Financial Planning
If you are new to investing or are experiencing a change in your circumstances find out more about:
- Eight principles of investing.
- Life stage planning.
- Managing your money.
Like any other type of plan, a financial plan is a map of how to achieve a set of objectives using financial products and services. This also includes a risk analysis of potential threats and to you achieving your goals.
- A good financial plan takes into account your personal circumstances such as:Your age: this determines the amount of time you have in the market i.e. your time horizon.
- Your earnings: this will determine how much you have to save and invest.
- Your family circumstances: do you have dependents?
- Your goals: what you want out of life in the short-, medium- and long-term.
Bearing in mind the complexity of some of these factors, we recommend that you consult a professional
financial adviser to help you structure and maintain a portfolio tailored to meet your needs.
Eight Principles of Investing
"We have always said that while we cannot predict the future, we have learned a lot from the past. It is important to stay calm rather than act impulsively or reactively - only then can you build a sound investment strategy. Your investment goals will still be achievable, despite the ups and downs of the markets.
"Our principles of investing are tried and trusted. They will help you to work towards your investment goals and your future plans. You can be sure that Old Mutual will always be there to offer any support, guidance or advice you may need along the way."
- Paul Hanratty, MD Old Mutual, South Africa
The Principles
- A sound financial plan: should include determining your goals, current financial position, planning horizon and risk profile.
- A diversified portfolio: a sound financial plan contains a balanced portfolio of investments, including shares, bonds, cash and property, in local and international markets.
- A holistic approach: don't focus on the performance of one element of your portfolio but consider its performance in its entirety.
- Time in the market: taking a longer-term view is bound to yield greater returns that trying to time the markets.
- Outpacing inflation: over the long term, cash is unlikely to deliver inflation-beating returns.
- Regular contributions: by investing on a regular basis over the longer-term, you generally enjoy the best returns.
- Financial partner: Old Mutual has the tools, experience and people to help structure your investments to match your needs and goals.
- A unique solution: the right solution for your neighbour might not be the right one for you.
- Life Stage Planning
To assist you in researching what products may be right for you at this time, we have identified several life stages and matched them to broad product categories.
- Single & starting out.
- Single & established.
- Married.
- Family Life.
- Divorce.
- Deep in debt.
- Bereavement.
- Empty nest.
- Retirement.
Understanding the basics of money management is an important first step towards wealth creation.
You will discover that your financial situation is not really about how much you earn. Rather, it is about your attitude towards your money and your future.
There are five principles that apply to everyone no matter what the size of their pay cheque. Follow the tips below and discover how simple sound money management really is.
- Pay yourself first & save.
- Create a clear vision & plan.
- Know what you earn & owe.
- Settle your debt.
- Grow your money.
The rising cost of education makes it imperative for parents to start saving at the earliest possible time. Ideally, that's just after your child is born. But, if that's not possible, then there's always the next best thing - now.
Complicating matters is the fact that your savings or investments are no longer confined to funding tertiary education. Nowadays you need to make provision for school (primary and high) as well as pre-school! Depending on your choices (type of school, degree or diploma) you will need a small fortune. But, with the right plan, an early start and a little bit of investment discipline it is not impossible.
Education Solutions
Old Mutual has not singled out an individual product as the ideal solution to education planning. Instead we offer you a choice of investments designed to suit your pocket, risk profile and investment term.
- The solutions are:Education Plan – an affordable, long-term education solution. Access to funds occurs after 5 years. Minimum investment period is 10 years although limited access to funds is available after 5 years.
- Max Investments – offers a choice of fixed or flexible payment options and a selection of tax options to suit your personal circumstances.
- Unit Trusts – this investment vehicle enables you to invest on a monthly basis or once off with a lump sum and for any amount of time. Due to the nature of this investment (i.e. investing in the stock market) it is recommended that you invest for at least 3-5 years.
The sooner you start, the more time you have to take advantage of compound growth. Compound growth is growth on top of growth. An investment of R100 at the start of year one could grow to R110 by the end of it. The growth in year two will then be on R110 and so on.
The more time you have to invest the more aggressively you can structure your investment portfolio. If, for example, your daughter is six months old and you would like to one day send her to university you will have almost 18 years to invest. You can afford to take on higher risk, which brings with it the potential for higher returns.
If your son is 13 and you have just 5 years to save then your investment portfolio would look quite different. The less time you have the more conservative your investment choice.
