The month that was - Covid, medical aids and pyramids

It is that time of the month where we take stock of what has happened over the past 30 days

JSE

The JSE had lots of ups and downs this month and dropped by 5% over the past 30 days

Covid

While many countries are moving back into lockdown, we have moved to level 1. It looks like things are getting back to normal if the traffic on the roads is anything to go by.

Just be careful about becoming blasé and letting your guard down. I have a close family member in hospital at the moment because of Covid – it is still out there and is not friendly.

Medical aid

The various medical aids are currently releasing their new benefits and rates. Now is a good time to look at what you have and see if you are on the right plan.

Susan is our medical aid specialist and she has a fancy programme where she can compare the benefits offered by the various companies and see which is the right one for you. Drop me a line or give her a call and she will gladly give you a medical aid health check.

Hierarchy of needs

When I studied psychology at UCT, I learned about Maslow’s Hierarchy of Needs. I recently came across a hierarchy of financial needs. This really resonated with me

Take a look at the pyramid below and see where you are on your financial journey.

1. Cashflow

How are you managing your cashflow? Do you have a budget that you largely stick to? Are you struggling with debt?

If you can’t sort this out, you will not be able to move up the pyramid.

2. Financial safety

This is the next step. You need ensure that no matter what happens, you stay on the same life trajectory.

If you have an accident and can’t work again, you need structures in place to ensure that you will continue to receive an increasing income. Similarly, if a family breadwinner dies, you need to ensure that there is sufficient income for the rest of the family to survive.

Only once this is in place can you start saving

3. Accumulating wealth

Here you start investing to get to the next level. It is always a good idea to have a goal here and understand what “the number” is that will give you financial freedom

4. Financial freedom

You have sufficient savings to live the life you want on your terms. You also have sufficient risk and medical cover in place to handle life’s emergencies

5. Legacy

You want to pass on the wealth you have accumulated to people and causes that are dear to you rather than the government.

By structuring your financial affairs cleverly, you can minimise estate duty that gets paid. A proper financial planner show you how to do this.

I recently participated in a week-long masterclass on estate duty and was impressed by the number of ways in which estate duty can be reduced. You often need to start doing this when you enter the wealth accumulation phase at step 3 of this pyramid.

Hope you found this useful.

Till next month, keep safe and look out for my column in the print edition of the Daily Maverick every Saturday.

ENDS