Four financial debates that put the importance of advice into perspective

Nirdev Desai, Head of Sales at PSG Wealth

The amount of content available on financial advice is staggering, and there are many opinions as to the best route to take. So, how do you know what to trust or ignore?

There are several age-old, apparent dichotomies that generally present two paths to a better financial outcome. Starting with some of these debates is a good way to demonstrate just how unique each person’s financial journey truly is.

Spending less vs earning more

Cutting back on expenses is one method to finding some extra money in your budget. Another way to find extra savings is to earn more income. The latter option isn’t always as easy, but the former can be just as tough when every rand seems to already be accounted for each month. Living from salary paydays to the next is a tough place to be, and each individual budget will have essentials and non-essentials – no one budget is the same and spending less or earning more – or both - could work for you. Often, understanding the trade-offs you make as part of the process can be invaluable, and here speaking to a qualified financial adviser can make all the difference. They have the knowledge to turn abstract debates into goals and help you picture the outcome you want to achieve.

Rules of thumb vs nuance

We so often hear statistics saying you need 15% of your monthly income to go towards retirement. For some, this won’t be nearly enough to attain the level of income hoped for in the golden years, particularly if you start saving late, while for others in light of the current pandemic, it isn’t feasible to allocate that much. Moreover, only relying on rules of thumb, without taking account of the nuances of your particular situation, could set you up for failure. Rules of thumb exist to guide us, but they were never meant to be the “end goal” of financial advice. Therefore, it makes sense to check in with a financial adviser along the way.

Perhaps pausing your retirement contributions to your retirement annuity might be needed for a few months, so long as you don’t pause for too long, and this may be the ‘lesser of two evils’ compared to cashing in your pension fund. Again, it’s going to come down to what else is happening in your budget and what options are available to you. But it’s important to keep future-you in mind in the present as much as possible, to make the most of the time it takes to get to that future. Losing out on time when you could have been saving isn’t a rule of thumb loss, it’s a completely wasted opportunity.

Owning a home vs renting one

This really comes down to preference, as well as purse strings. While owning a home might be viewed as an asset, acquiring this asset comes at a cost. Some people might opt to live in a rented home in a nice area with access to public transport, negating the need for a car, and avoiding long-term expenses. Others may choose to live further from work, using a car and paying off their dream home. All the expenses that come with each choice should balance the benefits, and should factor into your long-term plan. Whether one option is better than the other will depend on what you choose, as well as what your budget can support. Delaying buying a property might mean spending a potential deposit on rent, instead of on your own home’s deposit, just like buying a home ties up a lot of your capital and is generally a years-long commitment with all sorts of unexpected costs along the way. Your choice will be unique.

You don’t need advice vs Yes, you do.

There are many successful DIY investors, but money is often emotional. It’s so important to get financial advice tailored to you (and your investment risk appetite and goals), even if it’s just a once off financial plan you review annually. While you might be tempted to do it yourself (and save on fees), financial advisers are skilled investors who can help you see beyond the noise and make better long-term decisions. As such, they can potentially add much more value to your life than the fees you incur in the process.

Give yourself the gift of tuning out the noise while you truly consider your own financial dreams and means. A qualified financial adviser by your side takes the emotion out, and can help you see the bigger picture, and reach it financially too.