Working out how much you need and how long you have to save for it is the easy part. The next section looks at the solutions Old Mutual has to offer. Should you need assistance when making the right choice for you and your family, an Old Mutual Personal Financial Adviser can provide some sound advice.
Estate Planning
Your estate refers to everything you own and owe, from property and cars to investments and debts. Proper estate planning will ensure that your estate is set up in a tax-efficient way that benefits you during your lifetime and your beneficiaries after you die.
A properly structured estate ensures that:
- There is enough cash to pay outstanding debt
- There is an income (and capital if required) for your dependants
- The estate is distributed according to your wishes
- Your business interests are protected
- Taxes are minimised (e.g. estate duty and income tax)
- Your estate is flexible enough to accommodate changes in the economic and legal environment, as well as your personal financial circumstances
Estate planning is a complex process and there is a number of different estate planning vehicles available. The key is to establish your priorities - do you want to settle debts, provide an income for your spouse or protect your business interests for your heirs?
Old Mutual Trust will be able to advise you as to the best way to achieve your aims. However the two most common vehicles employed within estate planning, are Wills & Trusts.
Funeral Cover
Funeral costs are seldom considered until the time comes to organise one. And that is probably the worst time of all. Depending on the requirements it could cost anything between R7 000 and R30 000!
As sombre as it sounds, your own funeral is very rarely considered. The thought is brushed away with the misconception that there will be enough money in the estate to cover the cost. The problem is that access to funds is temporarily suspended until such time as the estate is wound up. That means loved ones end up paying the costs upfront.
Different cover for different needs
There are a number of options to consider when considering funeral cover.
These include:
To help protect you against those unexpected expenses Old Mutual offers two types of funeral cover.
These are:
There are a number of products in which you can save or invest your money. Each product is structured to meet a selection of investment needs and will be distinguished by characteristics such as:
Do I want to invest for growth or for an income? Old Mutual has a selection of solutions to help you achieve your investment aims.
If you don't want a packaged investment solution and prefer to invest without the assistance of an adviser,
unit trusts also offer access to potential growth or can be used to generate an income. And don't forget that a bit of offshore exposure is a great way to diversify your investment portfolio.
Please note that Old Mutual recommends that you consult an adviser when structuring your investment portfolio.
Insurance (Short-term)
Short-term insurance can become an expensive part of your monthly budget. On one hand it offers peace of mind in cases of emergency, for example: a burst geyser, the theft of a car, a break-in resulting in the loss of some or all of your valuables. On the other hand, paying for too much insurance, or for insurance you don’t need, is a waste of money.
Essentially you need to combine financial peace of mind with the correct cover. The most common forms of personal insurance are protection of household goods, personal liability cover and vehicle insurance.
The insurance solution - Allsure Insurance - explained in this section provides cover beyond just the three key areas. It is Old Mutual’s solution for your insurance needs as offered by one of our subsidiary companies, Mutual & Federal.
Mutual & Federal is one of the leading insurance companies in southern Africa. It provides insurance for the personal, commercial and corporate markets in South Africa, Namibia, Botswana, and Zimbabwe.
Medical Aid
The purpose of a medical aid is to ensure that you are able to pay for treatment received at the hands of a GP, specialist or while in hospital. The purpose of this section is to assist you in making the right Medical Aid choice for you and your family.
What You Need to Know
When researching and selecting Medical Aid covers there are a few things to keep in mind:
Types of cover can be split into a two main categories.
These are:
Selecting the right plan
Selecting the right plan means looking at your specific requirements. Do you or your family visit the GP regularly (typical of a family with young children)? Then you will need average (to above average) day-to-day cover and major medical expenses.
Or, are you a healthy, fit individual who seldom goes to the doctor but wants peace of mind that major medical expenses are covered in case you end up in hospital? In this example, you are looking for minimum day-to-day cover (if any) and a fair amount of major medical expense cover.
To help you select the right cover, try and ascertain the amount of visits you have made to a doctor over the past 12 months or if possible over the past two years. This should serve as a guide to the type of plan required.
Cost
Opting for the cheapest option may not always be the best option. What is important is the cost-to-cover ratio i.e. what are you getting for the amount you are paying.
Check for exclusions especially for things like certain types of chronic medication or HIV cover. Ensure you understand the hospital plan’s limit and what is covered by the day-to-day pool.
Chronic medication cover
A chronic illness is a condition that requires ongoing medical treatment, for example: asthma, epilepsy, bipolar mood disorder, Parkinson’s disease and diabetes. Check to see what type of chronic medication is covered in your medical plan choice and what the annual limit is on the type of medication required.
