Even the best DIY savers can profit from professional financial assistance
It is possible to "DIY" your personal finances - but most people don't have what it takes. Successful DIY-savers tend to be passionate about all things related to personal finance: they invest a great deal of time in educating themselves and do exhaustive research into products and providers, investment strategies and managers. They are extremely disciplined and have clear goals. But even the best of them seek validation, if not advice, from a qualified financial planner.
Stefaan, not his real name, is one of those and he's up there with "Supersaver Julia", who has become the poster girl for saving on Bruce Whitfield's The Money Show.
Like Julia, Stefaan had a one-off consultation with independent financial planner Warren Ingram, who was impressed by Stefaan's savings habit. The 41-year-old chartered accountant started saving in earnest about 10 years ago and he and his wife have since paid off their car and house, and invested successfully for themselves and their two children. They are currently saving 50% of their combined gross income.
They will be in a position to retire at 50.
The catalyst for Stefaan was a series of conversations with an older colleague. "He was the foreman at the plant where I worked, and because I was the 'money guy', he would talk to me about how he managed his money. He wasn't a big earner, but he put three children through university and said that if he wanted to buy his wife a diamond ring, he could.
"It was the first time anyone had spoken to me about saving and it was contagious. I really got the message that saving is paying yourself first."
The biggest hurdle: starting out
Stefaan started saving in a Satrix index fund.
"Every month after I started, I felt better and better. And, as my savings grew, so did the compulsion to save. At first, I saved on behalf of my wife and myself. But, as I talked her through what I was doing and she saw the results, I won her over and she really bought into the plan. We save together, but make sure our investments are spread evenly for estate and tax-efficiency purposes.
"A few years later, when the financial crisis hit, I was educated enough to know it wasn't as much a crisis as an opportunity to buy low. So I invested our annual bonuses, which have more than doubled."
When the couple had twins, they began monthly contributions to a tax-free savings investment in each child's name.
But a decade later, things have become more complicated. "My contributions to my company-sponsored retirement fund and to my retirement annuity began to exceed the maximum deductions allowed. And I had an old retirement annuity - one of those that attract a high penalty if you stop or reduce your contributions. I wanted to know if it was worth taking the knock and replacing it with a more cost-effective product. I had also made a direct offshore investment, and there were estate-planning implications."
The value of paying for advice
Stefaan says Ingram helped him think through these decisions and others.
"I turned out to be underinsured for disability. And our tax-free investments were not diversified. Up until now, we've been saving R15,000 a year for each child. We wanted some advice on how to invest the remaining R18,000 a year - up to the maximum annual limit of R33,000. Instead of putting the extra money in balanced funds, we are now considering investing in an actively managed property fund."
Paying an hourly rate for financial advice was a first for Stefaan, but he says he would do it again.
He says that saving and developing their own financial plan have been liberating.
"We aren't waiting for a windfall. We are working towards our goals."
Paying off their home loan in 7.5 years was a huge milestone. "As soon as you've paid off your home loan, you can really put your money to work. I reckon you aren't in control of your money until that debt is settled, and you must be able to say exactly when - the month and year - that will be; ahead of term, of course."