For The Money Show Personal Finance with Warren Ingram and a reminder, of course, Warren Ingram is a certified financial planner at Galileo Capital.

I don't know if you really want to look at the calendar and see where we are in the air, because we're actually just past the halfway mark.

The winter solstice, thank goodness, was already two weeks ago, and so we're kind of heading straight for December and hopefully a little bit of warmth.

Time for a media financial check Warren, good evening.

I feel a bit like I'm at the doctor actually, and you're about to hit my elbow with a hammer.

Kind of what exactly do we need to look at when we start with our check and you first suggest we look at our emergency fund.

Yeah, and it's never a bad thing Stephn to know your position.

I mean, if you start the year and you you know, you bright eyed and bushy tailed, and you make some plans for the year ahead, hopefully you know plans that are meaningful to you, then at some point along the way you should say to yourself, how am I doing and where am I going?

And am I on track?

And if you're not, what am I going to do?

About it.

All good things to do, and so yes, this is the doctor's room for your money for the six monthly checkup, and the emergency fund for me is in a time of I would guess now after Trump's announcements, even more uncertainty than before that the emergency fund is the one antidote we all have to this kind of uncertainty that could impact us.

You know, I think about people in the farming industry now, you know, especially if you're in citrus, probably very worried, and so in a situation like that, having an emergency fund is your protection.

It's impossible for people to kind of protect their earnings forever for their entire career.

I think that's a very difficult thing to do.

But certainly buying some piece of mind with your emergency fund, I think is something we can aim for.

And so the starting point here is we've said it on the show before.

You need somewhere around three six months worth of your expenses in an emergency fund.

And I think it's the fundamental aspect of all all of our financial planning if we want to get to a point of freedom somewhere along along the line.

And so that's step one.

Have you got three months, if you have well done, if you've got six months, even better, and then don't worry about it.

You can move on to step two.

However, you might be in a position where you don't have that, and then I would say, well, you know, if we're if we're in a situation where you've got an ideal range, which is three to six, what's the real red flag?

You know, where where should you be worried?

And to me, the real red flag is if you've got less than one month's worth of expenses in an emergency fund, you know, in money that's available to look after you, you know, at very short notice, for things that are not planned for real emergencies.

So I think step one is, let's check that emergency fund and make sure that we've got enough money.

If we don't and you've got less than a month, and then I think you need to take some serious action as soon as possible to at least get to that one month's worth of expenses now and and and get it set aside, just to protect you against things you cannot foresee.

I mean, I suppose that really is if you if you can't cover things for a month, you are in a difficult position.

Okay, then a debt to income ratio, This is about how much money you get every month and then watching the SMSs go out.

Yeah, and it's it's actually, you know, it's something that we monitor when we talk about countries and you know, what's what's their debt versus the size of the economy.

And we look at companies and we worry about how much debt are are companies funding from from the income that they're generating.

And and I think it's a it's a very interesting ratio to work out for ourselves.

So it's very quick mass lesson.

But you if you if you take what you spend in a month on debt, so how much does it cost you to repay your debt every month?

And you divide that by your total salary in other words, the salary before all the deduction and taxes get taken off, and you multiply that by one hundred you get to a percentage.

So just for example, let's say you earn ten thousand round a month and you're spending one thousand round a month on paying off your credit card, and that's the only debt that you've got, So you would take the one thousand round a month, you divide it by ten thousand, which is your salary, and you get to a number and I believe it's point one, and then your times at by one hundred, and that gets you to number of ten, and that tells you that your debt to income ratio is ten percent.

And for a business, a person, and possibly a country, that's an extremely healthy ratio.

We obviously don't really want a lot of debt in our lives, but I would suggest that if you're spending thirty percent or less of your total salary on debt repayments on a monthly basis, you're okay.

You're not in a great position.

But you're okay.

That's not a red flag for me.

But if you go over thirty percent and you get closer to forty percent, then you need to know you're in a danger one because taxes are probably thirty percent, and then you're paying forty percent of your income to debt, which means you don't have a lot of money left over for food, entertainment, school fees, rent, and all of those things.

So I would say that's a good ratio to work out for yourself.

Now, it might be scary the thing about bad news is it's probably always worse when we don't know the real story, and so we put it off and we don't want to look at it.

But my suggestion is this is the time.

This is where you look at it.

You kind of write that ugly number down, and then you work out a game plan for what you do to start getting your debts down because you've got a few months, nearly six months left of the year to go, and you don't want this problem to get bigger and bigger and by the end of the year, you're rarely grappling with an enormous problem that's compounding against you.

So it is the half your health check.

Take time to look at this number and then take some steps to get that debt repayment down again.

If you've got to make some tough decisions, make them now before they become much bigger and much tougher problems to deal with.

Okay, So thirty percent up until thirty percent of your monthly expense is going to debt, that's okay, But forty percent or more you need to take action.

Yeah, and you know, I mean, it's one of those things where you need to get on the front foot what you don't want to do is be in a position where you know, the bank comes knocking and takes your car because you can't afford the debt repayment.

What they'll do with that car is they'll put it on auction, and I promise you that price is not going to be as good as the price you can get if you take control and sell that car yourself.

