way to start the journey to financial wellness in your later years is to start saving for retirement as early as possible. In this article, we’ll discuss when you should start saving as well as what you need to know about one of the most recommended savings products: a retirement annuity.

When should I start saving for retirement?

It’s suggested that you start saving for retirement as soon as you earn a stable income and can afford to pay the monthly premium. You are probably saying, ‘I do want to save, but I can’t right now.’ Well, it should be possible by making a few adjustments to your spending habits to accommodate saving for retirement. It’s completely understandable that you want to treat yourself from time to time, but rather save money for this purpose instead of putting it on a credit card; you’re increasing your debt.

Did you know that you can invest in a retirement annuity (RA) for only R500? It costs more per month to have a satellite premium subscription; one designer shirt can cost thousands of rand. So, with some tweaks to your spending habits, it should be achievable to free up this amount to contribute to retirement savings.

 

How do I get a retirement annuity?

If you’re not sure where to start, it’s best to speak to an independent financial adviser. Reputable IFAs will take the time to understand your personal and financial circumstances and help you put a solid strategy in place which can be tailored to your goals. IFAs aren’t affiliated with any insurance company or annuity provider and therefore recommend a financial institution that offers the best possible terms to grow your savings.

 

Benefits of saving early for retirement

You can extract the full potential of compound interest, by starting to save early and consistently over a long-term period.  

 

What is compound interest?

Think of compound interest (also known as compounding) as earning money today, on top of the money you earned yesterday. Essentially, compound interest accelerates the growth of your contributions.

 

Let’s break this down:

Simple interest

The amount of interest is calculated only on the principal amount of money you contribute.

Compound interest

The interest calculated on the initial principal amount AND includes the accumulated interest from previous periods on your monthly contributions. When calculating compound interest, the number of compounding periods makes a significant difference; that’s why it’s strongly recommended that you start saving for retirement as early as possible.

 

Benefits of a retirement annuity

• Your contributions are tax-deductible, and the funds are protected owing to the restrictions of a retirement annuity.
• You can invest a minimum of R500 per month.
• An RA complies with the prescribed legal investment limits – these limits control the amount of exposure to certain asset classes. This allows an investment manager to spread your investment across several asset classes, reducing investment risk.
• Barring exceptional circumstances, you can’t access the RA funds until you’re 55 years of age or older. Remember that the longer the investment period, the more you can benefit from compound interest. This means you have the reassurance your money will continue to grow over time. 
• Exceptional circumstances: Permanent disability. You can apply for early retirement if you become permanently disabled and cannot perform your job.
• You can also access your money if you decide to emigrate.
•  
• You can decide how much to invest. You can stop your contributions if you hit a rough spot and restart investing when you feel the time is right. There are no fees, penalties and no notice periods required when these changes are made.

 

So, to start successfully saving for retirement, please ensure that:

• All your financial objectives are clearly defined. This should be built into a financial plan. It’s best to ask an independent financial adviser to help you draw up a plan that suits your specific situation.

• Think logically, not emotionally.

• Always think of the long-term benefits, e.g. reaping the full rewards of compound growth.

 

The bottom line is that saving enough to be financially secure once you’ve retired may seem to be unnecessary when you’re in your 20s and 30s, but time passes quickly; you need to start saving as early as possible. Beyond the practical benefits, it also instils responsible financial management skills that you’re going to need throughout your life.

If you combine a disciplined approach with a feasible financial strategy, you’ll have peace of mind knowing that your financial future is under control.

BONUS TIP: Consider investing in other savings products such as unit trusts and/or a tax-free investment account. These have numerous benefits that will grow over time and complement the money you’re investing in a retirement annuity.

Unit trusts

There are numerous types of unit trusts to invest in; they include conservative, moderate and aggressive funds. Your choice depends on your risk appetite. Speak to investment management professionals before making any decisions.

Tax-free investment account

You’re currently allowed to invest R36,000 per tax year and R500,000 over your lifetime. It’s important to remember to stick to the limits. A hefty penalty of 40% is imposed on any contribution that may exceed these set limits.

Welcome to our exclusive series of personal – and business – wealth management insights from Ajay Wasserman, Founder and CEO of the Fio Group. In this article, he explains the ins and outs of business loans so that you can decide whether you’re at the right stage in your entrepreneurial career to make use of this particular borrowing facility.

