Dear KANAN WEALTH CLIENT
Hopefully through your encounters with the Kanan Wealth team you have gotten a sense of how passionate we are about offering sound financial advice.
At the core of our Raison d’être is a rich understanding of the power of money as an enabler, Furthermore, we are also very much aware of the many negative attributes that money has been accused of but on this note we believe that people create greed and destruction not objects.
So when embarking or even revisiting your financial plans consider this:
That you may live for 30 years after your retirement and that the labour market is becoming so competitive that your children may need substantial support for much longer than you may have hoped for. Combine these two scenario’s with a healthy dose of inflation and you have a very compelling case for being open to the deepest level conversations with your wealth manager.
As wealth managers we can employ the following tools to achieve financial freedom.
- 1. Learning to budget, understanding the difference between good and bad assets as well as good and bad liabilities
While we will be the first to admit that budgeting can be incredibly difficult and that we don’t want to be seen as dictators, we cannot help but step into the shoes of “old fuddy duddies” and advise the following:
- That keeping up with the jones’s is a bad idea;
- That learning to save or pay yourself first is s critical discipline;
- That a car is not an asset;
- That your home is not an asset unless you are prepared to sell and downscale;
- That credit cards are a very bad idea and that a mortgage bond can be a useful liability but should be monitored carefully and be aware of over extending yourself.
2. The power of compounding.
The best defence against a financially difficult future is the principle of compounding.
The compound concept is simple; money saved earns interest, and then interest is earned on that interest, and so it builds as you continue to contribute. The more money you save now, the more money you’ll have later in life.
But compounding takes time; and its arch enemy is instant gratification. The famous Marshmallow Experiment conducted by Walter Mischel in the late 1960s and early 1970s, demonstrated the benefits of delaying gratification. The experiment put a group of four-year old children – not normally known for their ability to delay gratification – to the test. Each child was given a marshmallow and told not to eat it for 15 minutes. They were also told that if they could wait the fifteen minutes, they could have a second marshmallow. Only about 30% of the children were able to wait. Studies on these same children some years later showed that those who could wait were more successful in life. In the same way, those who can forgo that luxury purchase today in favour of saving for tomorrow, will end up better off later in life. Sure you will wait more than fifteen minutes to build your wealth, but eventually you will be able to afford a lot more than two marshmallows.
Finally, compounding is great but is even better when the right investment or asset is chosen. The greater the return the greater the compounding and don’t neglect the importance of downside protection and the good fortune that stems from market timing.
- Life Assurance as an investment.
Life insurance is great.
Life insurance is an asset which offers a guaranteed payout without the concern of asset value destruction. The cover payout does not require that you take any risks or have to deal with intense admin issues. Life insurance ensures that widows enjoy financial freedom and that children can live their lives and pursue their dreams.
In conclusion
With all of the above in mind, we hope that all our clients feel capable of leaving a remarkable legacy. The world is moving quickly and is becoming or has always been a very demanding place. Money is certainly not the cure to all evils but is a powerful enabler.
Finally, a message for today’s multi-millionaires and tomorrow billionaires we conclude with a quote from one of George Clooney’s latest films The Descendants – “Give your children enough money to do something; not enough so that they can do nothing.
