2020 has been a year unlike any other. The COVID-19 pandemic forced many people to reconsider their financial plan and make financial decisions that would not have ordinarily been made.
In this issue we look at why cancelling life cover is a non-negotiable, especially if you have loved ones and/or debt. Market conditions should not deter you from saving, therefore we show you how compound interest can grow your wealth.
If your circumstances have changed, make sure your insurer is informed. Healthcare cover is another key aspect, and we share tips on how to stretch your benefits in the new year.
It is tempting to slow down and delay making any big decisions until the new year. However, some decisions need to be taken now, rather than later. Take time to reassess your financial plan to make sure you remain on track with your finances.
Don’t cancel your life cover
If you are looking to cut down on expenses, cancelling your life cover should be last on your list. As a vital financial safety net for your family, life cover is especially relevant during a pandemic. If you pass away without life cover, your family may not be able to maintain their lifestyle. Life cover can also provide enough money to cover your debt when you die.
If you are considering cancelling your cover now and reapplying for a policy later, think again. Chances are that you’ll end up paying a higher premium, as you get older. If you get sick in the interim, your new premium will be loaded or your application may be declined.
Grow wealth with compound interest
Harnessing the power of compound returns is the best way to build wealth when you invest. The sooner you start investing, the more you’ll reap the benefits of compound interest. This applies even in times of market uncertainty. If you save R500 per month at 9% return, you would accumulate R1,470,892 after 35 years.
Investing is more accessible than ever, and tax friendly savings vehicles help make investing attractive. Forming good investment habits and making sound decisions based on independent financial advice will place you in a better financial position in the long term.
Click for more tips to grow your investment wealth.
Inform your insurer of risk changes
Be sure to inform your insurer if your place of work has changed due to lockdown, as your risk profile may have changed.
If you are working from home now, driving your vehicle more – or less – for work purposes, or are not using your business premises, your insurer needs to know. This applies to household contents, vehicles and buildings. Your insurer will reassess the value of the risk and ensure the proper cover is in place, to ensure that you are covered in the event of a claim.
Reassessing risk is not only important during lockdown. To comply with your policy terms and conditions, you always need to communicate to your insurer any changes to your risk.
Click here to see why you should have your risk reassessed.
Making healthcare more affordable
As you choose your medical scheme option to suit your healthcare requirements for 2021, here are tips to stretch your healthcare benefits in the new year.
When you need medical advice, visit your general practitioner instead of going directly to a specialist. Also aim to use network doctors, optometrists, dentists, hospitals and pharmacies. By using your scheme’s selected medical providers and purchasing listed medicine, your scheme may pay these costs in full.
Be sure to ask for the generic versions of medication and consider using telephonic consultation services if this is available. This will help preserve your medical scheme savings account, which covers your out-of-hospital or day-to-day expenses.
Read further about making healthcare more affordable.
Review your financial plan
This year has been anything but ordinary, so take the time to reassess your finances and decide if your financial plan requires tidying-up.
Start by listing your assets, liabilities, income and monthly expenses. Decide how much money you want to save and how you will spend the remainder. You can then revise your budget so it remains realistic.
Your investments should suit your risk tolerance, time horizon, age and financial circumstances. They should also be structured tax efficiently. Your short-term insurance, medical scheme and other policies should accurately reflect your circumstances and beneficiaries.
Click to read more about being financially healthy.
Take caution when investing your money
The Financial Sector Conduct Authority (FSCA) continuously urges consumers to check the credentials of a financial services provider (FSP) before buying products or services from them.
To do this, go to the FSCA’s website and search the list of authorised financial services providers.
Another useful check, is to search through the FSCA’s media releases to see if they have issued any public warnings about the FSP or purported FSP.