Financial plan

Three things that will affect your financial plan over the next few months

You started this year with all the best intentions. You may have reviewed your financial portfolio, evaluated your investments, and confirmed your asset allocation in your investment portfolio – under the watchful eye of your financial advisor, of course. South Africa was apparently heading into the post-pandemic era, and while our Covid-battered economy was still fragile, things were looking a bit more optimistic, ratified by a better than expected Budget speech.

In a few weeks, several events may have influenced our best-laid plans, but we might ask ourselves, to what extent? Ryno de Kock, Head of Financial Planning and Advice at Consult by Momentum, shares the three things that could affect your financial plans over the next few months, and the level of their impact.

The annual budget speech – a minor impact on your take home pay

South African taxpayers breathed a sigh of relief when the finance minister announced tax relief during last month’s budget speech. Corporate income tax has been reduced, there has been an adjustment of personal income tax brackets and, for the first time in over 30 years, there has been no hiking in fuel Specimens.

In reality, says De Kock, the pressure on consumers and businesses has not diminished. “The personal income tax brackets were simply adjusted by 4.5%, linked to the rate of inflation. The intention is to offset the impact of inflation, but keep in mind that due to various macro-economic factors, inflation will continue to rise, so any positive impact is negligible.

“At the end of the day, South Africans will have no more money in their pockets.”

De Kock adds that although there was no hiking in fuel levelIn other words, the cost of gasoline and diesel is already so expensive that there was no room for a further increase without pushing consumers to the brink.

“We have experienced over a decade of very low economic growth in South Africa, which has contributed to our high unemployment rate of 46%. Consumers are under financial pressure due to low wage increases in recent years and lower than normal premiums (if any). On the other hand, according to international standards, we face a large tax burden, when income tax, value added tax (VAT), fuel taxes and capital gains tax- values ​​are taken into account.

“In our current landscape, our personal safety, education, electricity, tariffs and taxes, medical and food expenses are increasing at a faster rate than our income growth.”

The Russian-Ukrainian conflict – a medium (but short-lived) impact on your investments

Whenever there is uncertainty in the market, investors will face volatility in the stock markets, which impacts their investments. “Investors should beware of a common investment faux pas of buying only when there is good news and promising recent investment performance, and selling when there is bad news. news and after the value of your investment has declined.By the time the average investor is considering divestment following a war, pandemic, financial or oil crisis, it is usually too late, and the sale will only lead to the long-term erosion of capital.

He sees the early onset of the Covid-19 pandemic as an example. “If someone had de-risked their portfolio at the time due to concerns about market volatility, they would have ultimately suffered a loss and not benefited from the phenomenal rebound we saw soon after.

“The South African market has been quite resilient in the face of this recent conflict, and we urge investors to stay invested.”

However, he says, the conflict will hurt us in terms of fuel and food prices. This brings us to….

Increased food and fuel – significant impact on your monthly expenses

Now that Russian oil is off the table, there is less supply in the market, pushing prices up. When fuel goes up, so does everything else: the cost of the trip to work, the food on your table, and even the diesel in your generator when the lights go out, thanks to load shedding. The cost of bread could also rise, as Russia and Ukraine produce around a quarter of the world’s wheat.

This rise in fuel and food prices is contributing to rising inflation in South Africa. And when interest rates rise, debt also becomes more expensive, says De Kock. “If your car payments are linked rather than fixed, you will now be paying more each month. Those who saw their incomes shrink due to the pandemic – and who subsequently took out a loan to make ends meet – will find themselves paying more in debt service. They may have accessed more credit based on their previously intact credit history and income history, and now find that their monthly repayments are costing them significantly more.

In light of these three events, De Kock suggests that you consult a qualified and experienced financial adviser, who can help you manage the impact on your financial plans.

“Financial plans are dynamic, but just as they can be affected by broader economic factors, they can also be positively influenced by strong financial guidance. The cost of hiring a professional and experienced financial advisor is marginal, especially considering the potential consequences of a poor financial decision.

Ryno de Kock, Head of Financial Planning and Advice at Consult by Momentum.