So that might be a radical step that you have to take.

And you know, for some people, we read horror stories about their houses being taken by the banks.

Obviously there's a long process, but they you know, they lose the house, the house gets auctioned for terrible value.

If you're in that kind of a position where the debt is growing from forty to fifty to sixty percent of your total salary, you need to take serious action now and get ahead of this because you want to sell your assets so that you get the best price that you get this debt down and take some control.

Don't debt the banks and your creditors take control that they don't have your best interest in heart.

They want to pay off the debt and get the money back that they are owed.

That's their concern.

And then looking at your savings rate over the last six months.

What kind of questions would you need to ask yourself?

So I think you know, look through what you've earned over the last six months.

That's not that difficult to go through on your banking profile, and then see how much of that money have you actually saved.

We will tell you, you know often that you should be saving kind of you know, at the minimum somewhere around ten to fifteen percent of your salary on a monthly or yearly basis.

So we're six months into the year.

You've seen what your facelip was like in June, so you've got all the data you need for the first six months and work it out, you know, and see, you know, if you're if you're earning back to the one hundred thousand round, so you've earned a hundred thousand over the year, have you saved at least ten thousand to fifteen thousand of that for long term savings?

You know, that's part of your your kind of deposit for a house money, and your retirement money and your financial freedom money.

If you have, then you're doing the minimum, which is good, I mean, well done.

You've achieved something so far for the year.

If you haven't achieved that, it's important to kind of sit down and work it out what went wrong.

You know, if you started the year saying I think I can save ten to fifteen percent, what's derailed the plan?

And more importantly, how can you prevent that from derailing you for the next six months?

And what sort of action can you take to make sure you play a little bit of catch up?

And I think that that's you know again, it's something where we can make a small change now and a little bit of an adjustment, make up for some lost time, and hopefully end the year achieving that savings goal.

You didn't set that goal for fun, set that goal because you want to get to financial freedom.

I mean also this time of year, I mean maybe it's just me have started to think about the end of the year, holidays, things like that, what's going to happen?

Will there be one?

You need to plan for things like that too, even to determine if you're actually going to be able to go away.

Yeah, and let's say that, you know, you do get leave over December.

The good point now is you can look at what's gone on in your finances.

You can understand your financial position and then plan the holiday according to the income and expenses that you have today.

So I think a lot of the time people don't plan at all, and they don't actually you make the bookings and all of those things.

So they get to you know, October November, and then they start planning frantically to try and find somewhere to go.

And obviously by then what's left is either garbage or super expensive.

And so planning now means that hopefully you get some access to places, but equally that you can go to play.

Is that that actually suits the budget that you have rather than the last hole you think you should be living.

So, you know, if money's tight, then you know, where can you go camping?

You know, if money's tight, can you go and stay with friends on the on a countryside house or you know, on a farm or something like that.

You know, you don't have to go and live large, you know, in the waterfront, and you know, and compete with all the foreign tourists and they're huge budgets.

You can do things that are fun that aren't that expensive, but you can't do those things if you don't plan for them.

And planning starts now and figuring out you know how much money you can set aside on a monthly basis for those holidays so that you don't start in January again with debt and you know, on the back foot before you've even got going.

It's a fascinating question.

We've got a question from KG saying, Hi, guys, I haven't heard from my financial advisable to you, as I see for my statements that they're still earning a fee from my investments.

Is this correct?

We'll find out from Warren Ingram in just a moment for.

The Money Show Personal Finance with Warren Ingram, and we had a question from Kge Warren saying, Hi, guys, I haven't heard from my financial advisor for two years.

I see from my statements he's still earning a fee from my investments.

Is this correct?

KG reminds us how carefully you need to check your statements.

Warren Gee, this question is making my blood boil.

The answer, KG is that it's absolutely wrong.

It's wrong from a moral point of view, it's wrong from an ethical point of view, and it's actually against the law.

So the law you know that applies here is around something called the Phase Act, and we don't have to go into all the detail, but at an absolute minimum, if you've got a financial advisor who is looking after your investments and earning a monthly fee from them, and this could apply to investments, but equally to life assurance at all of those things.

If you've got an ongoing relationship, they have to correspond with you, so they have to send you, at a minimum something in writing which explains that your investments or your products are still going.

What are the obligations that you've got, if you've got debit orders, what are the values, what are the benefits or all of that information, and then any fees that they are earning.

And if you're not getting that as an absolute minimum, then what's happened is they have just done a transaction with you.

They're earning fees and you're getting no service.

And actually, you know, I would say, if it's investments, they are going backwards as well, So there is no way that that's correct.

I would report this person straight to the phase onm But if I were you, because they know their obligation, this is not a new thing and certainly not going to be a surprise, but you know, it happens quite a lot in the industry, Stephen, where advisors to you know, take on probably you know, one hundred and fifty or two three hundred, sometimes up to five or six hundred clients, and there is no way that you can have a proper, you know, one on one relationship with that many people as an advisor looking after clients that they're not clients, they're just transactions that you've done.

