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Financial Future. Where to Start...

Anzarrah

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So I've come to the point in my life, where I need to start thinking about investing for the future. I've noticed my older family members are living just to get buy also having to work well past 65.

Currently 26 so hopefully I did not wait to long. I have no Idea where to start. I currently do not have a Pension,RA,TSFA or any sort of Investments.

They only "Savings" and "Retirement" I have are in Nedbank and FNB Interest accounts/notice accounts.

We spent a large portion of our savings to settle down as our son was born in March. So our monthly expenses has settled and our budget stabilized. Looking to go for the more stable root now.

I got a lot of suggestions to go see a professional financial adviser/planner but their fees seems so excessive or is it actually worth it? I've looked at Easy Equities/Alan Gray/Alexander Forbes/Prudential/Old Mutual but even more lost.

Would just like some personal experience replies instead of the google do this do that.

If I have R5000 a month to put away how to I split it? Would also to contribute Annually(larger sums)
Do I put portions towards RA/Investments/TSFA do I put everything in RA?
I do also have a bond which I'm planning to add around 15% more to the payments to get that settled quicker?
Do a buy stock, share etc?


The only debt I have is my car and bond. I live on a very strict budget so putting away money is easy for me. It is just not growing as I think it should

Don't know if it will help but some goals:

1. Retirement Income - Covering all my expenses at that time
2. Sons Education and Jump Start (Currently getting a combined contribution of R1000 per month to a savings account, which we plan on giving him for his 18/21 bday as a gift) - Would like to get as much as possible 18 Years to go.
3. Debt Free
4. Growth, would be nice if we can actually go on some nice vacations now and again. Mostly disposable if I am wording it correctly.
5. Would like some security maybe foreign investments as well as local.

Any advice would be welcomed.
 
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Qui_Illustrati

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Throw all extra money at clearing your current debt - I'd say car first - then all in to bond. More especially if you have an access bond of sorts.

You will be both amazed and horrified how much interest you're paying on the bond over the term.

Once your bond is cleared - then start looking at other investment avenues where you can diversify. You will have more to invest once your car and bond is cleared.

That's just my 2c
 

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So I've come to the point in my life, where I need to start thinking about investing for the future. I've noticed my older family members are living just to get buy also having to work well past 65.

Currently 26 so hopefully I did not wait to long. I have no Idea where to start. I currently do not have a Pension,RA,TSFA or any sort of Investments.

They only "Savings" and "Retirement" I have are in Nedbank and FNB Interest accounts/notice accounts.

We spent a large portion of our savings to settle down as our son was born in March. So our monthly expenses has settled and our budget stabilized. Looking to go for the more stable root now.

I got a lot of suggestions to go see a professional financial adviser/planner but their fees seems so excessive or is it actually worth it? I've looked at Easy Equities/Alan Gray/Alexander Forbes/Prudential/Old Mutual but even more lost.

Would just like some personal experience replies instead of the google do this do that.

If I have R5000 a month to put away how to I split it? Would also to contribute Annually(larger sums)
Do I put portions towards RA/Investments/TSFA do I put everything in RA?
I do also have a bond which I'm planning to add around 15% more to the payments to get that settled quicker?
Do a buy stock, share etc?


The only debt I have is my car and bond. I live on a very strict budget so putting away money is easy for me. It is just not growing as I think it should

Don't know if it will help but some goals:

1. Retirement Income - Covering all my expenses at that time
2. Sons Education and Jump Start (Currently getting a combined contribution of R1000 per month to a savings account, which we plan on giving him for his 18/21 bday as a gift) - Would like to get as much as possible 18 Years to go.
3. Debt Free
4. Growth, would be nice if we can actually go on some nice vacations now and again. Mostly disposable if I am wording it correctly.
5. Would like some security maybe foreign investments as well as local.

Any advice would be welcomed.
Start here - Mr. Money Mustache

Trying to instill some of the values and invest savings. So far I've managed to clear all debt and lowered my monthly spend significantly on unnecessary things ... problem is that leaves more money for CUD haha.
 

Qui_Illustrati

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Start here - Mr. Money Mustache

Trying to instill some of the values and invest savings. So far I've managed to clear all debt and lowered my monthly spend significantly on unnecessary things ... problem is that leaves more money for CUD haha.
😁

That's where discipline comes in.

