SA's biggest Fraud affects 94% of population!

The below is an article I was asked to write for the Harbour Wealth Newsletter which is based on a talk I gave at the Money Expo sponsored by MoneyWeb - SAFM radio and RSG radio. Following the positive response I thought I would share this with more people as many can still do something about it.

Imagine retiring to the idyllic setting of your choice. Whether that is long walks along our beautiful coastline or the magnificence of our African bushveld sunsets. Maybe it’s living near friends and family you love with absolute financial peace of mind. What if while you were savouring the freedom that a lifetime of labour had brought your peace and contentment was interrupted by a phone call. No ordinary call. A call bringing news that was about to drop a dark vale over the inner joy you had just been experiencing. It is news that your savings have been subject to a fraud that has cost you 25% of the financial security you created through a lifetime of effort.

We all think this will never happen to me. 94% of you will unfortunately be wrong! That 94% will be affected by this fraud daily. The long-term detrimental effects on your life savings may vary however the net result will prevent you from retiring successfully as only 6% do, according to retirement statistics.

For the sake of clarity I have included a definition of fraud below as per the dictionary. According to the definition synonyms for fraud are embezzlement, deceit and deception. As I write this note I read about another PONZI scheme in SA. So how do people get caught in schemes and frauds that embezzle them of their hard earned money? Most think they are too smart to be a victim.

The perpetrators of fraud succeed because they understand the emotion and desires of their targets. Their schemes work because they promise to provide a quick solution to satisfy the wants of their victims.

Fraud:fr?d/

noun: fraud; plural noun: frauds

wrongful or criminal deception intended to result in financial or personal gain. "he was convicted of fraud"synonyms:  fraudulence, cheating, swindling, embezzlement, deceit, deception,          

 The fraud I’m covering in this note works for all the above reasons. The perpetrator knows the victim and understands exactly how to deceive them. This is because the perpetrator and the victim share the same ID number but are not exactly the same person.

Confused?

The fraud I’m talking about involves the “current you” defrauding the “future you” of valuable retirement income. The “current you” has become an expert in justifying bad financial decisions that will rob the “future you” of a successful retirement. The “current you” knows exactly what lies to sell you to get you to spend money on immediate gratification without considering the long term implications. The marketing machine of consumerism assists gladly.

Car marketing has convinced some that their status and self worth are linked to a piece of metal.

Don't get me wrong, everyone is entitled to luxury but if you’re buying a vehicle purely for status then you’ve had to convince your "current self" that it's a good idea. This is worse if this new acquisition puts the “current you” and “future you” under financial pressure.

Think I’m being a bit dramatic?

Let me give you an example. Say you’re 35 years old and could reduce your spending by R2000 per month, which is either 2 cups of coffee a week along with a meal every second week and a night out once a month. Doable right?

Maybe it’s a few items of clothing or the difference in installments between a Golf base model and a GTI.

“If you keep buying the things you don’t need you may end up being forced to sell the things you do” – Warren Buffet

Back to the R2000 per month you avoid spending. If you were to save that R2000 and increase that by 10% each year at a return of 12% per annum it would result in R15 012 623 in 30 years time. The converse is that you spend it and defraud the “future you“ of fifteen million rand!

The smell of the new car will wear off after a few months but the rest of your retirement without adequate income will feel like forever. As a non-smoker who is part of the insured population you have a 40% chance of living to 90 if you’re a male and a 71% chance if you’re a female.

Going back to the beginning of this note and the call you received about losing 25% of your retirement income. How would the “future you” feel about the “current you” losing R15 012 623 of your retirement capital.

Some may argue that they could never save R2000 and that they hardly come out on what they earn. This may be true for some. However for many if the government where to raise taxes by 10% they would be forced to adjust their lifestyles to accommodate that change.

My intention is not to be killjoy. You need to reward yourself for your current efforts otherwise you will lose motivation. Just be smart about it. Like your health the bad decisions you make in your youth will come home to roost.

I hope this note prompts you to start thinking about the “future you” in the way you think about the health of the “future you”. If you’re retired and have become the “future you” don’t underestimate how much future is still ahead of you.

The same principles apply to your daily living. Including watching the costs related to your investments as 1% savings in fees could increase your income by 20%. If you’re drawing the suggested maximum of 5% of your invested capital and could save 1% in fees you could now draw 6%. That’s an increase of 20% in income. 

There will be those thinking this is nonsense and who want to focus on just living for the day. It's a romantic notion but just make sure that the " future you" doesn't get hold of your current cell number! Having said that, it's unlikely if you ignore the above that the " future you" will be able to afford the airtime!