How 1.618 helps clients architect their ideal Financial Strategy.
Posted in Broker In Your Pocket on Jan 22, 2024
How 1.618 helps clients architect their ideal Financial Strategy.
When we look at risk, the idea behind risk is to reduce your risk, obviously, but also to make sure that you don't spend all of your money on these grudge payments, if I can put it that way, so that we can focus our attention on building wealth. And I think for a lot of South Africans, especially going through COVID and these type of events, if we add more savings, if we add more long term investments to tap into, I don't think it would have hit us that hard in that sense.
Now when the first one that we look at under wealth is obviously savings, and the important thing about savings is I need a nest egg that if something goes wrong that I didn't plan for, I can take out money and I can use it to fix that problem. A lot of us have tyres that we need to replace, geysers that's broken down, something in our house need that needs to be fixed. And the problem is we're so easy to go for a personal loan or a credit card and all of a sudden we're just creating more debt where if I have a good savings plan where there's 2, 3-4 months build up in terms of monthly income, I can use that money to pay whatever needs to be paid and then go from there.
Each of us again have different goals when it comes to saving. A lot of people say I don't need access to it on a monthly basis. A lot of people say I've got a more long-term view in terms of what I want to achieve, but I think the most important thing is what type of risk appetite do you have? Do I want to be aggressive in terms of my investments or do I want to be conservative? When we look at savings, most of the time we just want to beat whatever inflation is giving us.
So, it's very important that on a yearly basis, my money actually grows more than what inflation is giving us, but we don't want to take risks because if I want to withdraw that capital tomorrow, it needs to still be able to be the same as what I put in, plus whatever interest I got on top that that. So, that's not where we really want to take our risk. It's more about building up that nest egg, so that if something goes wrong, I can tap into it.
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