Article by Buhle Nxumalo – Alexforbes
Financial planning myths – we’ve all heard them. With financial literacy not being a priority in most school curriculums, and many people growing up without guidance from their parents on managing money, it’s no surprise that so many South Africans find themselves learning the hard way once they start earning an income.
Unfortunately, those ‘hard money lessons’ often result in long-term consequences such as unsustainable debt and delayed financial freedom.
Here are ten common myths about financial planning – and the truth behind them.
Financial planning is only for the wealthy
Myth: Only high-net-worth individuals need a financial plan.
Reality: Everyone, regardless of income, can benefit from a financial plan.
Wealth isn’t defined by how much you earn, but rather by your money habits. Many self made wealthy individuals credit their success to cultivating healthy financial behaviours
early on. The TV show “I Blew It” offers sobering examples of lottery winners who lost it
all – proving that without a solid plan and good money habits, even millions can vanish.
Financial planning is for anyone looking to set goals, manage debt and build a better
future
You only need financial advice close to retirement
Myth: Planning starts at 55.
Reality: Starting early allows for greater growth and less stress later in life
Financial planning has no age limit. The earlier you begin, the more you can benefit from
compound interest and long-term investment growth. Younger investors can typically take
on more risk, while older investors may move towards more conservative strategies as
retirement approaches. Regardless of age, the fundamentals remain the same — set goals, manage a budget, and invest wisely.
Financial planning is a once-off exercise
Myth: You create a plan once and that’s it.
Reality: Your financial plan should evolve with your life.
Life changes – marriage, children, job changes, divorce or illness – and your financial plan
should change with it. Meeting with your advisor annually, or during major life events,
helps ensure that your goals, strategies, and policies remain aligned with your personal
circumstances.
Financial advisors just sell products
Myth: Advisors are only interested in selling insurance or investment products.
Reality: Reputable advisors offer holistic guidance across all areas of your finances.
A professional financial advisor should act as a partner in building your overall financial
well-being. Beyond products, they assist with budgeting, managing debt, retirement and
estate planning, tax efficiency and achieving personal goals.
Financial advice is too expensive
Myth: I can’t afford a financial advisor.
Reality: Many advisors offer flexible and transparent fee models.
Financial advice isn’t reserved for the wealthy. Most advisors offer scalable solutions
tailored to your individual needs. Understanding the costs upfront is key, and in many
cases, the long-term value gained from a sound financial strategy outweighs the fees. It’s
also worth checking whether fees are negotiable or based on sliding scales depending on
your assets.
My employer’s retirement fund will be enough
Myth: My pension or provident fund will fully cover my retirement.
Reality: Most South Africans don’t save enough and must supplement their employer
benefits.
While employer-sponsored funds are a solid starting point, they often fall short of meeting
your full retirement needs. It’s important to assess your contribution rate and determine
whether it aligns with your retirement goals. Tax-efficient options like retirement annuities
(RAs) and tax-free savings accounts can help fill the gap.
If you change jobs, you should prioritise preserving your savings by transferring them to
your new employer’s fund, a preservation fund or an RA – all of which allow continued
investment without tax penalties.
All debt is bad
Myth: Debt should be avoided at all costs.
Reality: Not all debt is bad – some can be leveraged to build wealth.
Debt has a bad reputation, but not all debt is created equal. A home loan, student loan or
even a personal loan to fund a business can be considered ‘good debt’ when managed
wisely. Even credit cards can be beneficial if used correctly and paid off in full each
month. Many banks offer reward programmes like cash backs, travel points, or discounts
that can benefit you, but that should not be the reason for spending.
You only need life cover when you’re old
Myth: Life insurance is for the elderly.
Reality: The younger and healthier you are, the cheaper your premiums.
Risk cover – including life and disability insurance – is designed to protect your loved ones and assets. If you have a young family, it’s vital to plan for their education and wellbeing in the event that you’re no longer around. Getting cover early locks in lower premiums and ensures that your health status doesn’t affect eligibility down the line.It’s also important to understand that funeral cover is not the same as life insurance.
Know the difference and make sure your family is adequately protected.
Financial planning is just about investing
Myth: It’s all about beating the markets.
Reality: Financial planning is far broader – it includes estate planning, tax efficiency, and
setting life goals.
A good financial plan considers legislation, tax implications, personal goals and risk
management, not only investment returns. Your advisor should help you stay up to date
with changes in regulations and ensure your plan still serves your evolving needs.
Attempting to time the markets is risky – your investment strategy should instead be
aligned with your risk appetite and long-term objectives
I can do it all myself online
Myth: Google and apps are all you need.
Reality: Online tools can help, but can’t replace personal advice.
While online calculators and investment apps are useful, they can’t replace human
expertise – especially when it comes to navigating South Africa’s complex tax laws,
retirement strategies and local market trends. DIY planning also exposes you to potential
scams or misinterpreting terms and conditions. Working with a qualified advisor provides
clarity, accountability and peace of mind.
There’s no shame in having believed some of these myths – they’re common and widespread.
But armed with accurate information and the right financial advisor by your side, you can make
better decisions that put you on the path to financial security and freedom. It’s never too early (or
too late) to start taking control of your financial future.
