Each year we are presented with our president’s State of the Nation address and the finance minister’s budget speech around the same time. The SONA is closely linked to how money is spent; it’s a powerful reminder for us to consider the close link between our lives and our budgets!

Good finances begin and end with good budgeting – when you have a good budget and stick to it, you’re often 90 percent of the way to wherever you want your money to get you. But what is it about budgets that make it so hard to stick to them?

Failed state 1: The fantasy budget

This may sound familiar: you decide to work out your new budget, so you write down your income, your monthly expenses are guesstimated and some vague savings goals like ‘get out of debt this year’ or ‘save R4000 for retirement every month’ are set.

What’s wrong with this picture?

It’s not specific enough.

Many of us don’t work with an accurate measure of what we are spending day to day. We tell ourselves we spend R250 on our morning cup of coffee at work because that’s an amount we’re subconsciously okay with, when it may be closer to R550 per month. We tell ourselves we’ll ‘get out of debt’ but haven’t tracked exactly how much is owed on the credit card, or how much our interest is costing us.

A budget based on speculation is a fantasy budget.

A better budget: Get real about tracking

There’s a reason why almost every diet out there insists that you start by tracking exactly what you eat – reality is hard, but it works.

To start creating a budget, take a look at your bank statements for the last 3 months at least to determine your real expenses and the exact amount you make monthly. It’s also worth looking at the exact amount of debt outstanding on anything like credit cards or store accounts and, if you have savings goals, the exact amount you’ve saved so far.

Not only will you have a clear picture for the first time, you’ll also be inspired by the dose of reality to keep saving and keep an eye on those expenses.

Failed state 2: The too-tight budget

A super realistic budget shaped by the step above is great, but can sometimes lead to the second most common error in budgeting: a too-tight budget.

This may seem contradictory to you, but it is very important not to account for each and every cent with no flexibility. An okay budget works with exactly what you get and spend in your real life, right now. A good budget realises that life is what happens when you’re making other plans.

If you have no leeway in your budget for emergency expenses, you’re going to struggle to stick to your budget. Emergencies happen, spontaneous purchases happen and sometimes things cost more than even a carefully-planned budget can account for.

A better budget: Set up your own emergency fund

Everyone has sudden expenses, everyone has emergencies. Therefore, everyone can benefit from an emergency fund.

Whatever you can save to guard against these surprises is good, but a general rule of thumb to aim for is three months’ salary tucked away, which will cover you for many unforeseen, unfortunate events. Also, don’t undervalue the importance of insurance for your household items, income and movable assets – not just for your property and car.

Failed state 3:  The emotional budget

You’ve set up your budget and are ready to go, but are you looking at your expenses through objective eyes? Many people classify wants as needs, when in fact they could spend less on eating out, cellphone upgrades, new shoes or the work cafeteria.

Another instance of being emotional with budgeting is when we are unrealistic about how much we can save for certain goals. If our savings goals are unrealistic, we’ll struggle to achieve them and lose precious momentum we need to keep at it. 

Saving is like brushing your teeth – it’s the everyday habit that makes it effective, not a once-off effort.

A better budget: Cut back what you can

Be accurate about what you spend, then evaluate what you can do to cut that down – you’d be amazed at how small amounts add up.

Can’t see your blind spots? Give your budget to someone you trust. They may be able to see with fresh eyes and say: ‘do you really need a new car every year or a bagel from the canteen every day?’

Failed state 4: The solo budget

No man is an island, and very few budgets are either. If you’re married and/or have kids or are living with someone else, you need to take them into account. Why? Because they may well have their own budget ideas that could clash with yours, or you can be assuming something on their part incorrectly. Just because it’s your spouse who always picks up the dry cleaning doesn’t mean that they’ve got it on their budget. And they may well have decided on an aggressive savings plan you know nothing of. It helps to check.

A better budget: Talk the talk

Sit down together and compare budgets. Also, this could be a great opportunity to plan together for a shared incentive, like a holiday. If you have kids, inviting them into the budget conversation can be invaluable education for them too.

Every investor has their own unique style when it comes to the rigorous decision-making process that goes into what to include in their portfolio and how to weight it. January, with the fresh perspective that comes from a break and a new financial year pending, is often the ideal time to take a look at investment decisions from a new angle.

