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Retrenched – What Now?

Making the right financial decisions when you’re retrenched can make a huge difference in the long run.

Mirinda Laurens

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Being retrenched can bring on many negative but also positive feelings: stress, anxiety, loss of control, anger, happiness, opportunity to name a few.

In this time when you have to make serious decisions about your financial situation, letting your emotions cloud your financial judgement could be detrimental. You need to remember that many aspects of your finances remain under your control.

These decisions will have an impact on you, not only now, but also in years to come. Therefore it is critical to gain a better understanding.

Some practical steps to help you keep your finances on track:

Maintain your cash flow

Unfortunately the bills don’t stop when you are retrenched.  If you have never done a budget before then now is the time to start. This will show you how much money you need to pay your bills and still put food on the table.

By knowing how much you need every month you can calculate how long your retrenchment package will last. For example if your retrenchment package is R50 000 and you need R10 000 per month to sustain your lifestyle, your retrenchment package will provide you with an income for five months.

Have your retrenchment package paid into a separate account such as a money market account. Pay yourself monthly by transferring the amount you need for the month as calculated by your budget into your normal account, thereby establishing a temporary pay office. This will ensure that you do not spend more than what is necessary as you might think ‘but I have the money’.

Remain appropriately insured

Risk Cover: Most companies make provision for you to take over your life cover in your personal capacity. This is called a conversion benefit/option.

Bear in mind that you will no longer have the discounted premium benefit under the group cover, so the premium will most likely increase but the advantage is that you will not need to go for medical underwriting. This would count in your favour if your health has deteriorated and you might not be able to get the cover otherwise.

It is very important to maintain your life cover to ensure your debts are settled and your family is taken care of in the unfortunate event of death.

Medical Aid: As in the case with life cover, most medical aid companies also make provision for a continuation benefit. You become a private client and, depending on your needs and affordability, you can change your medical aid option and no waiting periods will apply.

Making the right decision in relation to your retirement savings

Retirement savings are complex and the wrong decision may unnecessarily cost you a significant amount in tax and lost benefits.

There are several options available on exiting a retirement fund. The combination of the options that are best for you will depend on a range of factors – fees, tax and your personal circumstances.  Decisions relating to your retirement savings cannot be ‘reversed’ therefore it is important to consider all factors at play.

  • Transferring your retirement savings to a preservation fund

A preservation fund is like your own private pension or provident fund. If you need to take some or all of your money before you retire, you can, but you can only do this once.  If you do, you will have to wait until you retire (at any time from age 55) to get the rest of your money the transfer will be tax free and you will only pay tax when you take some or all of your money before retirement. The rules of the fund will remain the same. You cannot make additional contributions to the preservation fund

  • Transferring your retirement savings to a retirement annuity

Your fund value is preserved until retirement. The transfer will be tax free. You can retire any time after you have reached age 55. You can make additional contributions to a retirement annuity fund

  • Transferring your retirement savings to a new employer

Your new employer’s fund rules must allow for the transfer, the transfer will be tax-free.  You will only be able to access your money on retirement or resignation and the new fund’s rules will specify your retirement age however the new fund may have different fees and charges. The new fund may have different investment risks and returns 

  • Cash out your retirement savings

If you decide to take you money in cash (all of it or only part of it), you will have to pay tax.Taking a withdrawal before retirement will decrease the tax-free amount that you will be entitled to at retirement. Cashing out your retirement savings may compromise your ability to maintain the lifestyle you would like in retirement. Take time to make these decisions and remove the emotion from them as they will affect the rest of your life.

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Mirinda is a Corporate Financial Services Manager at Consolidated Financial Planning.

Personal Finance

(Infographic) The Financial Advice Millennials And Gen Zers Want To Know

Having a grasp on your financials is tricky, but it’s crucial if you want to be successful. And that starts with getting the right advice.

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Whether it’s saving for retirement or paying off credit card debt, money management can be a challenge. Of course, different people have different concerns – and that often comes with age. While a 60-something baby boomer might be organising their savings for retirement, your 20-something millennial might be focused on paying off student loans.

In a recent study, financial intelligence company Comet surveyed more than 1 000 people to uncover the top financial concerns of various age groups, as well as the financial advice millennials and Gen Zers want to know and what they hear instead.

Overall, saving for retirement was the top concern across all age groups, with saving for an emergency and affording monthly bills following in second and third. However, it’s no wonder these are some of the most pressing worries – according to the research, 23 percent of people admit they don’t have a savings account, and 43 percent reported not being on track towards their retirement goals. Perhaps that’s because they didn’t hear the right advice growing up. At least that might be the case for Gen Zers and millennials.

According to the research, these young people want to learn things such as how the stock market works, how to manage an investment portfolio, how to invest in real estate and how to build credit. Instead, they’re simply told how to create a budget, save for retirement and pay credit card bills in full every month.

Related: 7 Critical Things Your Financial Advisor Must Meet

Having a grasp on your financials is tricky, but it’s crucial if you want to be successful and comfortable. To learn more, check out Comet’s infographic below.

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Related: Financial Wellness Coach Nelisiwe Masango Shares Retirement Wealth Advice

This article was originally posted here on Entrepreneur.com.

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Personal Finance

14 Ways To Make Quick Cash On The Side

If you need money quickly, here are some solid ideas.

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Need to make some fast money on the side, whether it’s to pay off a credit card or to make your rent?

Keep in mind, making quick side cash isn’t about making a lot of money or getting rich. It’s about getting a shot of capital to help tide you over and put something extra in your pocket. However, some of these side-income ideas can build up your wealth over time. There’s many ways to accomplish this: By participating in the gig economy, the sharing economy, online sales networks, passive income techniques and more.

