Financial freedom: Is it achievable?

The time period ‘financial freedom’ rolls off the tongue fairly simply, however it isn’t essentially as straightforward to outline or to attain in apply. Achieving and sustaining monetary freedom is a course of and an ongoing journey of self-discipline, for which there are sadly no shortcuts. That mentioned, you aren’t alone in understanding and getting the best merchandise to help you on this journey. This article explores the important thing areas to grasp in an effort to obtain monetary freedom. This contains making the best selections with regard to planning, merchandise and investments, all of which should be underpinned by a disciplined strategy.

Defining monetary freedom for your self

Before stepping into the main points, it’s helpful to begin by defining what monetary freedom means to you. This is essential, because it has completely different meanings for every particular person, and the best way you outline it is going to set the scene for the choices it’s essential to make. For one particular person, monetary freedom could merely imply having the ability to afford common journey, for an additional it might imply the power to afford high quality training for his or her youngsters. In its easiest type, reaching monetary freedom means taking possession of 1’s monetary place and being able to attain one’s objectives by means of all phases of life.

Key selections begin with a plan

Once you’ve outlined what monetary freedom means to you, the subsequent step is to evaluate the place you are actually – relative to the place you wish to be. Draw up the panorama of your present monetary place in respect of the next elements:

  • Debt
  • Income
  • Savings
  • Expenditure
  • Assets

With the assistance of your advisor, you may then develop a plan by:

  • creating short-term budgets frequently and sticking to those,
  • incorporating long-term financial savings plans (e.g. retirement and training), and
  • retaining in thoughts that danger cowl, medical help and a will are additionally crucial components of your total monetary plan.

Choosing the best merchandise alongside your monetary freedom journey

 Financial merchandise alone don’t pave the best way to monetary freedom. Instead, they supply the means to attain monetary freedom by serving to you accumulate and protect wealth. The desk under highlights the important thing options of a wide range of monetary merchandise that can assist you make extra knowledgeable product selections which can be appropriate to your wants.

Key options that drive selections
Retirement annuities (RAs), preservation funds and employer retirement funds · Saving for retirement is crucial. This could also be troublesome to understand early in a single’s retirement financial savings journey, however retirement fund merchandise (e.g. the PSG Wealth Retirement Annuity and PSG Wealth Preservation Fund) are a vital part in serving to you obtain monetary freedom in the long term.

· The most necessary facet of those merchandise that one wants to grasp is that it’s essential to begin contributions as early as attainable.

· Contributions to those merchandise are tax deductible and all of the returns on these merchandise are tax exempt.

· Access to capital in these merchandise is proscribed, which makes them efficient merchandise for preserving capital.


Tip: Growth belongings are sometimes essentially the most appropriate underlying investments in these merchandise.


Tax-free financial savings accounts (TFSAs) · TFSAs, such because the PSG Wealth Tax Free Investment Plan (TFIP), present further flexibility when it comes to funding choices and entry (in contrast with RAs and preservation funds).

· The quantity you may put money into these merchandise is topic to contribution limits of R36 000 a 12 months and R500 000 over your lifetime.

· TFSAs can be utilized to help monetary freedom in retirement or present environment friendly tax-free financial savings for different functions, together with saving for training or unexpected occasions.

Endowments · Endowments can facilitate tax-efficient investing for people who fall right into a marginal tax bracket in extra of 30%. This is as a result of the tax fee on funding returns is successfully 30% for people investing in endowments.


Reminder: Your means to entry all of your endowment financial savings is proscribed within the first 5 years.

Living annuities · Living annuities, such because the PSG Wealth Equity Linked Living Annuity (ELLA), are designed to offer an ongoing earnings in retirement.

· The advantages of dwelling annuities are usually optimised by having a monetary advisor to assist handle fund allocations and withdrawal charges on an ongoing foundation.

· It is essential to regulate annual earnings withdrawals from these merchandise. Withdrawing an excessive amount of can quickly deplete capital over time.


Tip: With the enhance in longevity danger ensuing from an extended life expectancy, you will need to contemplate continued funding in development belongings inside your dwelling annuity.

Unit belief funds · Unit belief funds are underlying investments of the funding merchandise listed above and are the constructing blocks for reaching one’s total funding targets. There are many various unit belief funds obtainable in South Africa, so choosing the best ones could be a daunting determination to make.

· A PSG Wealth monetary advisor can provide the mandatory steering and entry to our market-leading PSG Wealth Solutions unit belief funds. These funds are designed to help the above talked about merchandise and to attain optimum consumer outcomes in relation to return and danger.

Direct shares · Investing immediately in shares affords a higher diploma of flexibility in alternative in comparison with unit trusts. However, investing immediately means there isn’t a fund supervisor, so this funding possibility is extra appropriate for educated and skilled traders.

· If you like investing immediately in shares, it’s essential to be certain that you perceive the dangers concerned, particularly the danger of restricted diversification throughout shares.

·  Consider appointing a monetary advisor with the mandatory {qualifications} to handle a share portfolio in your behalf.

Monitor your selections repeatedly

As your monetary freedom journey develops, you might want to regulate your plan accordingly. Revise your selections, however at all times stick with the essential precept of economic self-discipline. A monetary advisor may help you perceive what it’s essential to contemplate to attain monetary freedom, information you in making extra knowledgeable monetary selections, and assist you preserve your plan and funding merchandise on monitor.

Jan van der Merwe is head of Actuarial and Product at PSG Wealth.

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