WORDS ON WEALTH
It’s officially spring, although it certainly doesn’t feel like it in Cape Town, where I live. But the signs are there: translucent young leaves decorating our ancient oak trees and flowers aplenty showing their faces up the West Coast.
The tradition of giving one’s home a thorough cleaning when spring arrives is more established in northern-hemisphere countries than here in South Africa. Up north, it takes place in March and, according to Wikipedia, there are various theories as to its origin.
One possibility is that it can be traced to the Persian new year, which falls on the first day of spring. Iranians continue the practice of khaneh tekani (literally “shaking the house”) just before their new year.
Another suggestion is that spring cleaning dates back to the ancient Jewish practice of thoroughly cleaning the home in preparation for the springtime festival of Passover.
Similarly, in Greece, and other Christian Orthodox nations, it is traditional to clean the house thoroughly either before or during the first week of Great Lent, referred to as “Clean Week”, around the end of March, beginning of April.
In 19th-century America, before there were vacuum cleaners, spring was the best time for dusting, because it was getting warm enough to open windows and doors, but not warm enough for insects to be a problem, according to Wikipedia. It was also a good time to wash the soot off the walls, deposited there by indoor fires or coal furnaces.
While you may not feel inclined to give your home a thorough cleaning any time soon, you should consider the annual practice of dusting off your household finances and, where necessary, adapting them to suit your changing circumstances. Let’s take each area of your finances in turn:
Short-term insurance: This needs to reflect any new purchases or other changes in your insured possessions, and changes to your risk profile, such as improved security arrangements. You may qualify for a slightly lower premium on a car that is now a year older. It may pay to shop around among insurers for a better deal, not forgetting that you need to look at more than the monthly premium amount if considering changing insurers.
Long-term insurance: You cannot tamper with life and disability cover as you can with short-term cover. Switching policies would require you to go through medical underwriting all over again, and you’d probably pay more, because life cover gets more expensive as you age. But you do need to ensure that you have sufficient cover to protect your loved ones in the case of a calamity. Oh, and don’t forget to check that the details of the nominated beneficiaries on your long-term policies are still correct.
Medical aid: Most medical schemes give you a window at the end of the year during which you can change options for the year ahead. But it’s not too early to relook your benefits and what you’re paying for them, comparing them with other options and even those of other schemes.
Retirement fund: If you’re a salaried employee and belong to your company pension fund, you should receive an annual statement giving the value of your benefits (retirement savings and group risk cover). It should also indicate whether or not you’re on track to retire at an acceptable income replacement ratio (your retirement income as a proportion of your working income). If this ratio is low, you need to consider supplementing these savings with additional retirement or discretionary savings. Again, you also need to check on your nominated beneficiaries.
Discretionary investments: It may be necessary to rebalance your portfolio (with the help of your financial adviser) to realign your asset allocation with your investment objectives. What you shouldn’t do is panic switching into safer assets in reaction to the current volatile markets – not if your objectives are long-term ones. Ride out the dips if you can, as long as you’re invested in good-quality assets that can survive the turbulence.
Estate planning: Wills Week is just around the corner. Check that your will is up to date and reflects your wishes. If you haven’t drawn up a will, do so without fail.
Mortgage bond and credit agreements: Ensure your payments are up to date and that you know your credit status by requesting a free credit report from one of the major credit bureaus. See whether you can stretch your budget to pay a little more into your mortgage bond each month – it’s a form of saving at the interest rate of the bond.
Budget: Finally, if going through the above necessitates a reallocation of finances, you’ll need to adjust your monthly budget accordingly. For example, you may need to adjust your discretionary spending downwards to accommodate higher allocations to long-term investments or your mortgage bond.
PERSONAL FINANCE