Value added services and benefits
Rewards
Most medical aid schemes nowadays provide value added benefits to encourage a healthy way of living. The rewards or benefits may distract from the core offering i.e. medical aid cover in the form of a hospital plan and day-to-day benefits. Your choice of Medical Aid should include a balance of relevant cover for your needs and value-adding services or benefits such as reward schemes.
Savings option
The other question you need to ask is whether your Medical Aid plan offers a savings option. The savings option of a medical aid plan enables you to set aside some funds for:
The last thing you need in an emergency is to worry about your medical cover (and if there’s enough in it to cover what you need). That’s why choosing a reputable Medical Aid provider with years of experience is important. Checking the payment record of the Medical Aid Scheme provides a good indication of its reputation
Life Cover
Life cover means protection from financial loss as a result of death and disability.
To help protect you against those unexpected expenses Old Mutual offers two types of life cover.
These are:
Retirement is a fact of life. The question is: What can you do to ensure that you retire in security and comfort?
The answer is to start planning for your retirement as soon as possible. There are two primary stages to consider when developing your plan:
Saving your money in a bank account is not enough because inflation will erode the buying power of your cash. You need to find a way to ensure that you expose your money the growth potential inherent in the markets in order to secure your future financial stability.
Advice
Because planning for your retirement is key to your future security we highly recommend that you contact an adviser to help you structure and maintain your retirement plan.
Your adviser will conduct a regular assessment of your changing financial circumstances as well as help you take advantage of the markets where appropriate.
Old Mutual Trust will be able to advise you as to the best way to achieve your aims. However the two most common vehicles employed within estate planning, are Wills & Trusts.
Funeral Cover
Funeral costs are seldom considered until the time comes to organise one. And that is probably the worst time of all. Depending on the requirements it could cost anything between R7 000 and R30 000!
As sombre as it sounds, your own funeral is very rarely considered. The thought is brushed away with the misconception that there will be enough money in the estate to cover the cost. The problem is that access to funds is temporarily suspended until such time as the estate is wound up. That means loved ones end up paying the costs upfront.
Different cover for different needs
There are a number of options to consider when considering funeral cover.
These include:
- Funeral cover for yourself
- Funeral cover for yourself and your immediate family
- Funeral cover for your extended family, which could include your mother, father, brother, sister, aunt or uncle and even your in-laws.
To help protect you against those unexpected expenses Old Mutual offers two types of funeral cover.
These are:
- Funeral Plan Range: this range of Plans offers you the option to cover yourself and your immediate and extended family. You can choose between our Care, Standard and Comprehensive+ ranges of these Plans, depending on your needs - and your pocket.
- Greenlight Final Expenses Plan: this plan also offers you the option to cover yourself and members of your immediate and extended family. Medical testing is required in some instances.
There are a number of products in which you can save or invest your money. Each product is structured to meet a selection of investment needs and will be distinguished by characteristics such as:
- Fee structures
- Adviser commission
- Tax benefits
- Liquidity
- Estate planning benefits
Do I want to invest for growth or for an income? Old Mutual has a selection of solutions to help you achieve your investment aims.
If you don't want a packaged investment solution and prefer to invest without the assistance of an adviser,
unit trusts also offer access to potential growth or can be used to generate an income. And don't forget that a bit of offshore exposure is a great way to diversify your investment portfolio.
Please note that Old Mutual recommends that you consult an adviser when structuring your investment portfolio.
Insurance (Short-term)
Short-term insurance can become an expensive part of your monthly budget. On one hand it offers peace of mind in cases of emergency, for example: a burst geyser, the theft of a car, a break-in resulting in the loss of some or all of your valuables. On the other hand, paying for too much insurance, or for insurance you don’t need, is a waste of money.
Essentially you need to combine financial peace of mind with the correct cover. The most common forms of personal insurance are protection of household goods, personal liability cover and vehicle insurance.
The insurance solution - Allsure Insurance - explained in this section provides cover beyond just the three key areas. It is Old Mutual’s solution for your insurance needs as offered by one of our subsidiary companies, Mutual & Federal.
Mutual & Federal is one of the leading insurance companies in southern Africa. It provides insurance for the personal, commercial and corporate markets in South Africa, Namibia, Botswana, and Zimbabwe.
Medical Aid
The purpose of a medical aid is to ensure that you are able to pay for treatment received at the hands of a GP, specialist or while in hospital. The purpose of this section is to assist you in making the right Medical Aid choice for you and your family.