 

Businesses require funding to function: whether you’re a start-up or established corporate, there will more than likely be times when you need a cash injection to get you over a rough patch. If the global pandemic has taught us anything, it’s that you need to have a sound worst-case-scenario financial contingency plan in place to buffer unforeseen events.

 

“I can’t afford to get a loan.”

This is a valid statement, but ask yourself “can I afford NOT to get a loan?” If your business is struggling and there’s no other source of capital on the horizon, the repayment of a loan outweighs the risk of having to shut your doors permanently. It’s vital to employ a borrow-to-build mindset.

Take a step back and look at the long-term benefits of a capital injection.

• You’ll have the means to build up the resources required to ensure your business operates properly. This includes everything from purchasing equipment to hiring employees.
• You can enlist the services of wealth management professionals such as independent financial advisers who can assist you in drawing up a viable financial business plan tailored to suit your business’s circumstances.
• Hire an HR company to perform an audit which will allow them to recommend the policies and procedures necessary to ensure your business operates optimally.
• You can consult with marketing experts who will help you map out a compelling short, medium and long-term strategy which may include
• Creating/refining your corporate identity.
• Promoting brand awareness.
• Defining and optimising the marketing channels that are best suited to your product and/or service.

There’s nothing wrong with being risk-averse, but there’s a difference between taking informed risks as opposed to flying blind and hoping for the best.

 

The different types of business loans available

Short-term and long-term business loans

Major South African banks such as ABSA; Standard Bank and FNB offer short, and long-term loans; however, the application process is quite timeous ­– approximately two months. It’s generally a protracted process. They generally require documents including but not limited to business plans, financial statements, tax records, and even financial forecasts.

Now you’ll have to wait approximately two months to find out if your application has been approved. If it is successful, there is an additional waiting period before you will receive the funds.

 

Business lines of credit

Many start-ups and SMEs don’t have the capacity to wait for business loan approval; the next option is considering a line of credit. This is a type of small-business loan that is more flexible than a traditional business loan. It’s crucial to understand that.

• There is a limit to how much money you can borrow.
• Interest is paid on the amount that you borrow.
• You have the leeway to withdraw and pay back funds as you wish, as long as you don’t exceed your credit limit.

 

Invoice discounting or debtor factoring

A financial institution, e.g. a bank purchases your company’s debtor book or can lend money against the book. Do you know what a debtor book is? It’s a collection of all your receivable invoices.

The primary benefit of debtors factoring is that a business can use it to supplement cash flow issues if they’re struggling to survive. It acts as a financial buffer while they wait for their customers to make payment(s).

 

Seek advice

It’s best to speak to an independent financial adviser about these loan options. Make use of these borrowing facilities if it becomes necessary; don’t feel that you’ve failed because you need help with your cash flow. Did you know that Elon Musk needed to borrow vast amounts of money from investors to fund his SpaceX project just to survive a period before they launched?

I would suggest to any entrepreneur that if you are really passionate about navigating your business through rough patches that you are likely to experience, consider borrowing money but make sure you have a sound financial – and marketing – strategy in place to increase sales and overall business growth. This will ensure that you always meet the loan repayments.

 

Connect with Ajay

Thank you for watching this video. I don’t want you to miss anything, so please subscribe to my YouTube channel, visit, and like,  my Facebook page, connect with me on LinkedIn and follow me on Instagram and SoundCloud.

I’m young, fit and healthy; why should I need to pay premiums towards a medical aid scheme? Surely, that money could be better utilised?” These are two questions that go through an individual’s minds when considering medical aid cover. The reality is that we can’t predict the future and the question you should really be asking yourself is “can I afford NOT to have medical cover?” Think of it as a long-term contingency plan that is in place should an unforeseen event that affects your health occur.

Another reason people opt against medical aid cover is that it can be an arduous process; the complicated fine print; foreign terminology; codes and formularies are not coffee table reading. In this article, we’re going to breakdown medical aid schemes to give you a better understanding of this essential, potentially lifesaving product. Did you know that certain employers opt for a group medical aid scheme to cover employees’ health? This benefit should be stipulated in your employment contract.

