Are you aware of your financial situation?

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Yesterday a client of mine dropped me an email and it made me remember what made me decide to be a financial planner.

In the quite of my day I remembered that my first promise was to share that which I learn and educate all the people God will allow me to come into contact with.

Today I have decided to go back to basics and ask you the question ” Are you aware of your financial situation”?

Do not answer just yet.

Please give it some real thought.

Yes it is important for you to know what happens to the money you earn or receive on a monthly basis and to have a plan to ensure that you can meet all your financial commitments.

Most people have to make financial decisions every day and realize too late that they need advice and guidance on their personal financial management.

Getting financially fit is normally a process and for this reason a proactive rather than reactive process achieves the best results.

When you understand your financial lifestyle you are in a better position to make responsible decisions.

Budgeting can assist you in understanding your financial position and making sound financial decisions.

Your budget is a list of your total income and your total expenses during a determined period, i.e. a month. It is not only a plan of how you will spend your money, it is also a record of how you have spent your money over the month. A budget will give you a sense of financial responsibility and help you identify what your priorities are when it comes to spending your income.

It will help you to:

  • Tackle your debts systematically
  • Control your spending
  • Determine how much debt you can afford and
  • Build wealth

Follow the steps below to draw up your monthly budget

Step 1
List your expenses

Fixed expenses: home loan/rent, car repayment, loan repayment, insurance, fees, etc

Variable expenses: electricity and water bill, food, petrol/transport, other bills, etc.

Discretionary expenses: annual amounts like TV license, car service, school fees, etc

Step 2

Work out a spending limit for each expense category : see below

Step 3
List your income

Step 4
Set your savings goals for the future

Short term goals: getting out of debt, paying for an upcoming vacation

Medium term goals: University tuition for your children, extravagant vacation, paying off your bond

Long term goals: retirement and estate plans

Step 5
Draw up a budget with the information from steps 1 to 4

Step 6
Compare your actual expenses to your budget at the end of each month and take corrective action if you overspent

Draw up your budget Monthly budget template Rules for correct and effective budgeting

Keep your budget realistic

Live within your means. Don’t use a bonus to supplement your standard of living

Get your priorities right, distinguish between ‘needs’ and ‘wants’

Budget for a surplus, leave a margin of at least 5%

Involve your family

Create an emergency fund, put some savings aside to protect you in case of an emergency

Revisit your budget on a monthly basis

There is talk of an economic recovery in sight and the only thing that is going to help us not sink to this level again, is for you and I, to be very aware of where we are today financially and using these basic steps to map our way to where we pray to be.

I end my note to you, with these few words;

“We are products of our actions so let us decide to push forward and cultivate the actions that will lead us closer to our end goals”.

Ebo Quagraine

How Money Savvy Are You

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I came across, this simple test by Laura Twiggs and found it truly helpful.

By reproducing it on this blog, I am hoping it will assist you on your journey to financial independence.

So here it goes;

When it comes to your financial acumen, how savvy are you?

Answer these five questions and find out.

1. Which of the following is truest for you?

a) You have no idea of how much debt you have: you’d rather go shopping for something to make you feel better.
b) You know exactly how much you owe to each of your creditors and you make the minimum repayments.
c) You have home-loan debt and that’s all: you use credit cards and in-store cards but pay off the full balance every month.

2. You get a chunk of unexpected cash from the tax man. Which of these do you do?

a) Spend, spend, spend. You book a holiday and are at the shops before you can say ‘lump sum payment’.
b) You allocate half for debts on credit cards and store cards, then plan how best to spend the other half on things your family needs.
c) You put the entire sum into your flexible home-loan account where you know it will save you interest and be available, should you need it.

3. When you think of your retirement, you:

a) Get nervous, hope your parents aren’t spending your inheritance and quickly start to think about something else.
b) Consider cashing in your retirement annuity. It’s good to have one, you know, but you could do with the extra cash.
c) Feel secure: you look forward to your golden years.

4. Which of the following is the biggest money mistake you can make?

a) Dipping into your emergency fun. That is, if you had one.
b) Borrowing money from your home’s bond.
c) Being unaware of your credit rating and not looking after your credit profile.

5. When people talk about ‘money leaks’ they mean…

a) The way money burns a hole in your pocket and you always think you have more than you really do.
b) Lots of little things that drain your resources unnecessarily. But they can’t mean your daily latte or buying prepared meals,because that is worth it in time saved and pleasure given.
c) The loss of potential capital through spending small, barely noticeable amounts as regularly as breathing.

SO HOW DID YOU FARE?

If (a) =1; (b) =2; and (c) =3

1-5     You truly need help. Contact a Financial Advisor urgently

6-10  You are halfway towards being money smart, you do sabotage yourself each time you indulge in short-term pleasures. Consider delaying your short term gratification and look to the long term benefits.

11-15  You are on the right path to creating wealth and security for you and your family.

GENERAL MONEY TIPS YOU CAN PRACTICE

1. Always try to pay off your credit card and store-card debts in full at the end of every month. The interest rate on these cards can be as high as 25 percent and a R300 purchase on a card can lead to repayments of up to R1 200 within a year. Anyway most of the banks now offer a 55 day interest free period so why not save yourself a few cents by paying in this period. Also change all your store cards from 12 months to 6 months and save more cents again from interest repayments ( Do confirm with the retailer first as not all of them offer the 6 months interest free program, although majority do)

2. Every additional amount you deposit into your home-loan account not only brings down the amount you owe, over time, but also the length of the bond and the interest you pay on it.

