How to give yourself a raise in 2017

January can be a long month for working South Africans. Many go into the new year burdened by financial baggage from the previous year, thanks to a stressful and often expensive festive season, along with anxieties about additional overheads that 2017 may bring (such as potential tax increases or unforeseen expenses).

So, it is no surprise that most people use the start of the year to sit down and look at how they can better control where their money goes, as well as how they can potentially save more.

The good news is that you can give yourself a raise in 2017. How? By investing smartly. And by smart, I don’t mean miraculously predicting which stocks will skyrocket, but by choosing a smart financial provider that maximises your money at every turn.

It all comes down to the following traits:

Low fees:

There is only one predictable factor that affects your investment outcome. While there’s no telling exactly what markets may do or which stocks will perform, you can always rely on the fact that the more you pay in fees, the less of your money gets invested for you – and this impact is dramatic.

For example, total fees of 3% per annum could end up costing you up to 40% of your final investment. That’s 40% of your money, going to … not you. Choosing a low-fee provider can prevent this from happening. By looking at lower fees, you are ultimately investing more for yourself and getting more out, without digging into your already stretched wallet.

Index tracking:

A good way to ensure that you have more money, is to resist the temptation to ‘gamble’ it away.

While an actively managed fund might sound attractive in terms of giving you a shot at beating the market, statistics show that these funds result in losses for investors more often than they do gains. This is because there is no way of predicting how a fund will perform and even those who perform well rarely (if ever) repeat their success.

The wise alternative, is index-tracking – which is a passive investment strategy that aims to match, rather than beat, the market; and which studies show performs better over the long-term. You can save money by switching to an investment provider that offers competitive returns, using products that don’t require an advisor and utilising an index-tracking fund with low fees.

Use the tools on offer:

Luckily we live in an age where you are spoilt for choice when it comes to choosing how you want to save. There are shorter-term saving options (for periods less than five years) like fixed deposits, money market accounts and 32-day accounts. All these short-term savings vehicles will help you save without exposing you to the potential volatility of the market. However, keeping your money in these “safer” options for a longer period of time means you barely keep up with inflation.

If you’re looking to save long-term, you need your money to do more than just keep up with inflation. This means investing in equities on the stock market as a reliable way to create long-term wealth.

Bonus:

For those individuals who are getting a bonus at the end of the first quarter, you’ll probably need it to offset the higher seasonal expenses, try not spend it all. Be sure to set aside a portion of your annual bonus to your retirement fund (if your employer has not already done so), as well as reserving some emergency capital for unexpected costs during the year. However, it is important to remember that your bonus may not be guaranteed, in which case you should not factor it into your annual cash flow budget.

At the end of the day, low fees, smart investing and disciplined saving will result in a better financial outcome, which means more money in your pocket at retirement. So start your year off by making the right investment decisions and think of it as the raise you give yourself.