What is a medical aid scheme?

Medical aid schemes are actually non-profit organisations. The money is pooled together by individuals who pay a monthly premium or contribution, and the money is accessible when he/she needs to pay different healthcare expenses.

What does my medical aid scheme cover?

The expenses that you can claim from your medical aid scheme depends on your specific plan; there are a variety of tiers that dictate the benefits of your cover. Medical aid schemes generally range from hospital plans to comprehensive plans. A list of all plans should be available on the medical aid scheme companies’ website.

All plans are regulated, governed by South Africa’s Medical Scheme Act so that you have access to healthcare when you need it most.

You may be able to get healthcare coverage through your employer

Employers can choose to have a group medical aid scheme which offers healthcare benefits to all their employees. However, the type of plan is decided by them, and the monthly premium will be deducted from your salary. Another question you may be asking yourself is “what if the premium is more than you would pay if I belonged to another medical aid as an individual, not an employee? Can my employer force you to belong to a specific medical scheme(s)?” Yes and no.

Yes. Companies in South Africa may enforce membership of a particular medical scheme(s) if it is provided for within the framework of conditions of service. This may be the case if you work for an employer who has a closed medical scheme.

No. You don’t have any obligation to belong to your company’s chosen medical scheme if it’s not provided for in your employment contract.

If you are employed on a cost to company (CTC) contract, which is typically the approach companies follow, you should be able to belong to any medical scheme of your choice.

As mentioned above, there are closed and open schemes.

Closed schemes: Restricted (also known as closed) medical schemes are overseen on behalf of companies for their staff members and their families. They can also be joined by people working in a particular industry.

Open schemes: In contrast, open schemes, are open to the public and anyone can join if they are over the age of 18, are not currently a member of another medical scheme and can pay the monthly contributions.

Deciphering terminology

There are specific terms that are commonplace to all medical aid schemes in South Africa. Here are explanations to a few of them.

Open enrolment

All medical aid schemes must accept all applicants and charge them the same monthly contribution (depending on their chosen plan), irrespective of his/her age and health status.

Regulatory reserve requirements

When a member joins a medical aid scheme, it should hold 25% of the yearly contribution in cash reserves from the first day that membership has been approved (even before the member has paid his/her first contribution).

Prescribed Minimum Benefits (PMBs)

All medical aid schemes need to offer a set of minimum healthcare conditions and procedures; these are known as Prescribed Minimum Benefits (PMBs). Schemes are able to use tools such as designated service providers, networks and formularies to manage expenses connected with PMBs.

Networks

Some plans, benefits and healthcare services require you to use the medical aid scheme’s network providers. If you choose not to use one of these providers, your expenses will not be covered, and you’ll be liable for the full amount.

Chronic Disease List (CDL)

The Chronic Disease List (CDL) is a list of conditions that the medical aid scheme covers according to their prescribed minimum benefits

What is gap cover?

Your medical aid scheme may not cover all of your medical expenses; it depends on your plan. In some instances, doctors and specialists charge rates that are above medical aid scheme rates, which results in a shortfall. Gap cover is a short-term insurance policy that works in conjunction with your medical aid and covers the shortfall (the amount which you would have to pay out of your pocket.)  

Conclusion

It may feel like a grudge purchase, but it’s vital that you become a member of a medical aid scheme.

• It protects you financially if you suddenly need to pay a high, unanticipated medical cost that you otherwise couldn’t afford to pay.
• If you belong to a medical aid scheme, you can typically have peace of mind that there will be no timeous delays in your medical treatment because you have the coverage.

Please speak to one of our consultants. He/she will provide you with more information about finding a medical aid scheme that suits your needs.

Welcome to our exclusive series of personal – and business – wealth management insights from Ajay Wasserman, Founder and CEO of the Fio Group. In this article, he explains why you should have an informed budget planning strategy in place to pre-empt a lack of cash flow.

Do you usually feel financial pressure by the 20th of the month? It’s a gut-wrenching feeling, isn’t it? It’s a worldwide reality, unfortunately. People often run out of money in the middle of the month, and they cannot afford to buy essentials due to income being unnecessarily spent shortly after payday. This is why it’s important to build a comprehensive budget plan that accounts for your fixed and variable expenditure as well as your short, medium and long-term financial goals.