I know all about it too - same boat
 

Anzarrah

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Throw all extra money at clearing your current debt - I'd say car first - then all in to bond. More especially if you have an access bond of sorts.

You will be both amazed and horrified how much interest you're paying on the bond over the term.

Once your bond is cleared - then start looking at other investment avenues where you can diversify. You will have more to invest once your car and bond is cleared.

That's just my 2c
We wanted to with the car but where we financed, we actually pay penalties for paying of the car debt.

We are actually putting away a few k more into our bond. Atm I just don't know which will give me a better return. The bond or other options.

The main thing that scares me is everyone is telling me compound interest this and that. So yes I will pay off my bond much quicker but I will have nothing else until I do?
 
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Anzarrah

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Start here - Mr. Money Mustache

Trying to instill some of the values and invest savings. So far I've managed to clear all debt and lowered my monthly spend significantly on unnecessary things ... problem is that leaves more money for CUD haha.
We are super strict budgeting keeping with it. We have daily budgets , monthly budgets. We eat out maybe once a month( we cut this out a lot, more for the health benefit). We buy in bulk save were we can. CUD has completely stopped since son was born so that problem has been sorted.

Now we just need to save "better/smarter"

Thank you for the site, will be reading through it.
 

CRE4MPIE

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We wanted to with the car but where we financed, we actually pay penalties for paying of the car debt.

We are actually putting away a few k more into our bond. Atm I'm just which will give me a better return. The bond or other options.

The main thing that scares me is everyone is telling me compound interest this and that. So yes I will pay off my bond much quicker but I will have nothing else until I do?
Interest is essentially money you're just throwing away ... so get rid of that first.

FNB has a great account called a Money Maximizer if you're lazy and don't want any risk - 7.1% p/a return and the moneys available immediately. Minimum balance applies etc. R500k will yield about R3k pm on that which will increase slightly every month due to the re-investment (unless you cash that out )

There's a few good articles on Mr. Money Moustache - especially on the "Start Here " button on how to save , invest and re-invest to ensure you can retire within the first 10 - 15 years of working.

If only I knew about this when I was 25 ...
 

pXius

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We wanted to with the car but where we financed, we actually pay penalties for paying of the car debt.

We are actually putting away a few k more into our bond. Atm I'm just which will give me a better return. The bond or other options.

The main thing that scares me is everyone is telling me compound interest this and that. So yes I will pay off my bond much quicker but I will have nothing else until I do?
Your interest rate on your house will almost always be more than the interest rate on an investment.
Depending on your capital.

So to make your decision easy whip up an excel sheet with the following,

1 section with your bond, outstanding bond value and it's monthly installment based off it's interest rate.

A second section where you start to invest say R5k a month that calculates earnings(interest received) monthly based off the avg investment interest rate for the product you're looking at, adding a new R5k every month like you plan to do.

Now run it over 5-10 years and see what your financial standing is.

Now do the same but add the R5k to your bond payments instead and compare.
 

Harbinger2000

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In support of @[U]pXius[/U] 's comment above, try checking out the loan/homeloan calculators on the banks' website.

I know FNB's calculator allows you input expected additional monthly amounts showing the difference between just making the expected payment without additional payment vs adding additional payments. It can be rather eye opening on the difference a small additional payment makes over the course of a 20 year loan.

Any additional payment made earlier on in the loan has an effect on the loan interest over the entire loan period. Each monthly payment is used to first address the loan interest for that month and the remainder after subtracting the interest is then applied against borrowed amount. For example, my very first month's payment on my loan had a bit less than 20% (if I recall correctly) of the actual payment detracted from the borrowed amount.

Loans over time really eat up cash, a home loan over 20 years have you pay back more than double the borrowed amount if I recall correctly. Car loans interest over 5 years I think is usually 50% or more of the burrowed amount, speaking on possible correction as it has been a while since I did the numbers.

I would also recommend trying to see a broker for advise, they just know better what is currently going on.

For possible RA's perhaps check out Allan Gray which has 2 different funds you could pay into, with I believe have a monthly payment option of R500.

