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By Maria Smit *
We’re almost half way through the year, so the big question is: What are your holiday plans for December? Whether you’re planning to travel overseas or locally, we all know that we have to make bookings now to secure the idyllic holiday we so deserve.
This attitude has always intrigued me: if we can be so diligent about planning for a well-deserved break, why can’t we do the same for our retirement? After all, isn’t retirement just the big holiday we take after a life-time of working?
South Africa has a tragically low retirement savings record, with industry estimates showing that only 6% of us can retire in the same comfort we’re used to while working. Yet, I suspect, many of the 94% have no problem planning their holidays with great enthusiasm and vigour.
Allow me to draw the parallels between planning a holiday and planning for your retirement to show that it is possible to retire comfortably, if you plan correctly.
1. Set your destination (set your goals)
Just as you need to decide where you want to go before planning a trip, you need to set clear financial goals. Whether it’s buying a dream home, securing your child’s education, or planning for a comfortable retirement, defining your goals is the first step.
Having a distinct goal doesn’t mean you can’t go on other trips. In the same way, it’s possible to have a plan that gets you to the deposit for a house, or helps you educate your kids or save enough for retirement.
2. Create an itinerary (create timelines)
Once you know your destination, you create an itinerary. If there are sights to see and experiences to book, you’d do this in advance so that you’re not disappointed when you get to your dream destination.
Similarly, set timelines for your financial goals. Categorise them into short-term (next few years), medium-term (5-10 years), and long-term (10+ years). This helps in aligning your investments with your goals.
3. Budget your trip (quantify each goal)
Before you travel, you need to budget for flights, accommodation, and activities. For financial goals, quantify exactly how much money you need. And, don’t forget to account for factors like inflation and your time horizon to ensure accurate estimates.
4. Pack accordingly (allocate assets for each goal)
When packing for a trip, you choose items based on the weather and activities. In investing, allocate assets based on the time horizon and risk associated with each goal. Short-term goals might mean more conservative investments, while long-term goals allow for more risk-taking.
5. Choose the mode of transport (choose investment vehicles)
It goes without saying that you need to choose how you’re going to get to your holiday destination. Trying to drive your car to a remote island is obviously not going to end well.
So, choose appropriate investment vehicles for each goal. For short-term goals, you could look at safer options like fixed deposits or short-term bonds. For long-term goals, listed stocks, unit trust funds, or ETFs would be more appropriate.
6. Book in advance (automate investments)
Booking flights and hotels in advance are essential to reduce travel stress. You can do the same with your savings and investments by setting up automatic transfers into your investment accounts. These automatic contributions are a great way to stay on track with your financial goals because you can set and forget the debit order.
Benefits of goal-based investing
Hopefully I’ve made the case for having a clear financial plan to help you get to your end destination. And just like your holiday choices will differ from mine, so do your goals and circumstances. So, choose a destination that appeals to you and put in place a plan that you can stick to.
Proper holiday planning should help you avoid unexpected costs, and so can proper financial planning. One of the biggest benefits is that a proper plan helps you avoid debt traps that rob you of money you should be saving.
Goal-based investing ensures you have the necessary funds when needed, avoiding the need for loans.
In the same way that travel plans keep you on schedule, clear financial goals help you stay disciplined with your money. Knowing what you’re working towards keeps you motivated, even during market fluctuations, which is the secret to reaching your financial goals.
Just as a well-planned trip ensures a smooth journey, goal-based investing gives you a structured and effective approach to achieving your financial dreams.
Happy planning! And if you’re unsure of what route you need to take to reach these dreams, please don’t hesitate to reach out to me. Nothing gives me greater pleasure than helping clients reach their destination, safe in the knowledge that they can no relax and enjoy the vacation.
* Maria Smit CFP® professional is an advisor at Brenthurst Pretoria
MARIA is a CERTIFIED FINANCIAL PLANNER®️ professional, a member of the Financial Planning Institute of SA and is fully qualified to give advice on all investment matters.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
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