I got engaged over the December holidays and want to starting building financial wealth together with my partner. Do you have advice on how to start a joint financial plan before we get married? Carina van Rooyen, Wealth Manager at PSG Wealth, Pretoria East.
Congratulations on your recent engagement!
Planning for a wedding is exciting, and many couples take the time to plan and budget for it but fail to discuss and plan for their financial future.
First and foremost, it is extremely important that an upfront discussion about finances takes place. Differences in how each manages money can result in severe disagreements. This conversation may be challenging but is a necessary step towards financial wellbeing. One of the most significant decisions to make is what type of marriage contract you will enter. Obtain a professional legal opinion to determine which contract type will be most appropriate for you as a couple.
Start your financial plan by determining a budget and deciding who will bear responsibility for certain expenses. You must have clear insight into each other’s financial circumstances including all assets, debt, income and expenses and other financial responsibilities. Another aspect that young couples often do not address is making financial provision for one another in the event of death or disability. Family dynamics will also come into play if you or your partner bear financial responsibility for your parents or other family members.
An open and honest discussion about each person’s financial goals will set the stage for a financial plan that will assist you in achieving those goals. Building a roadmap for your future together may be a daunting prospect, and as at any life stage, it can add a great deal of value to establish a relationship with a qualified and reputable financial adviser. An adviser can assist with the entire process that a joint financial plan entails before, of from the outset of, your marriage – from establishing a budget, drafting a will and estate plan, as well as creating a comprehensive wealth management plan that includes risk planning (life insurance as well as illness and/or disability cover), retirement as well as investment planning.
Incorporating all these aspects into your joint financial plan will enable you as a couple to work towards building wealth aimed at a successful financial future, and hopefully also contribute towards a happy marriage.
Why should I start saving for retirement at age 22 using a retirement savings product, when I could instead invest that money in the stock market? Jaanre Muller, Wealth Manager at PSG Wealth Hermanus Portfolio Management and Stockbroking.
The key reason to start saving for retirement as early as possible is the remarkable power of compound interest, often credited as referred to by Albert Einstein as “the eighth wonder of the world”. Compound interest allows you to earn returns not only on your initial contribution but also on the accumulated gains thereon from previous periods. This principle enables your wealth to grow exponentially over time, making it one of the most effective ways to build long-term wealth.
For example, if you start saving for retirement at age 40 instead of age 20, you would need to save almost five times as much each year to reach the same amount of capital by age 60.
Investing in equities, which are considered growth assets, is an effective way to build wealth as it typically provides higher returns over the long term than interest-bearing investments, albeit at a higher level of short-term volatility. It is a suitable asset class if you have a sufficiently long investment horizon, typically more than 5 years.
Retirement savings products, such as retirement annuities or pension funds, allow access to the stock market (while limited to 75% exposure of the total portfolio due to Regulation 28). Some product providers even enable you to hold a personal share portfolio within a retirement annuity.
Additionally, contributing to retirement funds provides significant tax advantages. For example, contributions to a retirement annuity are tax-deductible (subject to legislative minimums), while the returns (interest, capital growth and dividends) are also exempt from tax, effectively enhancing your overall investment return.
I am a 23-year-old who recently started working after graduating. What portion of my income should I allocate to savings and investments? Alexi Coutsoudis, Wealth Adviser at PSG Wealth, Umhlanga Ridge
As Warren Buffett famously said, “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”
Create a sound framework:
A helpful rule of thumb is the 50/30/20 budgeting framework: allocate 50% of your income to needs (e.g., rent, food, transport), 30% to wants (entertainment, hobbies, lifestyle), and 20% to savings and investments. If you can save more than 20%, even better! The earlier you prioritise saving, the greater the benefits of long-term compounding.
Start by building an emergency fund equivalent to 3–6 months of living expenses. This serves as a safety net for unexpected costs, such as medical emergencies or job loss.
Next, focus on retirement savings. At your age, aim to save 15% of your gross salary into a tax-deductible retirement account. This ensures that by age 65, you can retire with an income of at least 75% of your final salary, assuming consistent savings and an average portfolio return of inflation + 5% per year.
Use any remaining portion of your savings allocation for investments tailored to specific goals, such as a deposit for your first home or a dream holiday.
Keep Your emotions in check
Even the best-laid plans encounter obstacles. It’s crucial to stay committed to your strategy and maintain a long-term perspective. Document your goals and review your investments regularly to ensure you remain on track. For added guidance and expertise, consider working with a Certified Financial Planner who can help you navigate your financial journey.
We spent more than we budgeted over the festive season and dipped into our savings account. How can we rebuild our savings over the next six months? Dulcie Weyks, Financial Adviser, PSG Wealth, Waterkloof
Rebuilding savings after festive spending can be challenging, but with a focused plan, it’s achievable.
Here’s how to get back on track in six months.
Start by reviewing your festive season expenses. Knowing where you overspent can help you make temporary adjustments now. As personal finance expert Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went.” This insight will help you find areas to cut back and save.
Set a realistic goal for rebuilding your savings. If you dipped into R10 000, aim to save that back in six months. Breaking it down, that’s about R1 667 per month - more manageable in smaller steps. Financial planner Suze Orman advises, “Start with the end in mind.” Having a specific target helps you stay focused and motivated.
Examine your budget and find areas to scale back temporarily. For example, limit dining out, pause streaming services, or cut other non-essentials. Even small cuts can add up over time.
Another tip is to automate savings. Set up a monthly transfer to move funds directly into your savings right after you’re paid. This “pay yourself first” method builds savings before you’re tempted to spend.
If possible, explore ways to increase income like freelancing or selling unused items. Extra income — even a few hundred rand — can make a difference.
By making small changes, setting goals and tracking progress, you’ll have your savings back in shape in no time.
As a business owner, I am becoming increasingly concerned about the high rates of cybercrime in South Africa. Recent reports I’ve read show that South Africa is one of the biggest hotspots for this type of activity on the continent. I have worked hard to build my business and don’t want to see it fail due to a cyber-attack. How can I protect my business? Karen Rimmer, Head: Distribution at PSG Insure
South Africa is indeed a growing cybercrime hotspot, with attacks on businesses becoming more common as well as increasingly sophisticated. The consequences of cybercrime can lead to severe financial loss, reputational damage, operational disruption and potential legal liabilities. As digital reliance grows, so does the urgency for businesses to protect their systems and data against these evolving threats.
One of the most crucial safeguards to have in place would be comprehensive cyber insurance. This type of cover will protect your business in situations such as data breaches and ransomware attacks. Cyber insurance is still relatively specialised in South Africa, so working alongside an insurance adviser can help you navigate any complexities.
Outside of insurance cover, you can also look at implementing proactive cyber risk management strategies to protect your business. These could include:
1. Implementing robust authentication systems: Multi-factor authentication (MFA) combined with complex passwords creates an initial line of defence against unauthorised access.
2. Conducting employee training: Human error remains one of the top causes of cyber incidents. Regular employee training on phishing recognition, secure data handling, and email security can greatly reduce risks.
3. Securing data backups: Regular, encrypted backups of company data minimise disruption and data loss in cases of ransomware or other cyber incidents.
PERSONAL FINANCE