Good luck
 

LouisABC

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Throw all extra money at clearing your current debt - I'd say car first - then all in to bond. More especially if you have an access bond of sorts.

You will be both amazed and horrified how much interest you're paying on the bond over the term.

Once your bond is cleared - then start looking at other investment avenues where you can diversify. You will have more to invest once your car and bond is cleared.

That's just my 2c
Not really the best advise throwing all your cash into a depreciating "asset". Just to clear off debt and get rid of the interest. In the short term, yes you will save some money, but have you ever considered what would the impact be on the long term? Penny wise and pound foolish!

Home loan is a good way to save over interest, but should not be the be all and end all where all spare cash go, as you won't be diversified and a home is not very liquid and various over factors means it aint the best investment vehicle.

Should rather aim to preserve the capital and look at areas on how you can obtain a net return (after tax), which would exceed the cost of capital. Also, you are throwing away liquidity and not getting any "return", only saving cost. If the interest on the car bugs you, sell it and buy something you can afford cash.

Interest is essentially money you're just throwing away ... so get rid of that first.

FNB has a great account called a Money Maximizer if you're lazy and don't want any risk - 7.1% p/a return and the moneys available immediately. Minimum balance applies etc. R500k will yield about R3k pm on that which will increase slightly every month due to the re-investment (unless you cash that out )

There's a few good articles on Mr. Money Moustache - especially on the "Start Here " button on how to save , invest and re-invest to ensure you can retire within the first 10 - 15 years of working.

If only I knew about this when I was 25 ...
Mr Money Moustache (I did not read any of the "advise"), would look at basic principles, i.e. cost savings, disposable income, use Financial Advisor jargon to say save x% of your income, to ensure financial security, but it remains basic and won't factor in everything, especially which would be beneficial in your country of residence.

Most people are recommended a financial adviser, yet to afraid to go there, because of fees (which by the way can be negotiated), however do they even understand the following, the main reason for a financial advisor (not all are great and are only their for comms, so you need to understand this as well):
* Tax implications (unit trusts, trading (shares vs forex, capital vs income), RAs, Pensions, TFSA, section 12J);
* Financial immigration options;
* Disposable income;
* Cost of capital vs return on capital;
* Liquidity of investments;
* Research as much possible as you can, and expand your knowledge and give yourself that financial power, this would serve you great in the long term!
etc

What you are asking, is not something that can be answered in a quick thread over a forum. also, a lot of people will have opinions, as this is what they believe and what they have been told is best, yet, is it really?

Some basics will be beneficial, but to really obtain long term growth, the answer to your need will be more complex, just make sure of the following:
1. Live within your means (budget, compare with actual and understand your disposable income);
2. Get those tax benefits and optimal returns;
3. Don't over in-debt yourself;
4. Leverage your capital from your access bond on your home loan;
5. Don't believe in the braai talk of promised return of 30% in 6 months, as the guy, know a guy, whom invested and now living the high life.

Good luck
 

Qui_Illustrati

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Not really the best advise throwing all your cash into a depreciating "asset". Just to clear off debt and get rid of the interest. In the short term, yes you will save some money, but have you ever considered what would the impact be on the long term? Penny wise and pound foolish!

Home loan is a good way to save over interest, but should not be the be all and end all where all spare cash go, as you won't be diversified and a home is not very liquid and various over factors means it aint the best investment vehicle.

Should rather aim to preserve the capital and look at areas on how you can obtain a net return (after tax), which would exceed the cost of capital. Also, you are throwing away liquidity and not getting any "return", only saving cost. If the interest on the car bugs you, sell it and buy something you can afford cash.



Mr Money Moustache (I did not read any of the "advise"), would look at basic principles, i.e. cost savings, disposable income, use Financial Advisor jargon to say save x% of your income, to ensure financial security, but it remains basic and won't factor in everything, especially which would be beneficial in your country of residence.

Most people are recommended a financial adviser, yet to afraid to go there, because of fees (which by the way can be negotiated), however do they even understand the following, the main reason for a financial advisor (not all are great and are only their for comms, so you need to understand this as well):
* Tax implications (unit trusts, trading (shares vs forex, capital vs income), RAs, Pensions, TFSA, section 12J);
* Financial immigration options;
* Disposable income;
* Cost of capital vs return on capital;
* Liquidity of investments;
* Research as much possible as you can, and expand your knowledge and give yourself that financial power, this would serve you great in the long term!
etc

What you are asking, is not something that can be answered in a quick thread over a forum. also, a lot of people will have opinions, as this is what they believe and what they have been told is best, yet, is it really?

