Protecting your wealth from financial shocks
Building wealth can be a journey filled with exciting milestones, such as a growing investment portfolio, a comfortable home and the freedom to pursue your passions. However, life is full of uncertainties and rarely follows a perfectly smooth trajectory. Unforeseen events, such as market downturns, and unexpected expenses can threaten the financial security you've worked so hard to achieve.
As you strive for financial growth and a secure future, it's crucial to also safeguard your wealth by preparing for potential financial shocks that could disrupt progress. Protecting your prosperity (and preserving your legacy for generations to come) is an ongoing process that requires careful planning, regular review and the right support.
Are you adequately protected?
The first step in protecting your wealth is honestly assessing your current level of preparedness. Ask yourself:
Do I have an emergency fund?
This should cover at least 3‒6 months of your living expenses, providing a buffer against job loss, unexpected medical bills or other crises. An emergency fund provides a financial safety net that prevents you from having to prematurely sell investments (at a loss) or accumulate high-interest debt, which could derail your wealth-building efforts.
An emergency fund also offers flexibility. Sometimes, unexpected opportunities arise that require immediate cash, such as a promising investment or a discount property. Having this fund allows you to seize these moments without disrupting your existing financial plan.
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Why 3‒6 months? It’s a strategic cushion to navigate unexpected job loss, medical emergencies or major repairs, giving you crucial time to recover without financial panic. |
Discover the key scenarios and how to assess when it’s okay to dip into your emergency fund.
Do I have the right insurance coverage?
You don’t want to be over or under insured; this is one of those goldilocks moments where you want it just right. Having adequate insurance coverage is like a financial bodyguard, shielding your wealth from unexpected disasters such as accidents, illnesses or property damage. It prevents you from wiping out your savings to cover huge bills and ensures your family is taken care of.
Review your life, health, home and vehicle insurance policies to ensure they have kept up with your circumstances and provide enough cover to protect your and your family’s lifestyle.
Find out more about the types of insurance plans that exist for you to cover yourself and your loved ones.
Are my investments diversified?
Diversifying investments is about spreading your money across different types of assets, even with smaller amounts. The key is to avoid putting all your money into a single thing, no matter how ‘safe’ it seems.
Even small steps towards diversification can significantly reduce your overall risk. This could mean having a mix of growth (stocks) and stability (bonds) within retirement funds, owning property and having accessible savings in a high-yield account.
See how diversification can help mitigate your risk and how you can build it into your portfolio.
Preserving your wealth
Protecting your wealth isn't just about having enough money for today or weathering a financial storm; it's also about building a legacy for your loved ones and ensuring your hard-earned assets benefit future generations.
Consider the following in your long-term wealth preservation strategy:
| Estate planning | Debt management |
| A comprehensive estate plan, including a Will, trusts and powers of attorney, ensures your assets are distributed according to your wishes. It also minimises potential tax burdens (which eat into wealth). | High debt stagnates your wealth: every rand earned goes to debt first, potentially causing it to outgrow your assets and leaving you vulnerable to financial shocks. Prioritise paying down high-interest debt and keeping a healthy balance between debt and income. |
| Family governance and education | Long-term care planning |
| Teach your kids and grandkids about money and create clear family rules for managing wealth so your legacy thrives and avoids future disagreements that can be costly to resolve. | Plan for potential long-term care needs, such as nursing home care or assisted living. This can help protect your assets from being depleted by these expenses. |
Use our checklist to assess your current wealth protection status and identify areas that need more focus.
Solutions available to protect your wealth
Navigating the world of wealth protection can feel complex, but taking proactive steps can provide peace of mind and help you safeguard your financial future. Protecting your wealth requires a multi-faceted approach, including a combination of the following:
Professional financial planning: A qualified financial planner can provide personalised guidance based on your unique circumstances and goals. They can help you do the following:
- Assess your current financial situation and identify potential vulnerabilities
- Develop a comprehensive wealth protection strategy tailored to your needs
- Regularly review and adjust your plan as your life changes
Comprehensive insurance coverage: Having adequate insurance in place to protect against various risks may include the following:
- Life insurance to provide financial security to your loved ones in the event of your death
- Health insurance and gap cover not only to cover medical expenses, protecting against the potentially crippling costs of healthcare, but also to cover medical aid shortfalls and copayments
- Home insurance to protect your property (and all your belongings in it) from damage or loss due to fire, theft or natural disasters
- Vehicle insurance to cover vehicle damage and theft
- Disability and income protection insurance to provide income replacement if you become unable to work due to illness, injury or retrenchment
Investment management: Work with an advisor to craft an investment strategy that matches your risk tolerance and goals, choosing a mix of assets, including tax-efficient investments, and regularly adjusting your portfolio to stay on track and minimise risk.
Fiduciary services: Establishing a robust and well-crafted estate plan ensures your assets are distributed according to your wishes and minimises potential tax burdens. Key elements to protect your wealth through an estate plan include the following:
- Creating a Will that specifies how your assets will be distributed after your death
- Establishing trusts can help manage assets, protect them from creditors and minimise estate taxes
- Appointing powers of attorney: Designate someone to make financial and healthcare decisions on your behalf if you become incapacitated
- Reviewing beneficiary designations: Ensure your beneficiary designations on retirement accounts and insurance policies are up to date
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Disclaimer: This article is for information purposes only and does not constitute financial, tax or investment advice. Readers are strongly encouraged to seek financial or legal advice before making any decisions based on the content.
Standard Bank, its subsidiaries or holding company, any subsidiary of the holding company and all of its subsidiaries, make no warranties or representations (implied or expressed) as to the accuracy, completeness, or suitability of the content of this article. The use of the article and any reliance on the content is at the reader’s risk.
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