Guidelines for optimising financial wellness

Navigating the maze of personal finance can be daunting, especially for young professionals just entering the workforce. In a bid to demystify money management, Nedbank Private Clients recently hosted an enlightening webinar in which panellists Khanya Modipa, a fitness and wellness entrepreneur, and Thapelo Tsiu, Senior Manager of Financial Wellness and Education at Nedbank, shared their wisdom on leveraging financial literacy to secure a financial future that is as strong as it is sustainable.

Some of the valuable insights and guidance they shared during this enlightening session included the following:

1 Set long-term financial goals. Modipa emphasised the importance of setting long-term financial goals, specifically mentioning the often neglected aspect of retirement planning. ‘Contrary to popular belief among young people, retirement planning isn’t a far-off concern,’ she explained. ‘It should be a part of immediate financial priorities. The sooner you start planning, the more secure and comfortable your retirement will be.’

2 Master the tax game. The panellists agreed that understanding taxation is another cornerstone of financial wellness. According to Modipa, young professionals should not only be aware of how to save on taxes, but also actively use all existing tax incentives to build their future wealth, particularly those related to retirement savings. ‘Investments in qualifying pension funds or retirement annuities offer significant tax benefits, making it an essential avenue to explore,’ she pointed out, ‘and there are many other tax structures that can help ensure you pay SARS only what you have to – so it’s always a worthwhile investment to consult with a tax expert.’

3 Build a financial buffer with an emergency fund. Both panellists agreed on the necessity of an emergency fund. They suggested aiming to save at least 3 to 6 months’ worth of your monthly salary in a liquid account. Importantly, the objective here isn’t to earn maximum interest – it’s crucial to have quick access to these funds in cases of emergencies, such as a loss of employment or other income.

4  Develop an investment mindset. Another point both Modipa and Tsiu agreed on is the value of having an investment mindset. They advised against chasing quick wins or relying on hearsay and instead undertaking comprehensive research to understand various investment options and aligning them with your financial goals. Setting up regular automated investment deposits was also highlighted as an effective way to grow your financial portfolio consistently.

5 Make the most of debt, carefully. Tsiu provided valuable insights into understanding and managing debt. ‘Contrary to common perception, not all debt is bad,’ he explained, ‘and when managed wisely, it can serve as a financial lever.’ He used credit cards as an example, explaining that using a credit card responsibly can build a good credit score, which is vital for acquiring larger loans like car and home loans in future. However, he cautioned against becoming over-indebted or losing sight of the fact that an interest rate hike can add significantly to your debt repayments, which is something you should always keep in mind when spending on credit. 

6 Harness the power of collective savings. Modipa confessed to being an ardent advocate of stokvels, which is a popular form of collective saving in South Africa. She argued that, rather than being ‘old school’, these arrangements are an excellent way to maximise savings by pooling your resources with friends or colleagues to ensure you have enough capital in a savings account to earn the highest tier of interest. ‘Besides amplifying your savings power, a stokvel helps you stay disciplined in your savings, because you are accountable to everyone else involved in the scheme. You have no choice but to make your monthly deposits,’ she explained.

Asked for their most valuable money management lessons, Modipa and Tsiu offered numerous other pearls of financial wisdom, including the following:

  • Watch out for lifestyle creep, which can hinder your financial goals.
  • Be aware of the impact of Black tax and set clear boundaries for dependent family members.
  • Preserve your pension fund when changing jobs.
  • Establish a comprehensive financial plan with a professional planner.
  • Leverage technology to manage your money more efficiently.

While the webinar offered a wealth of valuable money management advice, the most important message was that it’s not enough for young professionals to rely solely on their monthly salaries or even their planned career development to create the future they want. Building that future begins with ongoing financial education to equip yourself with all the knowledge and tools you need, and then follow the wealth creation path you have set with discipline and tenacity.

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