One of the most useful ways to do that is the big picture look at trends affecting investing on a global scale.

This ‘seeing the wood for the trees’ approach can help with a far longer-term approach.

Here are some of the macro trends experts are saying will most affect investors in 2020 – and far.

Agitated agriculture

Climate change, the hot and bothered elephant in the room in most macrotrends analyses, continues to affect foresights by experts.

In PwC’s ‘Doing Business in Africa’ report, it was forecast that agricultural productivity throughout the continent could be reduced by as much as a third over the next 60 years due to climate change. This will be under even more pressure due to the fact that numerous experts have estimated the world’s biggest population growth for the next 50 years to unequivocally come from Africa. With less agricultural produce and more mouths to feed, what will happen for investors?

This is in direct contrast to the short view, outlined in the 2017/2018 PwC South Africa Agribusiness Insights Survey, which said that agribusiness drives 65 percent of Africa’s employment, with most bigger agribusiness CEOs forecasting a sunny 10 percent revenue growth for coming years.

To invest in agribusiness or not to? That is the question. It depends largely on an investor’s risk profile.

ESG excellence

One shorter-term upside for all this climate focus will likely be the continuing expansion and sophistication of ESG funds, perhaps into a formidable asset class in their own right. ESG has traditionally been seen as a ‘tree hugging alternative’ fund in SA, but has already seen a marked renaissance in the past six months.

However, the environmental ‘E’ sure to be emphasised with all this talk of climate change is likely to only further the ESG interest and value for savvy investors who are willing to look.

The rise and rise of pharmaceuticals

Less of a problem for the rest of Africa – but still a concern for SA – is the global ongoing trend in ageing populations getting older.

We are living longer, but often not living healthier. This has already led to an absolute boom in the frail care and pharmaceutical industries and this is showing no signs of slowing down. Shareholders of medical aids, established drug companies and private healthcare institutions like Netcare are still likely to be laughing all the way to the bank in 2025.

Tech takings

In October, tech thought-leader Gartner made an uncommon media appearance by announcing the findings of their 2019 CIO Survey and, as a result, their 2019-2020 technology trends, which they presented to government as the mostly likely to benefit public services in the next year or two and what their CIOs should look at investing in.

It provides valuable insights for the average investor too.

Startups specialising in digital identity protection software and ‘XaaS’ companies (software companies providing a generalist ‘anything as a service’ range of offerings through the cloud, paid for via subscription). The survey found that a significant 39 percent of government organisations say they plan to spend the greatest amount of any new funding on cloud services above anything else – which for investors means that this industry is ready to boom.

All of these pose attractive opportunities for the average investor, but remember that the savvy investor doesn’t only look at trends – they invest in what they know with the solid advice of a financial professional who knows what they’re doing.

Here’s to a good 2020!

As much as we dislike the idea of New Year’s resolutions, January can bring with it a welcome burst of drive and energy to try and improve things from the previous year.

When it comes to improving your investments, instead of focussing on maximising returns (which is never fully in our control), try focussing on the way you invest.

Try out these four tips to unleash your best inner investor yet in 2020:

Grow your patience

A successful day-trader once said that his training in order to excel at foreign exchange trading was to go each day to the post office at its busiest, with snaking queues and interminable waits. Once he was at last at the front of the queue, he would go to the back and start it all again. This, he said, prepared him to deal with the market better than anything else!

Often, it is our emotions which blind us to rational good sense and, in turn, cause us costly mistakes with our investments. If there’s one thing to learn in 2020 that will help your portfolio, it’s patience and control over such emotions.

Grow your network

The investors specialising in real estate have known this for years: effective networking can lead to effective investing.

We often imagine investment as a solitary affair played out between you and your laptop in an office, or perhaps at 3am at home. Sometimes it’s one on one with your adviser or some such other important party. Actually, the most successful investors are often very successful networkers.

What investors forget is that sometimes the golden rules of business and leadership also apply to investing. Learning is growth and learning is improvement, so why not seek out opportunities to meet with other investors and genuinely ask them why they do what do and try to learn from them?

