How to . . . Make the budget work for you

INCLUDED in the budget that Finance Minister Pravin Gordhan presented to parliament last week were some new products designed to help to protect South Africans from financial ruin, said Barry O’Mahony, a certified financial planner and founder of Veritas Wealth Management.

“We simply do not save enough every month,” said O’Mahony. But the launch of two financial products in the budget speech was geared towards helping South Africans save more, he added.

The first is a tax incentive that allows investors to save R30 000 a year in a bank account, unit trust or stockbroker account, and an investment of up to R500 000 in this fund in their lifetimes. The second is an enhancement to retail bonds that will enable investors to contribute monthly, rather than only in one lump sum.

O’Mahony also suggested watching for changes in the retirement industry as the government addresses costs, service and competence issues. Here is more advice from O’Mahony:

Become more disciplined about your spending;

Consider increasing the amount you save. From March 2015, you will be allowed to save up to 27.5% of your income tax free, and you will be allowed to withdraw R500 000 tax free on retirement (up from R315 000);

Make sure your retirement contribution is at 15%. If you started late, you can push it up to 27.5%;

Set up a debit order for a retail bond or one of the new tax-incentive funds and invest in good unit trusts. “A debit order is a brilliant way of fooling yourself into becoming wealthy. You’ll think you have spent the money that you are actually investing,” he said; and

Speak to a certified financial planner professional for sound advice. — Margaret Harris