Lot of plan­ning and ded­i­ca­tion

Sowetan - - Your Money -

or easy. You must have a solid fi­nan­cial plan to en­sure that you can give your child the best life pos­si­ble.

You can com­pare rais­ing a child to a sec­ond hous­ing bond. This is be­cause rais­ing a child is a long-term com­mit­ment that could last for years un­til they be­come fi­nan­cially in­de­pen­dent.

Re­search on South African mid­dle-in­come house­holds show that it costs about R90 000 a year to raise a child.

Buy­ing a car is one of the largest fi­nan­cial de­ci­sions one can make. When it

What car you drive

comes to buy­ing your­self the dream car you de­serve, the best ad­vice is to buy the car that fits your fi­nances.

How early you start sav­ing

War­ren Buf­fet wrote, “Don’t save what is left af­ter spend­ing; spend what is left af­ter sav­ing.

“How much you spend de­ter­mines your sav­ings rate. If you are young, time is one of your great­est friends in wealth ac­cu­mu­la­tion. You will never get more in the fu­ture.”

Sim­ple cal­cu­la­tions show that a 23-year-old who in­vests R6 000 ev­ery year for 10 years at an an­nual re­turn of 8%, will have R93 873.

If af­ter those 10 years, she stops con­tribut­ing and does noth­ing un­til age 60, her in­vest­ment will have grown to R749 863.

The per­son who waits un­til they are 33 to be­gin in­vest­ing will need to save R7 950 for 27 years, in or­der to have around R749 863 at age 60.

Whether you do it your­self or get a fi­nan­cial ad­viser

You def­i­nitely do not need a fi­nan­cial ad­viser if you have self-con­trol, fi­nan­cial plan­ning knowl­edge and self-knowl­edge.

Given that our lives are so full of other activities, you are likely to need as­sis­tance with fi­nan­cial plan­ning from qual­i­fied peo­ple.

Fi­nan­cial ad­vis­ers are in the busi­ness of in­vestor be­hav­iour mod­i­fi­ca­tion. The in­vestor’s chief prob­lem and even his worst en­emy, Ben­jamin Gra­ham said, is likely to be him­self.

We all have emo­tions and bi­ases that af­fect our de­ci­sion mak­ing, so we need a voice of rea­son to as­sist us to act ra­tio­nally.

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