If you’re thinking of investing more heavily into software companies in the new year, why not seek out meetings with software experts who think differently to you? And different financial professionals or investors who have been in the game longer than you have? If you want to invest differently, speaking to people who think differently is a savvy idea!

A broad mind and a constantly educated mind is a sharp one, and sharp-minded investors make good investment decisions.

Grow your knowledge

Make 2020 your year to find out about an asset class or types of funds you don’t know much about yet… Your goal will not be to move your money into these classes, but to understand your current choices better.

Most investors have varying degrees of knowledge about one or two (sometimes three) asset classes that they ‘believe in’ and tend to avoid everything else. Sometimes these investors know a lot and do very well – but a special sort of knowledge comes to the man or woman who understands how asset classes fit together in certain environments, exactly why some shine when they do and why others falter.

Growing your knowledge base can also include reading very widely and intently on a sector, company or stock you plan on investing in for months before you commit a single cent. It’s an empowering feeling, and guess what? You’re in good company. This is exactly how Warren Buffet allegedly invests.

Grow your vision

For the kind of long-term goals most investors are aiming for, such as retirement and future children’s university fees, long-term vision is vital. Simply keeping abreast with the recent few years is like taking a sprinter and expecting them to win the Comrades Marathon.

January is ideal list-making time, so make a list of exactly what you’d like your money to do for you in ten, twenty, thirty and forty years’ time, as well as after your retirement and even your death. Also, what exactly would you like your portfolio to look like.

This helps you articulate meaning for your money.

Only once you know precisely what you want can your portfolio be uniquely designed around that and measured in your terms of what success looks like.

Try out even one of these tips for longer than a couple of months, and it’s guaranteed to change your life as well as your portfolio. Now that’s worth investing in.

In the last few months of the year the personal income tax season hangs over year-end busy-ness like a shroud. Then, the new year begins right away with business’ financial year end looming. The last thing most of us want to think about in January is more tax.

But really, January is the best time to start thinking about tax – when you are comparatively freshest, to give you the most time and preparation possible to make it less awful. And, if you are an investor, it’s not enough to simply cough up in 2020 – several things have changed in regulation and with Sars that may affect the way you are taxed.

After the Finance Minister’s February budget, investors breathed a sigh of relief. No one suspected another VAT change (there would have been an uproar) but dividend tax, capital gains tax and more remained largely unchanged.

However, the relief was bittersweet when the dust settled – the bracket creep that had plagued investors has not been acknowledged at all and so tax breaks were not adjusted for inflation as they usually are.

Even though on paper investors were not taxed much, the lack of inflation adjustment meant that, in reality, investors were getting an effective 2 to 3 percent less out of their investments thanks to tax not taking into account inflation.

The other most significant change for investors, which is less well-known, is the infamous 12J changes. Due to a promised upfront tax incentive for investors, those who invest in venture capital companies (the Section 12J investment class), investment into venture capital essentially doubled in one year – a significant boon for the country!

However, as of November, restrictions to the tax benefit were finalised and passed, meaning that the previously generous tax incentive – hovering at about 45 percent of the total amount invested in Section 12J funds – has been limited to a maximum of R2.5 million. So, only R2.5 million at the most can be invested into the class. If you were one of the higher income earners investing sums of that size into 12J, this obviously affects you. It also affects SME businesses that would have benefitted from the 12J class, the companies invested into by the venture capital funds, as there is now a limit on how much investors can put in.

All of this means slower growth for would-be venture capitalists and has already resulted in the asset class looking less attractive to local investors. If you are team 12J, proceed with caution.

Lastly, one for the petrol heads. Many investors took enthusiastic note of President Ramaphosa’s announcement of a new upcoming automotive special economic zone to be brought in soon to attract local and global investors with significant growth and benefits. However, the taxman has already been all over the development, with numerous (and quite punitive) anti-tax-avoidance measures being proposed, withdrawn and revised several times already in the draft Taxation Laws Amendment Bill. Those who wish to get involved better wait until the dust settles on this one.

Ultimately, tax is a jungle for most of us and it is well worth us having a chat to stay well within the law while still limiting the damage tax can place on your portfolio growth.