Having a proper budget set up is one of the most important financial steps for anyone who needs to manage their finances, thereby improving their cash flow from money coming in from your salary. By implementing this method, you can see exactly what expenses still have to go off your account so that you don’t run out of money by the end of the month.

If you’ve never compiled a budget before and are unsure where to start, it’s best to speak to an independent financial adviser (IFA). They will assist you in firstly, understanding your financial situation, and secondly, mapping out your income and expenditure.

The process will

• Show you how much money you’re earning, and how much you’re spending.
• Examine what you’re actually spending your money on
• Determine how much money is required to cover your fixed expenses and how much can be used for variable expenses.

Fixed expenses

These are expenses that you can’t do much about and, therefore, they need to be the first ones you add to your budget. They include bond and vehicle repayments, rent, medical aid scheme insurance and life insurance.

Variable expenses

These are the things on which you choose to spend money. They include entertainment, groceries, eating at restaurants and travel. This is where an IFA can help you decide where you can make cuts to free up money that can be contributed to your cash flow.

Without a custom, structured budget in place, you are likely to find that most of the time you have to use credit cards, overdraft or another type of credit facility towards the end of the month. This is a dangerous strategy and creates a slippery slope leading you into a black hole of debt that you can’t pay back; you’ll also bear the brunt of compound interest, which can make your situation even more dire.

I think the most important thing for you should be to have an Excel spreadsheet or another type of software that you can use to run your budget. The reality is that payments aren’t always made on the same day every month unless you have debit orders. You may have some payments coming off your account on the first of the month, while others may be debited later in the month. By knowing and accommodating for these expenses, you should always have cash in your bank to be able to sustain the budget, the expenses and make sure that you manage your money correctly. 

You may be thinking, “this sounds relatively easy, I can do it myself. Do I really need a financial adviser?” Definitely, and here’s why. An independent financial advisor (IFA) has the necessary experience, and perhaps most notably, the ability to provide objective advice about your current financial situation. The problem that many people face when reviewing their finances is that it can evoke emotions, overriding logical thinking which is vital if you want to get a grip on your finances. 

Once you have finished your first session with an IFA, you should have a broad understanding of your current financial circumstances and what you can do to achieve your short, medium and long-term goals. At Fio, we have a cherry-picked team of independent financial advisers who can assist you in creating a sound budget so that you’ll always know where your money is going. We can also recommend different savings products tailored to maximise your wealth.

Connect with Ajay: I don’t want you to miss anything, so please subscribe to my YouTube channel, visit, and like,  my Facebook page, connect with me on LinkedIn and follow me on Instagram and SoundCloud.

‘Credit card’. Do those two words cause immediate anxiety, or do you see it as a positive financial tool that you can use to your advantage? There are different schools of thought when it comes to credit and like anything in life, having a credit card has its pros and cons. In this article, we’ll look at some of the advantages and disadvantages of using a credit card.  

Pro: They can increase your credit score

The ability to have a credit card can be seen as a type of financial rite of passage; another tangible milestone that can open up doors on your journey to be a fully-fledged adult. You’ve probably heard your friends tell you that ‘A credit card strengthens your credit score, so you must get one!’ Counter with the question, ‘Okay, thanks, but what does that mean?’ If you see a blank stare on his/her face, it’s best to ask an expert.

According to Transunion, “Your credit score is designed to show you, by way of a number, the strengths and weaknesses of the information in your credit report. It shows you how your credit standing compares with other consumers. It is calculated using a formula that evaluates how well or badly you pay your bills, how much debt you carry and how all that stacks up against other borrowers. In effect, it tells you in a single number what your credit report says about your management of existing credit.”

A TransUnion Consumer Credit Score ranges from 0 to 999 or from poor to excellent. The following score bands are defined below:

• Excellent: 767 – 999
• Good: 681 – 766
• Favourable: 614 – 680
• Average: 583 – 613
• Below average: 527 – 582
• Unfavourable: 487 – 526
• Poor: 0 – 486 

*The above information was correct at the time of the writing of this article. 