What You Need to Know
When researching and selecting Medical Aid covers there are a few things to keep in mind:
- What type of cover do you need?
- How much will it cost?
- What chronic medication is covered?
- Value added services or benefits – e.g. is there a reward system or programme to promote healthy living; can I add a direct family member like a mother or a brother to the plan?
Types of cover can be split into a two main categories.
These are:
- Major Medical Expenses: this constitutes major surgery, hospitalisation and dental surgery. It is basically treatment received in a hospital.
- Day-to-Day benefits: this is cover for treatment received outside of a hospital. It is what you would typically pay for GP consultations, the ordinary dental check-up, and prescribed medication.
Selecting the right plan
Selecting the right plan means looking at your specific requirements. Do you or your family visit the GP regularly (typical of a family with young children)? Then you will need average (to above average) day-to-day cover and major medical expenses.
Or, are you a healthy, fit individual who seldom goes to the doctor but wants peace of mind that major medical expenses are covered in case you end up in hospital? In this example, you are looking for minimum day-to-day cover (if any) and a fair amount of major medical expense cover.
To help you select the right cover, try and ascertain the amount of visits you have made to a doctor over the past 12 months or if possible over the past two years. This should serve as a guide to the type of plan required.
Cost
Opting for the cheapest option may not always be the best option. What is important is the cost-to-cover ratio i.e. what are you getting for the amount you are paying.
Check for exclusions especially for things like certain types of chronic medication or HIV cover. Ensure you understand the hospital plan’s limit and what is covered by the day-to-day pool.
Chronic medication cover
A chronic illness is a condition that requires ongoing medical treatment, for example: asthma, epilepsy, bipolar mood disorder, Parkinson’s disease and diabetes. Check to see what type of chronic medication is covered in your medical plan choice and what the annual limit is on the type of medication required.
Value added services and benefits
Rewards
Most medical aid schemes nowadays provide value added benefits to encourage a healthy way of living. The rewards or benefits may distract from the core offering i.e. medical aid cover in the form of a hospital plan and day-to-day benefits. Your choice of Medical Aid should include a balance of relevant cover for your needs and value-adding services or benefits such as reward schemes.
Savings option
The other question you need to ask is whether your Medical Aid plan offers a savings option. The savings option of a medical aid plan enables you to set aside some funds for:
- Shortfall: this is the difference between standard or state defined medical aid rates and private rates.
- Reserves: you may find yourself paying a good few medical bills because your medical aid cover has been exceeded. This could put you out of pocket but not as much as is needed to claim back from the taxman. Medical expenses, comprised of non-deductible medical scheme contributions and medical expenses not paid for by the medical scheme, exceeding 7, 5% of taxable income, may be deducted from taxable income.
The last thing you need in an emergency is to worry about your medical cover (and if there’s enough in it to cover what you need). That’s why choosing a reputable Medical Aid provider with years of experience is important. Checking the payment record of the Medical Aid Scheme provides a good indication of its reputation
Life Cover
Life cover means protection from financial loss as a result of death and disability.
To help protect you against those unexpected expenses Old Mutual offers two types of life cover.
These are:
- Life Plan Range: this range of Plans offers you the option to cover yourself and your immediate and extended family. You can choose between our Pure Life, Life & Disability and Accidental Death & Disability Plans, depending on your needs - and your pocket.
- Greenlight Life Cover: this plan is more than a traditional life and disability protection plan. It gives you a range of additional benefits to tailor the cover to your needs. This means you are not confined to selecting traditional Life Cover only. It does mean you are able to select options in Life Cover that are relevant to you.
Retirement is a fact of life. The question is: What can you do to ensure that you retire in security and comfort?
The answer is to start planning for your retirement as soon as possible. There are two primary stages to consider when developing your plan:
- Retirement funding: the accumulation of capital and assets to support a comfortable retirement.
- Retirement income: identifying the correct product and asset mix to generate a retirement income to meet your post-retirement needs.
Saving your money in a bank account is not enough because inflation will erode the buying power of your cash. You need to find a way to ensure that you expose your money the growth potential inherent in the markets in order to secure your future financial stability.
Advice
Because planning for your retirement is key to your future security we highly recommend that you contact an adviser to help you structure and maintain your retirement plan.
Your adviser will conduct a regular assessment of your changing financial circumstances as well as help you take advantage of the markets where appropriate.