Swiss banks hold a certain cachet about knowing good from bad investments, and currently the hottest topic on their lips are ESG funds.

ESG stock options – or, rather, ‘Environmental, Social and Governance sustainability’ – have been steadily gaining traction among investors in the last few months, emerging into something of a buzzword.

Once considered a ‘hippie tree-hugging’ concept, ESG funds are having a moment in the sun (hopefully a sustained moment…). And, in December, they’re likely to have more of a moment still. After all, this is the season of charity and goodwill to all. Wouldn’t it be nice to ensure that our investments were in line with ethical corporate behaviour and preserving our planet?

But ESG investing is far more than just putting money behind nice people. It can make sound financial sense too, according to the big players.

Expert opinion

For Marriott’s Dividend Growth Fund, which has a solid track record, it’s less about ESG for ESGs sake and more about the fact that companies synonymous with sustainability practises and good governance tend to also have more solid predictors of success in the market.

“Marriott’s investment team monitors and reports on ESG issues on a regular basis. An area of particular importance to Marriott relates to company reporting and disclosures. Companies with a reputation for withholding important shareholder information will not be considered for inclusion in a portfolio as the future prospects of these businesses cannot be determined with a high degree of certainty. Companies which take advantage of ill-informed consumers are also immediately excluded, not only from an ethical standpoint, but also due to the unsustainability of exploitative business models. The Marriott team also carefully consider environmental initiatives undertaken by companies to ensure their products and future business prospects are sustainable.

“Studies have shown that companies which pay, and grow, their dividends tend to outperform the market over the long term. This is evident in the performance of Marriott’s local equity fund – the Dividend Growth Fund – which has won a number of awards for risk-adjusted returns,” said Marriott’s Robin Hartslief in a recent press release about ESG funds.

The charts below illustrate the dividend track records of some of the companies the Marriott Dividend Growth Fund currently invests in. As you can see, it pays to be the nice guy:

ESG in the rest of the world

Overseas too, the Financial Times noted this month that ESG tends to seriously outperform in some key areas. “ESG assets under management have grown the fastest among smart beta strategies, at a compound annual growth rate of more than 70 per cent over the past five years, according to a recent report from Bank of America Merrill Lynch,” it said. In Europe, Lipper EMEA Research noted that “we have witnessed an above average increase of assets under management driven by market performance. Additionally, a high percentage of the overall net inflows in the European fund industry are invested in mutual funds and ETFs with a sustainable investment approach.”

ESG funds offer exciting opportunities for investors. They are still a tiny portion of the market in SA with not much but the fact that they’re a buzzword known about them when it comes to the average investor.

Just like with any other change in investment strategy, this requires a comprehensive conversation before making any switches, but if you’re looking for new options – ESG funds could be a great addition to your portfolio.

December should be a time of peace, cheer and goodwill to all men. But, if you’re a South African investor, it’s the month that likely brings up residual trauma of some decidedly un-jolly happenings from recent years’ Decembers. Cabinet reshuffle. Nenegate. Steinhoff. What is it about the twelfth month of the year that turns the festive season into the silly season?

If you’re understandably nervous this time of year as an investor, fear not. While no portfolio is fireproof to completely uncontrollable events like black swans and major unforeseen global macroeconomic events (like the first 2016 Brexit referendum), there is a lot you can do to limit your exposure to market-affecting shenanigans on the home front.

Here are a few ways to ensure that your portfolio doesn’t go ‘ki Dezember’ crazy this month, if the markets do:

Manage your emotions

It’s amazing how simple logic is so easily questioned when the buying of Christmas gifts, expensive holidays, Black Friday remorse and seeing far more family and friends that we usually do all play into the mix. Against this highly emotionally charged backdrop people tend to behave a little irrationally. And, when it comes to investing, emotional = dangerous.

The age-old maxim of ‘buy low, sell high’ works for a reason. And, most of the year, you may well stick to it. In December, be aware that you may try to knee-jerk sell. Don’t do it. Unless a major macroeconomic event like the actual apocalypse is happening, let’s have a quick WhatsApp catch up or a short phone call to double-check the best options.