In a nutshell, this means that if you want to apply for a credit facility such as a home loan or vehicle finance, your credit score will influence whether the financial institutions will grant you the funding. A low or unfavourable credit score signals to the banks that you may be a credit risk and, therefore, it’s unlikely your application will be approved. An independent financial adviser can explain the ins and outs of your credit score. 

Con: Credit cards can have a high cost of borrowing

Credit cards can have an interest percentage as high as 30%. Every time that you make a purchase using your credit card, interest will be charged on the purchase; however, it’s not that simple. The interest is compounded which means interest calculated on the initial balance as well as the accumulated interest from previous periods. Basically, if you don’t pay, at least, the minimum amount due, but preferably more, every month, additional finance charges can quickly grow your existing debt.

Pro: Credit cards are safer than cash

 Many people, even those who have the cash to cover the purchase, choose to use credit cards because they have extra security measures in place. 

• If you lose your card, you can cancel/block it immediately by simply phoning the bank. Most reputable banks offer this functionality on their mobile apps as well.
• Banks have a fraud department that monitors suspicious activity and will inform you if something seems inconsistent with your typical spending patterns.
• Credit cards have ‘chip and PIN’ security; at the point of sale, you will be asked to enter your unique PIN to approve the transaction. Remember to never share your PIN number with anybody.
• For online purchases, the bank will send you a unique One-Time Password (OTP) which is a number that must be entered and submitted before the transaction can be completed. 

Con: You can easily fall into a black hole of debt

There is no doubt that credit cards can help you finance large purchases and allow you to pay off over time. However, the ability to access credit should be seen as a privilege and not be used irresponsibly. If you aren’t careful, you’ll find yourself spiralling into massive debt that you can’t afford to pay back; this will cause your credit score to decrease and significantly impact your financial wellbeing.

Pro: Rewards points

The majority of credit card companies offer numerous rewards to customers for using their credit cards. The benefits are specific to the banks, e.g. First National Bank (FNB) and Standard Bank offer eBucks and UCount Rewards respectively. They are a points accumulation loyalty programme; points can be converted into the cash equivalent and used to make purchases. If you use your credit card for daily expenses, these points can add up quite quickly. The benefits you can amass can more than offset the cost of annual fees paid to keep the card active.

Con: Applying for too many credit cards can damage your credit score

Numerous factors can impact your credit score. These include but are not limited to 

• Payment history
• The current amount owed
• Length of history
• New credit
• Types of credit used

Every time that you apply for a new credit card, lenders can check your credit report to determine whether you’re a high credit risk or not. Should you have several credit applications, lenders will become skeptical of your ability to make regular payments and will likely reject your application.

The bottom line is that yes, most people will need to have a credit facility available to them at some point in their lives to achieve their financial goals. Make sure to consider all the advantages and disadvantages before you make that next purchase using your credit card.

“I don’t have enough money to save.”

“I prefer to live for today.”

“It’s just too much work. I can’t be bothered.”

Do these statements sound familiar when it comes to saving for retirement? If so, it’s time to change your mental attitude right now because through this belief; you are avoiding making one of the most crucial investments of your life.

There is nothing wrong with living – and enjoying – the present, but it cannot be in spite of planning for your future. In this article, we’re going to help you break mental barriers, even if you’re not able to start saving immediately, that are holding you back from achieving financial security at retirement.

No more excuses

“I don’t have enough money to save.”

Many South Africans simply don’t have any money to dedicate to retirement savings and the global pandemic has likely made it seem like an insurmountable task; however, if you implement and stick to a budget, it can be accomplished. With an informed budget in place you can face – and pinpoint – wasteful spending; you may find that it reveals pockets of money that could be contributed to a retirement savings product, e.g. a retirement annuity (RA). If you are unsure how to start, help is available: speak to an independent financial adviser (IFA) about budget planning. He/she will help you build one tailored to your specific circumstances.

“I need to take care of my family.”

Let’s look at this barrier from a different perspective. Isn’t part of taking care of your family dependent on taking care of yourself as well?  How will you be able to support them if you can’t take care of yourself? It’s admirable, and in many cases, necessary for you to take care of your children’s current needs as well as those of your parents. However, if you don’t consider and plan for your future, you’re perpetuating a cycle that can potentially affect your children.

“It’s just too much work.”

