While Father’s Day is all about spoiling dad it’s important that fathers, who are generally the breadwinner in the South African household, take some time out to reflect on whether they are doing all they can to secure their family’s financial future. In every household there’s typically some form of debt that’s being serviced.
There’s rent or a mortgage to pay, vehicle loans, store cards, personal loans and credit cards that need to be maintained. It can all add up and create endless uncertainty for the family. But dads can do much to reduce household expenditures, debt and to ensure that the family will be financially secure with or without them. Here’s 10 things you can commit to doing to give your family peace of mind this Father’s Day and beyond:
- Draw up a will
Would your family know what to do if you were to pass on? Have you got a financial plan in place for all your children and your spouse in the event of your death? Have you ensured that everyone is provided for, particularly if you have children from past relationships? Apply your mind and provide a comprehensive will specifying anyone who is receiving financial maintenance from you with their contact details. Make sure that your loved ones will be able to find a copy of this list should the unexpected happen. Also, review this list annually to ensure that it is kept up to date.
- Ensuring the family is adequately insured
If something were to go wrong – is your family adequately insured? What would happen to your spouse and children if you were to pass away or be in an accident and not be able to work? Speak to your financial advisor to ensure that there’s adequate medical, life, disability and funeral cover in place should your family need it.
- Make moves to be debt free
Compile a list of the lenders you owe money to and work out how long it would take to pay them off. If you can save some money elsewhere by cutting out on luxuries, like DStv, dedicate this extra money to your debt to help you to pay it off faster. If you find you are struggling to cope speak to an accredited financial advisor or debt counsellor to help you construct a plan to pay back your money so you don’t lose your home or other assets like your car in the event that debt collectors come to repossess your goods. There’s no shame in admitting that you have debt. But the sooner you address your debt problems the better life will become for you and your family.
- Cut back on expenses and fees
If you find your family can’t afford certain luxuries or you need to find more money to pay off your debt the best way of doing this is to cut back on expenses and fees. When it comes to your savings you can reduce the fees too. Consider investing in exchange traded funds (ETFs) which don’t have expensive asset managers choosing investments on your behalf. ETFs are a form of collective investment that can be bought and sold like shares. They are designed to track an index and there are a number of companies that enable you to invest in them like Ashburton and Satrix. Consider robo-advisors to get the costs down too. Increasingly, people are turning to automated online systems to choose their investment portfolio for them. We’re not saying ditch your financial advisor all together but consider robo-advice provided by the likes of Itransact because their fees are low (below 1%), compared to some fees attached to actively managed funds which can range from 3-6%. “With 1% you lose out on 17% of your savings to fees, with 2% you lose out on 31% of your savings and on 3% you lose 42% of your hard earned savings,” points out Lance Solms head of Itransact.
- Drawing up a family budget
Drawing up a budget may seem like a mundane task but it’s one of the best ways to get a snapshot on the family finances and how much is spent on goods and services. “If you have no idea what is coming in or out of your bank account, there is no way you are able to budget effectively. In fact, your bank statement is the perfect place to start budgeting, if you don’t have one in place, or aren’t the best at keeping on top of it,” says Ryan Prozesky, CEO of FNB Value Banking Solutions. There are also plenty of online budgeting tools that could help you if you don’t want to draw one up yourself like Old Mutual’s 22Seven, Nedbank’s MyFinancialLife or DebtBuster’s budget calculator. If you need to work out what you need for retirement, use Justmoney’s retirement calculator.
- Sticking to the budget
Once you’ve created the budget you’ll know what it is you and your family can afford. The key is sticking to the budget and not overspending on luxuries. While you may think you deserve a nice flashy car – is it something the family as a whole can actually afford? Remember that car finance typically runs for up to six years so it could take a long time to pay off the car once you’re committed to it.
The good news is that there are makes and models that have the same specs as some of the luxury vehicles. “With the high-specification cars on offer today, opting for a car that meets your lifestyle needs and takes the pressure off your pocket is achievable,” says Des Fenner, general manager of Datsun South Africa.
Rather opt for a cheaper, compact city runabout or find out what dealers can offer you within your budget if you need more space for a growing family. “Gone are the days when buying an affordable car meant getting a car without style and performance. It is far easier now to buy a new comfortable vehicle, at a suitable price, and keep your friends or family happy by not having to sacrifice other luxuries - like a night out on the town, or a well-deserved family holiday,” adds Fenner.
- Saving for the future
If you aren’t very disciplined when it comes to saving, initiate a stop order to a savings account or a unit trust with your bank. There’s also financial savings tool’s like Liberty’s Stash, which allows you to invest in stocks and shares through a tax free savings wrapper each time you swipe your card, with no service fees attached.
- Be transparent about the family’s financial position
Many marriages (almost half in South Africa) end in divorce and financial problems are often cited as a reason for relationships failing. While you may be the breadwinner it’s vital to share financial information with your spouse and even your children to ensure that the family are aware what money is left over to spend on luxuries and entertainment. If your children know how much is left in the family pot it will help them to understand more readily why you may have said ‘no’ to buying them something they desired. Keeping your family in the dark about any financial problems is also not a good idea. You may have made some mistakes but it’s best to rather have your family on your side as you fix them. Remember, that if you are married in community of property your spouse is equally liable for the debt that you accumulate, so it’s best to keep the communication up with your partner about how you resolve these money matters.
- Planning ahead before committing to an investment
As the head of the household you may be the only one to make the decision on where to stay and whether to rent or buy. It’s imperative therefore to plan ahead if you are committing to a major investment like buying a property. Besides the purchase price, consider other costs like transfer duties, transfer costs, bond registration costs, and other costs of ownership such as levies, rates and taxes. Involve your family in the decision making process before you commit the finances to such a large investment that comes with added responsibility.
- Being an example for the family
How do you handle your money? Are you good with it or do you tend to whip out the credit card and spend? Remember that your children are watching your every move and tend to mimic what you do. Explain to them the value of saving and how, by saving, their money will earn interest and benefit from the compounding effect. When you go out shopping with the family only buy what’s on your shopping list and use your debit instead of your credit card to pay for the goods. Don’t get pressured by your children to buy things if you can’t afford it. Instead, ask them to do chores around the house and pay them pocket money and save for the item together.
Handy tip: If you are struggling with debt, apply for debt counselling here.