So I mean, I think for for KG, this is you know, this is really bad news, and we should hold advisers to account.

It's great that they get paid for delivering good service, but when they're getting paid for doing nothing, for having sold your product some time ago, then you should take them out and you should call them out.

And if you don't want to report them, then make make contact with the product provider and tell them that you are firing your advisor and you don't want to be charged to fee at all for advice.

And they have to listen to that.

Do they the people that you would the people who you're getting the product from your you know, the big providers.

Absolutely, they have no choice.

You don't.

You're not obliged to deal with an advisor in a situation like this.

If I mean, if they refuse.

What that means is that they're enabling an advisor to continue breaking the law.

So they must listen to you.

And in fact, I mean to give credit here.

You know, some of the product providers would would be horrified and and actually would would blacklist those advisers as well.

If this is something that an advisor is doing, you know, as part of their business practice, a lot of the product providers would want to know about it so that they you know, they're blacklist that advisor and that they don't get associated with this.

Okay, investment performance, so let's just go back to the sort of six month health check, the mid year health check that we're doing here and sort of tapping my knee with the hammer the investment performance.

We actually need to look at how your investments are doing, because this is the other thing you've invested money.

There's no point having money that's not performing for you.

Well, I think it's it's number one.

What my first comment will be.

Let's say you've bought a unitrust that invests in the South African stock market.

One of the things you would like to do now is to check what is your investment done.

You've got six months of history, so how has it performed?

And then the other thing to do is compare that to the performance of the All Share index the South African stock market for the last six months.

And that's information that you can find pretty easily on the internet.

It's not hidden, you don't have to pay for it.

But for interest, I mean from the first of January to the end of June, the South African market's given a bit more than sixteen percent for the first six months of the year.

So what you want to do with your investment is if you're if you're in a pure stock market index you know, unit trust or exchange traded fund or whatever it is, and your investment has done roughly that amount.

It doesn't have to track it exactly.

So if it's done fourteen percent or it's done eighteen percent somewhere around there, then what you do know is it's doing its job.

It's it might not be doing it perfectly, but investment is not an exact sign.

So then you could say to yourself, you know it's doing okay.

And similarly, if you've got a global invest you know understanding what the what the global markets have done, and how how has your investment performed relative to that, and and and so you would go across the board if you've got a balanced fund.

You know, balanced funds would have a lot of exposure to shares, but that also have exposure to bonds and cash and property and and for the first six months, all of those those assets have have made money.

So if you're in a position where you've you've got a balanced fund that's lost you money and all the other aspects of the markets have gone up, it tells you that you've got something that's that that's gone wrong, and then you need to do some real homework to understand why is your balanced fund not doing well when all the underlying components of those markets have done well.

So I think it's you know, equally, if we were sitting here and and the global markets were down for the year, that the JSE was down for the year, and and maybe the bond market as well, and your portfolio was down by a similar amount, then you understand the tide has gone out, your investment is down.

That's that's the the unfortunate part about and you will lose money from time to time.

So it's about understanding the environment in which your money is working, and then how is it performing relative to that environment?

And at the moment, things are going well despite all the bad news and despite all the drama around the world, markets are performing well, especially in South Africa.

So is it should be a rewarding time.

You should be looking at positive statements now, and if you're not, then you need to ask some serious questions.

It's very tempting at this point to sort of compare yourself my person.

They personal finance advisors said do this, and this is how much money they've made, and I've only made that much.

I mean, should you be comparing with other people?

No?

I mean I think you know understanding that when you've set your goals, your goals are determined by your appetite for risk.

You know, your financial position, your time horizon, so there's so much that's unique to you.

And comparing what you've done to the person next door you might well be comparing, you know, an apple to a roast pork, just so completely different and then expecting that you know a good outcome if you then adapt your investments to what your friend has done, where they might have a totally different position and risk tolerance.

So I think it's much more important to compare your investments to their own universe what they're supposed to be doing, and then knowing that you're on track or not relative to yourself.

You're not in a race with anybody.

Your job is to set your own objectives and then reach those.

And I think a lot of the time people make the mistake of comparison.

They look at what the world has done or what the markets have done, forgetting, for example, that they can't tolerate losses.

So if you can't tolerate losses, and you see, well that the JS has gone up sixteen percent for the last six months, and suddenly you swing all your money into the JAC and then it promptly loses you sixteen percent over the next six months, you're only compounding really bad mistakes on yourself.

So the comparison game in the investment will is really a bad way to make long term decisions, and you should really avoid.

It and very quickly.

The RAND also has an impact, right.

Yeah, I think you know understanding now that a lot of our balanced funds, for example, can allocate forty five percent of their assets overseas.

So when we've watched the RAND go from nineteen to the dollar all the way down to you know, seventeen fifty or nearly eighteen.

It does have an impact.

It will mute the returns that you're getting, but understand that that cycle will turn again.

So just know that the RAND is now a factor and a lot of our retirement funds and a lot of our balanced funds much more so than it was five or ten years ago, So just be aware of that when judging the performance of your investments.

Warr Ingram, thanks so much, co founder of Galileo Capital, and a good doctor to speak to for your financial health at this time of the year.