Is it, though? Think about it for a minute. It’s no more work than opening a bank account, it can be completed online, and most financial institutions have designed their website to streamline the process through easy to understand interfaces.

 

Break the pessimistic cycle by following these four steps 

• Assess your spending habits

Please do yourself a favour: download and print a three-month or six-month bank statement and review them meticulously. Highlight transactions that fall under variable expenditure (money that you choose to spend) and ask yourself the question ‘did I really need to make that purchase?’ Calculate the total amount, and you’ll find that there is likely a sizeable portion that could have been invested for retirement. 

Think about this: it costs more to have a premium satellite TV subscription than most minimum monthly contributions towards a retirement annuity. Most financial services companies offer investment minimums from only R500 per month. It puts things into perspective, doesn’t it? 

• Learn how to create a budget

This will assist in understanding how much of your income needs to go to fixed expenses (rent; mortgage; insurance; medical aid scheme, etc.)  and how much money forms your variable expenditure. Now, it’s time to create a budget that prioritises where your money goes; contributing to retirement should be at the top of your list. 

• Factor in ‘cost of living’ increases

 Length of time and compound interest are your best friends when growing your money. However, the value of your money can decrease over time, meaning you may not be able to buy as much with the same amount of Rands, as the prices of services and goods increase. This is known as inflation. Salary increases that meet with price inflation allow you to maintain a fixed standard of living over time. However, COVID-19 has had a devastating effect on the country’s economy; employees have been forced to take salary cuts or, in the worst case, become unemployed. 

Now, for many, the rate of inflation has exceeded their take-home income, causing massive financial strain. Unfortunately, the cost of living hasn’t decreased, making it necessary for people to be much more financially frugal. It’s more important than ever to breakdown your ‘cost of living’ expenses when creating your budget so that there is no needless spending and any extra money can be contributed towards your retirement. 

• Reflect on your financial circumstances

 By now, you should have a definite idea of how much money you can contribute to retirement. It’s time to act and physically implement what you’ve learned. Think about how many years you have until you retire. This depends on your job, but many businesses and institutions have a mandatory retirement age ­– typically 65 years of age. Remember, contributions to a retirement annuity can only be accessed from 55 years of age. So, you need to consider whether or not you may need to access your investment before you retire; if you do, you need to start saving sooner. 

• Don’t procrastinate

The time to start saving for retirement is right now. Every month that you choose to spend the money, you could contribute to retirement only delays the date at which you’ll reach your goal. Recognising your financial future is based on what you do today is a discipline that will benefit you immensely.

As mentioned earlier, if putting a plan in place and choosing investments is daunting, an independent financial adviser (IFA) can help you examine and amend your monthly expenditure to help you make room for retirement saving. 

Are your marketing and operational strategies are running smoothly, and the business is achieving a stable ROI? That’s fantastic! You may be feeling it’s the right time to expand your business to elevate business growth, but how, and what do you need to kick-off this journey? Answer: You have to decide on a business growth strategy that suits your specific financial goals. This article serves as a guide to the best business growth strategies available to you.

Top business growth strategies

Franchising strategy

In a well-written article published on Entrepreneur South Africa, author and franchise consultant Mark Siebert discusses some of the advantages of franchising which include but are not limited to the capital required, speed of growth, motivated management, and risk reduction. Let’s take a closer look.

Please note that this article is a foundation on which the conversation is based. It has been used as a high-quality resource, and nothing has been copied verbatim. We’ll be focusing on the following six advantages.

Capital

Access to enough capital is one of the prime reasons that inhibit SMEs’ business expansion plans. However, franchising offers entrepreneurs an alternative way of acquiring capital without running the risk of getting into debt.

This is financially beneficial because the franchisee (the individual or company that buys into the business) provides all of the funds needed to open up a branch. It allows the franchisor’s business to develop through other entity’s resources. Furthermore, the franchisee signs the lease as well as other necessary contracts, so expansion takes place with minimal liability to the franchisor.

Franchising significantly lessens the amount of capital needed to expand will minimise risk. In addition, there is hypothetically no limit to the number of franchisees, so if you have many interested parties, franchising is a growth method that will expose your product/service to a broad audience quickly, which in turn creates a plethora of marketing opportunities to spread brand awareness, drive quality traffic to your website as well as establish your business on social media platforms.