Cash is king – in context

You don’t get much more liquidity than cash. And in times of trouble or uncertainty, people opt for several versions of the old ‘cash under the mattress’ trick, like holding cash in a standard bank account or stocking up on Krugerrands.

Cash is an option, but it works best inside of a diversification strategy. Nothing short of a very well-proven crystal ball will help you move exactly the right thing at the right time to the right place. It’s about having all your assets in different places, different classes and with different levels of liquidity that will see you through.

Don’t make any sudden moves

When it comes to investing, always remember: any change costs something. A change when everyone else is pulling the same change (like investing offshore), is also expensive. Try not to suddenly pull huge lump sums out of equities and into a different class without it being in line with your long-term strategy.

A move like this, which may seem simple enough, could cost you five times: the price of the fee to pull money out of equities, the setup price of moving into bonds, the loss of momentum on your equities, the loss of any compounding you may have been about to tap into or eventually attain on your equities and the price of starting from zero in the new asset class.

Switching things up in your portfolio is sometimes necessary, but it must be done inside of a comprehensive strategy, not a panicked whim. When nearing the end of an investment term, it could be a good time to change your weighting in various classes and the diversification of your portfolio. Feeling scared watching the news is not.

Be commitment wise

Don’t get involved in something you don’t know well. December is often the time of year-end bonuses. Feeling jolly, you may think: ‘hey, why not try out Bitcoin?’

Unless you’ve been studying the market history, inner workings and headlines surrounding Bitcoin for more than a year, maybe give it a little more thought.

Many tried this back in 2017 when Bitcoin was trending and either lost all that irreplaceable, untraceable investment in a hacker’s spree or waited until December 2018 to find out it was worth 80 percent less.

Ultimately, investing always works best when you have a trusted, second opinion to every move you want to make. Either knuckle down and focus on the people around you and let your money work for you, or let’s get in touch and have a comforting cup of coffee to bolster your portfolio.

There is ample research to show that December is by far the most financially stressful time of the year for most people. Spending pressure is more emotionally charged than almost any other time of the year.

Luckily, December need not be all doom and gloom for your wallet. Like many situations that seem at first glance insane, it just requires a plan.

Here are our top tips to get you through the festive season without major money haemorrhage:

Step 1: Calculate exactly how much you’ve got

Unless you have it in writing or in your bank account, this does not include that Christmas bonus. This includes how much funds you have… until the end of January.

The trick to getting through December is not to just think up until the 25th but, rather, look at the fact that you will likely be receiving your next salary only 30 days after that. When do school fees need to be in by? What about buying back-to-school stationery with the same pay check that you will be using for present shopping?

While this may sound like a sure-fire way to get even more stressed about December, it’s the opposite. It allows you to cap your spending in December so that you still have enough for January.

Step 2: It’s the thought that counts

Little things add up when it comes to actual Christmas, and to the rest of ‘ki Dezember boss’ and ‘Januworry’ too. Try think of exactly what food and household items you’ll need to get you through both months and buy them in bulk. This follows on comfortably from the first tip – when you know how much you have to work with, you can be savvy with what you have.

Take a long hard look at your diary and consider investing, along with your family, time over the next few weeks to hand-craft what you can. That may mean homemade wrapping paper or less pies from Woolworths. Either way, it adds up.

Also, don’t underestimate the value of just asking someone what they want for Christmas. It may be a lot less expensive than the thing you were eyeing that you thought they’d love.

Step 3: Avoid December debt

Always try to avoid borrowing money to spend money. That includes December groceries and overspending on things you really don’t need or have space for. If you find yourself in serious financial straits, see if there is a temporary loan you can get from a loved one instead. Anything but bad debt.

Step 4: Put it away instead

It almost seems like money is made for spending when it comes to December, but if you have carefully budgeted, you might be able to have some extra cash to save.

Whether that means squirreling it into an emergency fund, topping up some of your investments or putting it into your retirement annuity, make sure it goes into a safe place. Unaccounted-for money has the tendency to disappear into mindless sending at the best of times, and December is the worst of times when it comes to that.

If you follow all of these tips, there’s no reason why you and your finances shouldn’t be more jolly this December. Ho ho ho!