In partnership with Morningstar: A Russian invasion of Ukraine could materially disrupt the global oil supply in several ways, but none are likely, in our view. As Russia currently exports around 5 million barrels a day of crude oil, Iran-style sanctions specifically targeting Russian oil exports could theoretically wreak havoc on oil markets, but they are unlikely, in our view. Given that energy exports account for 60% of all Russian exports and 30% of the country’s GDP, this would seem like a powerful deterrent or punitive response if an invasion takes place.
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In partnership with Morningstar: We all go into the new year full of fight and fury to accomplish our list of goals – be it losing weight, getting fit, being healthier, spending more time with family and so forth. These are all fair goals, and we should all aspire to pay attention to the areas in our life we want to improve. In partnership with Morningstar: Did you know, that if you start saving only a small amount, early in life, it can lead to a larger savings pot than if you were to save a large amount much later in life? Sounds too good to be true? That’s exactly why compound interest is known as the eighth wonder of the world. In partnership with Morningstar: Naspers has for long been one of the biggest drivers of investors returns as it was the largest company on the index and one of the best performing. We have seen the Naspers share price go from an initial listing price of R47.50 to gaining momentum and being priced over R3 500 per share at its peak in February 2021. It therefore comes as no surprise that Naspers/Prosus frequently tends to feature in the top 10 holdings of numerous local funds and even a few international funds. In partnership with Morningstar: The future is unknowable, so the best we can do is to address it in terms of probability and preparation. In assessing probability, however, people are often driven by bias and emotion, emphasizing the positive at one moment and the negative at another. That narrow emphasis is likely to be reflected in the rapid changes in price of investments. Over-emphasis on optimism or pessimism leads to price volatility, which is part of being an investor, and enduring volatility is a price we pay for reaching our goals. In partnership with Morningstar: In the words of David Bergmann, “the tax tail should never wag the investment dog”. With that being said, it definitely won’t hurt to know and understand how a Retirement Annuity (RA) can minimise the amount of tax you pay and keep more of your hard-earned cash in your own pocket. Last month we talked about Focus on Building Assets. This month is our 12th and final instalment on the series, we focus on Regularly Review Your Progress. Congratulations on make it this far! Let's recap the first 10 steps: Step 1 - Make as much money as you can Step 2 - Do not spend more than you earn Step 3 - Do not take on credit Step 4 - Keep record of your spend Step 5 - Invest 15% of your earnings Step 6 - Set up an emergency fund Step 7 - Money is a means to an end Step 8 - Set up short-term goals Step 9 - Step up long-term goals Step 10 - Focus on building assets So what have you learnt so far? What have you written down and implemented? The last step of Regularly Review Your Progress completes the cycle. Review your actual progress against your budget, short-term goals and long-term goals, to check whether you are on track. In terms of your monthly budget, you should check monthly. In terms of your short-term and long-term goals, you should review your progress at least annually. Typically the good time to review would be the end of a calendar year, the beginning of a year, or the middle of a year (June/July). They tend to coincide with the school holidays. Regular reviews can check whether you are on track, ahead of your schedule or behind your schedule. Are you moving forward, or backward? What were the unexpected things that happened, good or bad? It will help you identify what has worked, what has not worked, whether you have developed good financial habits, whether you are disciplined in implementing the plan. It is like looking yourself in the mirror and detect any blemishes to get rid of. You want to have a close look, be honest with yourself. Monthly budget On a monthly basis, typically at the end of the month or the beginning of the following month, check whether you are within your monthly budget. Did you overspend or underspend? What categories did you overspend, and the reasons? Were are able to save money at the end of the money? If you use a budgeting app on your smartphone, you probably can figure these out quickly. Jot down your thoughts in your (digital) diary or notes app. Think about how you can improve your spending, and write it down. Are there credit card instalments or personal loan instalments coming off your bank account? These typically have high interest rates that suck money out of you. Prioritise to pay off the full balances quickly. Are there monthly debits going off you bank account that you don't even know what they are? Check with you banker. Small debits add up, chewing your money away. Do you subscribe to DSTV, Showmax, Netflix and Amazon Prime Video? Do you need all these? Can you cut down to two, or even one? Do you have all these small policies debiting a few hundred rands from your bank account? Is it better to consolidate? Are you paying multiple funeral policies? Speak to a qualified Financial Planner to review all your policies, to see whether you should consolidate and save some money. Short-term and Long-term goals You should review your progress, at least annually. If you work with a financial advisor, schedule a time that is convenient for both of you. The review session is normally one to two hours, depending on how complex your financial affairs are. Otherwise, I have found the good time to review would be the end of a calendar year, the beginning of a year, or the middle of a year (June/July). They tend to coincide with the school holidays, when you may have some breathing space, some downtime, to relax, to refocus and strategise. Go through your short-term goals, your "quick wins" one by one. Tick off the ones you have achieved, pat yourself on the back. For the ones in progress, are they on track? For the goals you didn't achieve, what are the reasons? Some things may be within your control, some may be out of your control. For example, you might have planned a year-end holiday in Mauritius, and you have saved up for it. However due to the COVID-19 pandemic, and the latest new Omicron variant, Mauritius has re-introduced travel bans, and you could no longer take the family to Mauritius for a holiday. Instead, you had to change to local destinations such as Cape Town or Kruger National Park, or worse still, because of the increasing number of infections, you decided to stay put and stay home. We plan, and plan for the best to happen. But we must also be aware of the environment we are in, and there are many things outside of our control. Recognise them, be pragmatic. Focus on the things we can control. Write down your thoughts in your (digital) diary. Go through your long-term goals, one by one. Goals like long-term savings, child education fund, retirement, emigration, financial freedom. What progress did you make? Was it good, little or no progress? What caused you not to progress as planned? Changing jobs, poor business environment, load shedding, financial markets, your own behaviour and habits? What can you do to improve? What help do you need? What type of people can help you, e.g. life coach, business coach, financial advisor, accountant, IT specialist, mentor? How do you go about building the team around you, to support you? Write down your thoughts and action items in your (digital) diary. Implement the action items. If you do the reviews month-in, month-out, year-in, year-out, I am sure you will count your progress, achievements big and small, and be thankful of blessings received, and the advisors that have helped you along the way. Epilogue Twelve months, twelve articles on 11 Steps to Financial Freedom! Thank you for walking this journey with me, as we go through another tough year during the COVID-19 pandemic. Importantly, these are the steps I have followed to realise my financial freedom, and I have advised all my clients to follow. I hope you have found some of these insights helpful. If you have any testimonial, if you have any comments, questions or suggestions, please write to me on kyeh@daberistic.com. I don't proclaim to have all the answers, your comments and suggestions help us all improve on the process. Do follow us on Facebook, our company's Daberistic Financial Services page, and Instagram @daberisticw, for regular ideas and inspirations on personal finance, wealth and journey to financial freedom. May you be blessed with life, health and wealth. Here's to a Merry Christmas and a prosperous 2022! Kevin Yeh, CFP® |
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