Rapid growth 

For start-ups and SMEs in particular, expelling the competition is one of an entrepreneur’s biggest challenges. You may have a revolutionary product/service that will sell extremely well but to do so; you need to grab a chunk of the market share quickly. Franchising gives a business this much-needed jumpstart because the franchisee does the majority of the work.

Franchises working simultaneously can give the franchisor the necessary human resources and capital to compete with larger companies. In this way, they can saturate markets before competitors.

Easing of micromanagement

The effectiveness of management can dictate a business’s success. Poor employee management, as well as unclear policies and procedures, can derail a business’s growth efforts.

In this regard, franchising is beneficial because the franchisee(s) are responsible for the daily operations of each unit – you don’t have to micromanage at all. The onus is on them to ensure the franchise meets required targets; they are also solely in charge of negotiating and paying staff salaries so your financial returns won’t be affected.

Amplified profitability

Franchisees are required to take on potentially time-consuming activities including site selection, lease negotiation, marketing as well as hiring and training of employees. Necessary operations such as payroll and accounting are also their responsibility. For these functions to run smoothly, it’s a good idea to speak to HR professionals who can advise and implement the necessary elements.

The franchisor is, therefore, able to financially leverage off a group of self-supported units, meaning that the franchise organisation has the potential to increase profitability.

Due to franchising growth strategy infrastructure, a franchisee can generate a higher revenue than a manager of a competing independent establishment. Also, franchises usually have their cost structure and operate the unit more cost-effectively even after taking into account what needs to be paid to the franchisor.  

Risk reduction

As mentioned above, the inherent nature of franchising reduces a franchisor’s risk. They are in charge of everything from equipment purchasing and maintenance to any working capital that may be needed. Also, any liability that takes place in the unit is the franchisee’s responsibility, such as employee and/or customer litigation or accidents that happen on the premises.  

Affiliate strategy (independent agents)

Do you want to earn passive income? It’s possible if you utilise an affiliate marketing growth strategy correctly. So, what is it exactly? Firstly, let’s answer these fundamental questions.

What is an affiliate?

An affiliate is a person or company that is licensed by another business to market their products and/or services. Essentially, they help a business spread brand awareness, garner interest from a broader audience and make new sales.

How do affiliate programmes work?

Affiliate marketing is based on a revenue distribution model which essentially means that third parties undertake promotion of products and/or services, and the revenue from sales is shared with the affiliate marketer.

An article published by Forbes says that by 2022, the affiliate marketing industry is forecasted to eclipse the $8 billion (approximately R130 billion) mark, nearly double what it was worth in 2015. Today, affiliate marketing is one of the most effective ways to earn an income online, drive sales and increase brand awareness.’

Author of the article, Amine Rahal, provides a clear breakdown of the typical parties involved in affiliate marketing.

The creator: Otherwise known as the vendor, the creator is a business or brand that offers a product or service and shares revenues with affiliates.

The affiliate: The affiliate, or publisher, is a business entity or individual who advertises the creator’s product or service and receives a share of each sale that they help generate.

The consumer: The consumer is the customer of the creator, who buys their product or service via an affiliate marketing channel.

The power of affiliate marketing stems from the unique distributed networking model. There is a lot of opportunities for lucrative passive income to be generated. It needs to be noted that there are three different payment structures involved. The one which is chosen is based on vendor and affiliate preferences.

• Per sale

The affiliate is paid a commission of each sale via the affiliate’s custom product link.

• Per lead

The affiliate receives payment for every prospective customer who completes the desired action, such as signing up for a newsletter.

• Per click

The affiliate is paid an agreed-upon amount for every user that they redirect to the vendor’s website.

The following are a few key takeaways from how affiliate marketing works, according to Neil Patel.

• You hire affiliates who are paid to bring customers to you.
• You only pay affiliates if visitors to your website convert to customers.
• Each affiliate has his/her strengths. For example, they may be very adept at content creation, meaning that they can ‘package’ your product/service in a way that reaches a particular audience that would otherwise have not been tapped.
• It’s a beneficial strategy for start-ups because it is generally cost-effective, so if your business is operating on a shoestring budget, this may be the best growth strategy to consider.