BUSINESS NEWS - Lynn Bolin, Head of Communications at M&G Investments, says life is much easier when you plan, and with the new year having only just started, now’s a good time to get out the calendar, sit down with your partner and anyone else involved in your finances, and note down some key dates.

"Knowing when you need money on hand, and being prepared for the outlay, can save you stress and extra cash when you most need it. Here are a few considerations," she says.

Bolin has provided the following planning tips that will help you avoid unnecessary nasty surprises:

Financial deadlines to remember

The end of February is the cut-off for any extra contributions to your retirement savings and tax-free-investment savings (TFIs) to be included in the 2021/2022 tax year. It’s worthwhile assessing if you’ve used up your annual contribution allowances or if you need to make up for any shortfalls. 

For example, for the tax year, you can contribute up to R36 000 to your TFI, and up to 27.5% of your remuneration or taxable income (whichever is higher) towards an approved retirement fund, up to a maximum of R350 000, to reap optimal tax benefits.

By making the most of these tax incentives and contributing to the limits, you might get a tax refund from SARS, a windfall that you can use to bolster your investments further or for other key financial commitments in the year.

Then, around May, SARS announces the dates for tax season, which is the period for filing your tax return. You will need to prepare for any tax you might owe, particularly if you’re a provisional taxpayer. 

In this case, you’ll be required to pay at least two amounts in advance during the year of assessment, usually in August and no later than February, so keep these dates in mind.

It’s also worth noting when the SA Reserve Bank’s Monetary Policy Committee (MPC) meets and whether they’ve increased the repo rate. This is the interest rate at which the Reserve Bank lends to commercial banks and the basis for calculating other interest rates such as prime (the rate at which banks lend money to their customers). 

The MPC’s rate decisions impact the cost of any debt you are paying off, as well as any debt you plan to incur such as a bond for a new home. You can find the MPC meeting dates on the Reserve Bank’s website.

Inflation is another dynamic number that can influence your investments, so it’s good to keep an eye on it. Annual consumer price inflation (CPI) is currently around the 5% mark and is predicted to move closer towards the SARB’s 4.5% midpoint in 2022. 

This gives you a good guideline as to how your investments need to perform to keep up with the cost of living.

Regular payments

What regular payments are you aware of, and when are they due? This includes school fees, medical aid contributions, credit and store card payments, car payments and your bond. If you live in a sectional title complex, you’ll also have levies. And of course, there are rates, taxes, and utilities to pay.

Estimate these for the year in advance and make sure you’ll have the money to pay your bills, and on time. Paying late penalties is simply a waste of your hard-earned money! 

Once you’re clear about what’s ahead for you financially, you could divide the total by 12 and invest that amount every month in a unit trust to ensure you’ll have what you need when it’s time to pay your bills.

There could also be some ad-hoc expenses you should plan for in the coming year, such as maintenance on your home or a family wedding. The exercise of looking ahead lets you factor in any once-off expenses like these, and could give you the time you need to source multiple quotes, get supplier references or take advantage of specials.

Birthdays and special events

Make a note of everyone’s birthday, important anniversaries, or special events you typically attend (like festivals or shows). Also mark down the school holidays, public holidays and when you might be hoping to get away for a holiday of your own. You can then budget your costs per event upfront. 

Planning can save you money. For example, if a special birthday is coming up, you might be able to buy a gift on sale, or if you’re planning to go away, you could receive a discount by booking in advance.

If you are saving throughout the year for financial events, or already have money put aside that you won’t use for anything but your calendar plans, it will be much easier to avoid getting caught in the trap of overspending. Having a plan is a powerful tool for reaching your financial goals, including being able to retire comfortably one day.

Make a start

Regardless of whether you end up overspending this festive season and need to play catch-up in January, there’s really no excuse to delay planning for 2022. 

Although it takes commitment, it’s a fresh year, and that extra bit of time and attention devoted to assessing your finances in advance might just make 2022 your best financial year yet.

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