3. You should be planning your retirement and saving towards retirement from the moment you start earning, and you should never cash in pension plans or retirement annuities, rather contact your financial planner to assist you with a preservation fund if you do ever leave your employer and want to move the funds.

4. If you do not have a good credit rating, you cannot access any capital and cannot get a head start: credit scores or ratings are more important today than they have ever been, and banks are extremely cautious about to whom they will lend money. The two credit bureaux are TransUnion and Experian. Check your credit record with each to find out your financial reputation in South Africa. Not using any credit is actually a bad idea, because it means you do not have a credit score.

5. The wealthy know that plugging money leaks is the only route to wealth creation.

I am available to assist with any further information or assistance you require.

Passionately yours,

Ebo Quagraine

E-mail: Ebo.Quagraine@fnb.co.za

Tel: 011 036 5885

An Outline of the Present Economic Crises

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Day to day, I deal with a varied number of people and with this experience I have come to realise that although the present economic situation has been explained over and over, many of us still do not understand why and are stuck on what we should be doing.

Watching Opera yesterday, (Yes I watched Opera, who wouldn’t when Suzie Orman is her guest) I received a new breath of inspiration and this I am going to share with you over the next three weeks.

For this week, Let me explain how we got to this present economic situation and advice a way forward.

A housing bubble was created in the mid-2000s: Strong demand for housing, especially in the US, led to a sharp increase in house prices. This, coupled with historically low interest rates and low levels of financial regulation, caused an extensive increase in mortgage financing, particularly to the risky end of the market.

There was a ten fold increase in loans made to home owners who would not normally have qualified for these loans. A large portion of these loans were repackaged and sold to other financial institutions and investors who also thought of using this way to make a quick buck.
Many of these repackaged financial instruments were sold off as investment grade products.

In 2006, the US housing bubble started to unravel : This was on the back of high interest rates, record debt levels, record oil and food prices and deteriorating levels of consumer confidence. Demand for housing weakened, resulting in a decline of house prices. And

Like every hot baloon the bubble burst late 2007: The weakness in the US housing market, together with the higher interest rates, led to home-owners defaulting on their loans. Some analysts estimate that up to 13% of all home owners in the US might lose their homes as a result of the weakness in the housing market. Prices of securities backed by these mortgages fell heavily, leading to banks having to write off billions of dollars.

This left many financial institutions with too little capital as the values of the assets had declined relative to their debt.

Reaction during 2008: Financial institutions have been trying to reduce their debt by selling assets, including mortgage-backed securities. This has eroded asset prices further, making the problem worse. Since nobody was sure how many more potential problems were lurking in the balance sheets of the different banks, they started refusing to lend to one another.

When banks do not have enough cash assets, they also cannot extend loans to the rest of the economy. Consequently, the banking crisis rapidly spread to the rest of the world.

All that goes down must then go up
The first steps to fixing the problem was acknowledging that major interventions were needed. Governments around the world attempted and are still implementing different intervention methods.

Let us take the US intervention, 3 October 2008: The US Treasury Secretary’s $700 billion plan was approved. This plan was designed to inject liquidity into the US banking system.

Coordinated rate cuts, else where. On 7 and 8 October 2008: The following countries lowered their interest rates in response to the ongoing liquidity squeeze: Australia, USA, England, Sweden, Canada, Switzerland and China.

European intervention, 15 October 2008: Germany, France, Italy and twelve other European countries unveiled a comprehensive intervention plan to boost liquidity, underwriting bank debt until the end of 2009 and recapitalise distressed banks.

Markets, 15 October 2008 and beyond: Stock markets have fallen dramatically as these events unfolded, but seem to have stabilised after the announcement of the various “rescue packages”.

How should you respond during this time?
During these volatile market conditions it is important that you remain focused on your long-term investment objective and keep these five principles of sound investing in mind:

1.Timing the market creates more c 1. asualties than heroes: Experience shows that stock markets are very difficult to predict, particularly in volatile times like these.
2. Stay invested for the long term: Local and offshore equity markets have the potential to deliver significant returns over the long term. Sharp drops are usually followed by recoveries and in the long run they balance each other out to produce good long term returns.
3. Invest in a diversified portfolio: By including cash, bonds, property and equity in your portfolio, the positive performance of some investments could neutralise the negative performance of other investments. This approach reduces the volatility within a portfolio and might allow for a smoother investment performance.
4. Invest on a regular basis: This allows you to take advantage of what is known as ‘cost averaging’. Your fixed investment amount each month will buy you more units during periods of weak markets. When market prices rise again, these units, which have been bought cheaply, will enhance the return of your portfolio.
5. Speak to a Financial Planner as myself to help you invest with a company, which has the expertise to help you manage your investment.

Your Financial Planner
Ebo Quagraine
Tel: +27 11 405 4415
Cell: +27 72 221 5231
E-mail: Ebo.Quagraine@fnb.co.za

Setting the Stage

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Good Morning to you

Another day of opportunity welcomes us and it is my wish that today you, you step forward to achieving that goal you set yourself.

In my world as a financial planner, I have come to observe that over a period we see many people, and some planners tend to neglect the relationships they so well built with their older clients.

You are the reason I succeed everyday and reach the feat I do.

It is my prayer and I firmly trust that, this blog will not only affirm my desire that you and I will never part, but it will become for you a frequent dose of inspiration, learning, motivation and a push to action.

Thank you for been you.

You are special and I am blessed to know you.

May you, have a lovely day.

Your Financial Planner
Ebo Quagraine
Cell: +27 72 221 5231
E-mail: Ebo.Quagraine@fnb.co.za