5 New Year’s resolutions wealthy people make

Last updated on 9th December, 2020 at 03:20 pm

Get on track to boosting your wealth in the new year by taking your cue from these successful individuals.

1. “I will reward myself, but I’ll do it the smart way”

Depriving yourself of the things you enjoy in order to save cash can often backfire: those little rewards help motivate you towards your financial goals. The trick? Budget in your indulgences, and then say no to the rest.

“You can enjoy life without being extravagant,” says managing director of Durban accounting firm Pillay KSP & Associates, Kubendran Pillay, 56. “It’s more about not buying things you don’t need, because one day you may have to sell the things you need to survive.”

Wealthy people preserve wealth by remaining mindful of their expenditure – ad hoc purchases rack up fast, and can quickly derail your budget and your savings along with it.
It doesn’t help that the ways we reward ourselves are often via more expensive products – finding cheaper alternatives is a great way to preserve your wealth.

Pinnacle BlueStar financial planner Jyoti Gopee-Mothie shares that some of the most common changes clients make to realise their true wealth potential is to reduce what they spend on daily indulgences such as food, drink, entertainment and cigarettes.

“With the increased tax on wine, spirits and cigarettes, these indulgences continue to increase in cost,” she comments. Simply cutting down (not necessarily eliminating) what you spend on these items – or swapping them out for more affordable alternatives – can free up cashflow and improve your financial standing considerably over time.

2. “I’ll make my finances as tax efficient as possible”

Maximise tax-free payments and contributions to set yourself up for a tax-efficient year ahead. It is one of the easiest and hassle-free ways to save thousands every year.

“Wealthier clients are always looking for tax efficiency in their financial planning,” shares Gopee-Mothie. “At the beginning of the year we do extensive calculations to ensure that these clients have maximised their:

• Retirement annuity tax contributions (the deduction is limited to the lower of R350 000 or 27.5% of taxable income);
• Tax-free donations (R100 000 per annum) and;
• Tax-free savings (R33 000 per annum).”

It’s in this area that a fantastic financial planner is of real value to you – they’re experts in this area, and should be able to help you set up savings and investments to be as tax efficient as possible, based on your personal needs and income.

Have you used TaxTim yet? It’s an online tool that’ll help take the stress out of your tax return, and it’s free for Sanlam Reality members! Click here to find out more.

3. “I’ll set up an investment I don’t even have to think about”

Using compound interest (when your interest earns its own interest over time) to grow wealth is one of the basic investment principles followed by wealthy people. Even better: compound interest will increase your wealth without costing you additional money, or without you even having to think about it! All you need is to commit to an investment amount monthly, and to give your nest egg time (as in, years) to grow.

“It’s important to commit to a debit order, even with a modest amount,” encourages Gopee-Mothie. A debit order does two things: it creates a regular commitment that will leave your account before you can spend it, and it means you’ll adapt your lifestyle so as not to ‘miss’ this cash each month.

Amrith Maharaj, 32, is the managing director of Tempo Compliance Software and shares the following tip: “Break up your big goals into manageable ‘bite-sized’ targets. Rather than saying, ‘This year I want to save or invest an additional R50 000’ which does seem quite daunting, shift your mindset and say, ‘This year I will save or invest R4 100 a month,’ which seems more achievable.”

The other bonus of using a debit order? As your income increases over time, you should adjust your investment debit orders accordingly, thus increasing your wealth-building potential as your own earning potential grows. This is also why meeting with your financial planner at least annually, to adjust these amounts and investments, is ideal.

For more about goal-setting for successful saving, read this.

Have you used our online savings calculator yet? This tool comes in useful for goal-setting and getting closer to your financial goals.

4. “I’ll prioritise becoming debt-free”

“Free all interest-bearing debt,” encourages Pillay. “Then you will have more disposable income.”

With more disposable income comes the increased ability to save or invest without feeling the pinch.

Maharaj adds to this, sharing that the resolution he’s found the easiest to commit to is paying off debt. “This decision came along quite easily after reviewing the monthly interest paid across to service the debt,” he shares. “Chances are that most of us will go through this phase at some point, but the key is to understand the difference between wants and needs, and to avoid unnecessary debt at all times.”

5. “I’ll educate myself about money more”

Wealthy people don’t just invest their money, they invest in their minds, too. No one will be more committed to your finances than you – so empower yourself to understand as much about them as possible.

“I personally feel safer in understanding where I am financially, before committing to any saving or investment plan,” says Maharaj. “This is another turnkey offering from my financial planner – that of reviewing my financial road map and advising on how to best amend this to meet my goals.”

This doesn’t only apply to finances, as he explains: “Always try to be ahead of the game and constantly learn. Just like how businesses forecast trends, as individuals we should be doing the same.” The benefit of this, he says, is that it allows him to identify what financial mistakes he’s made in the past, and prevent them going forward.

For advice about setting savings and investment goals and building your wealth meaningfully, set up a meeting with a financial planner here.