Duma Mxenge, Head of Business and Market Development at Satrix

A simple, structured check-in on your financial goals, done annually, will help to ensure that your money is working as hard as you are to achieve your dreams.

A goal-based annual financial review isn’t just about rebalancing your investment portfolio. It’s about ensuring each investment continues to serve its purpose. Ask yourself critical questions like:

• Is my emergency fundadequate for my current lifestyle?
• Am I on track for my medium-term goals, or do I need to adjust my contributions?
• Am I following the 15:35 rule* forretirement, ensuring that I have sufficient capital and a sustainable withdrawal rate?
• Are my long-term wealth creation investments positioned for maximum growth?

By following this step-by-step process, you’ll maximise your chances of achieving every financial goal you set for yourself this year and beyond. Start by listing your primary financial goals, including your emergency savings fund, lifestyle purchases (like a car or holiday), retirement, and long-term wealth creation. Treat each as its own “investment bucket” and review them one by one.

Emergency Fund Review

Are your emergency savings adequate and fully funded? Your target should be enough to cover three to six months of essential expenses. If your monthly expenses have increased due to salary growth or lifestyle changes, you should increase your emergency fund target proportionally. For example, if you earned R40 000 a month when you started investing, and you’re now earning R50 000, your emergency fund target range should increase from
R120 000 ‒ R240 000 to a new three- to six-month range of R150 000 ‒ R300 000.

Your emergency savings should be easily accessible, which removes growth investments from the equation. You could consider keeping your emergency fund in a money market ETF that earns 5% to 7% annually.

Lifestyle Goals (One–Five Years) Review

Evaluate your progress against your target for each medium-term goal (one- to five-year horizon). Will your monthly contributions plus investment returns allow you to reach your goal on schedule?

For example, if you’re saving R5 000 a month for an R80 000 car deposit in three years, and your balanced fund is earning 8% annually, you should be on track to accumulate approximately R195 000 by year three. If your calculations have you behind schedule, increase your monthly contribution. If you’re ahead, consider reducing your contributions or redirecting surplus funds to other goals.

The optional investment product for medium-term goals is a balanced ETF, or exchange traded fund, (comprising 40% to 60% equities and 40% to 60% bonds), which protects you from being forced to sell during market downturns.

Retirement Review

This is your most crucial annual review – even if your retirement is still many years away. When you retire, you’ll want to have at least 15 times your final annual salary saved. To achieve that goal, you should have saved twice your annual salary after 10 years of employment; five times after 20 years; 10 times after 30 years; and 17 times after 40 years.

Are you on track? Use the 15:35 rule* to see how you’re doing. By contributing 15% of your salary for 35 years, you’ll be able to withdraw 1/15th of your asset pool (6.67% annually) for 35 years of retirement. That works out to about 15 times your final annual salary as your retirement nest egg. And that’s the goal you’re working towards.

Wealth Creation (Ten+ Years)

For long-term investments beyond retirement – such as a Tax-Free Savings Account (TFSA) with pure equity ETFs – your investments should remain heavily weighted toward equities (80% to 100%) to capture maximum growth.

It’s also advisable to meet with your financial adviser at least once a year to ensure you’re on track to meet your goals or whether changes need to be made to your portfolio.

*The 15:35 rule is a guideline to save around 15% of your income for roughly 35 years to build a sustainable retirement pot.

ENDS