If you’re looking to make extra money in a relatively short period of time, check out these 14 slides.

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Personal Finance

Take Advantage Of Financial Democracy Made Possible By The New Stock Exchanges

Why should financial democracy matter to entrepreneurs?

Etienne Nel

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Because it creates a society able to afford products and services. Without it, even the innovative products and services that are entrepreneurs’ bread and butter will fail.

What is financial democracy, exactly?

It’s both the right and the ability of the (wo)man in the street and business people to make the decisions that affect their financial circumstances.

Financial democracy does not automatically follow political democracy. For almost 25 years after South Africa’s political transformation, the exclusiveness of our financial markets continued to deprive the vast majority of South Africans of the means to invest, save, and build wealth. South Africa has, therefore, never developed a retail stock exchange environment. So, it has deprived the majority of small and medium sized business of access to capital.

For entrepreneurs to truly flourish, they need a mechanism that easily and seamlessly connects the investor pool with every size of business. And, they need affordable ways to enter both the retail and institutional market.

In short, they need stock exchanges. Ones on which listing takes weeks rather than years, doesn’t break the bank for listing fees, and provides the shortest route to the largest possible potential investor base.

That’s not been possible in the stock exchange monopoly that existed for six decades. Now, it is.

What’s changed?

We now have four new stock exchanges. The resulting competitive environment will significantly reduce the cost of listing – and the cost for investors of buying and selling shares.

Instead of restricting share trading to people or organisations who already have tens of thousands of rands to invest or millions to spend on listing, by licensing four new stock exchanges, the Financial Services Conduct Authority (FSCA, formerly the FSB) has recognised that most financial decisions do not call for high levels of education.

Related: The Role Of Foreign Exchange In The Economy

Most people know how to spend their own grocery money. Most know that it’s better to keep their R1 000 monthly income in a coffee jar than spend R50 of it on bank account fees. People who can barely read and write are immensely skillful at manipulating air time deals to their advantage.

There is significant financial savvy in all social strata.

In the same way, although the mechanics of bookkeeping and accounting may be unfamiliar territory to many entrepreneurs, most have a clear understanding of the difference between profit and loss.

The FSCA has therefore enabled democratisation of the financial markets by enabling the broadest possible spectrum of entrepreneurs and investors to use stock exchanges to participate in and contribute to the economy – on their own rather than prescriptive terms.

How do you take strategic advantage of this democratisation?

  1. Base your business strategy on people’s instinct for making decisions in their own best interests. Trust financial decentralisation, such as one sees in crowd funding and in digital environments such as block chain, where people would far rather trust one another than institutions and governments. This is democracy innately at work in the financial environment and it’s accelerating organically as digital technologies give people more means and the confidence to help themselves – to information and opportunities. Ride the wave.
  2. Tap into people’s desire to innovate. Consumer organisations have proved that letting people interactively help them develop products is a powerful growth engine. Apply the principle by letting people grow your business by buying shares in it, giving you capital and themselves a platform on which to build wealth.
  3. Remember, the ultimate loyalty reward is equity.

Your financial democracy business plan

Look to list on an entrepreneurial stock exchange; one that was founded by entrepreneurs on entrepreneurial principles.

That means: A stock exchange that is already built on financial democracy and decentralisation. One that has, at its core, a single operational concept that keeps things simple for you, automatically gives you an immediate competitive advantage, and, ensures that no matter what your business needs in terms of attracting capital, the exchange can provide all the options in the same, consistent way.

What does such an exchange look like?

It has fintech capabilities. So:

It slashes your listing costs. It achieves this, among other things, by enabling you to populate an electronic prospectus, demonstrating your financial viability, and self publish.

It gives you control by having the granularity and agility to impose relevant governance right down to the individual investor. You get to decide the types and quantities of investors you want to attract. This also enables you to achieve black economic empowerment in perpetuity.

It leads the world by clearing and settling trades in T+0. No-one in the value chain has to hold large sums of money for days following a transaction. Small transactions become profitable. Investors don’t have to risk their life savings on a single large trade. A retail market is opened. An investment and savings culture is entrenched. The economy expands. Your business grows steadily.

It enables anywhere, any time trading via a mobile app that allows investors to see share value in real time. See economy expansion point above.

It integrates processes and procedures, simplifying them and ensuring rapid onboarding of issuers and, therefore, speed to market with new concepts and alignment with the digital economy.

It operates a principles-based regime. So:

It treats you, as an executive, with respect. It’s not prescriptive. It does not insist on excessive oversight, allowing the Companies Act to guide you to sustainability.

It does not attempt to squeeze your company into a pre-defined business or listings format. It recognises and works with your uniqueness.

It obviates the need for expensive specialist listings advisors.

It focuses on financial inclusion and access. So:

Shares can be bought and sold for no more than R1 000. See economy building point above.

Related: 27 Of The Richest People In South Africa

The new world of stock exchanges is integrated, synergistic, holistic, organic, self-fulfilling

Decentralisation of financial control, democratisation of opportunity leads to a whole new economy. One in which, for instance, a taxi operator can finance a minibus through a company in which his purchase gives him shares. A single purchase gives him two benefits: a vehicle on which to found his business and a longer-term investment in shares that he can trade. The funding company gains liquidity through access to a wider base of investors while being able to control who buys and sells and the conditions on which trading takes place. Increasing black equity in business becomes an organic, natural, self-perpetuating process.

Everyone wins in a decentralised, democratised financial market. And it’s the stock exchanges that drive the process.

As an entrepreneur, can you afford to ignore the acceleration that listing could give your business growth?

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