Some basics will be beneficial, but to really obtain long term growth, the answer to your need will be more complex, just make sure of the following:
1. Live within your means (budget, compare with actual and understand your disposable income);
2. Get those tax benefits and optimal returns;
3. Don't over in-debt yourself;
4. Leverage your capital from your access bond on your home loan;
5. Don't believe in the braai talk of promised return of 30% in 6 months, as the guy, know a guy, whom invested and now living the high life.

Good luck
If you say so.

My interest saving of just under 2mil on my bond over the term says otherwise.

Each to their own I guess. Sure makes me feel better not having had to have paid all that over in what amounts to as a loss.

Sure makes me feel even better having the agility to take those funds and divert them to a more feasible investment avenue.
 

LouisABC

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If you say so.

My interest saving of just under 2mil on my bond over the term says otherwise.

Each to their own I guess. Sure makes me feel better not having had to have paid all that over in what amounts to as a loss.

Sure makes me feel even better having the agility to take those funds and divert them to a more feasible investment avenue.
Look, you are comfortable with that, because that is what you can calculate and understand. It's a simple calculation the saving, but nothing scares people like uncertainty. Also, investments is complex ,with a lot of stuff to take into consideration, so it is not for everyone. I am just wondering, you now have the agility to take those funds you saved on interest and divert them to a more feasible investment, which might be?

Look, paying off a car quicker hardly has any financial freedom prospects, a bond, yeah, you will save interest, but what happens after that, once paid off, where do you go? Also will the return on your house exceed that of over capital investment options? How did you diversify and also what tax benefits you got from your house? In SA, we get taxed heavily, be it directly or indirectly.

The access bond can be used nicely to your benefit, to save interest, direct capital investments and obtain tax benefits. Leaving all the cash there is like leaving it all in a fixed deposit, you have certain returns, with low risk, but has a lot of short falls.
 

Qui_Illustrati

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Look, you are comfortable with that, because that is what you can calculate and understand. It's a simple calculation the saving, but nothing scares people like uncertainty. Also, investments is complex ,with a lot of stuff to take into consideration, so it is not for everyone. I am just wondering, you now have the agility to take those funds you saved on interest and divert them to a more feasible investment, which might be?

Look, paying off a car quicker hardly has any financial freedom prospects, a bond, yeah, you will save interest, but what happens after that, once paid off, where do you go? Also will the return on your house exceed that of over capital investment options? How did you diversify and also what tax benefits you got from your house? In SA, we get taxed heavily, be it directly or indirectly.

The access bond can be used nicely to your benefit, to save interest, direct capital investments and obtain tax benefits. Leaving all the cash there is like leaving it all in a fixed deposit, you have certain returns, with low risk, but has a lot of short falls.
It's really quite simple to understand, and you don't really have to apply much of the garbage you're ranting on about.



As to what avenues I currently have to divert my funds, a whole lot more options become available once ones debt is settled. One of the largest debts a person has in their lifetime is a mortgage.

It's really, really that simple. Investing money when one has debt is borderline silly, especially a debt as large as a mortgage.

The numbers speak for themselves. My numbers certainly do and it works for me.

Like I said though, each to their own and if your black magic fukkery formula is working for you - then kudos to you. There isn't a one size fit all solution to it I guess.

OP - best you perhaps speak to a financial advisor.
 
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LouisABC

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Sucks savings 10% on a mortgage, when I can get returns in diversified markets, some in the US, gimming returns over 15% (investment picking is required, to understand underlying assets, industries involved, customer footprint and also who on earth Trump will be going to war with next).

So ya, paying a home loan faster, to save 10% on an "asset" growing at a measly 3-5% in the last few years(check fnb research if you want), not factoring in any maintenance, insurance, liquidity, diversification, etc, sounds like great advise.

So if all the various stuff I am ranting about is garbage, you still have a lot to learn, as tax, RA, tfsa, section 12J, unit trusts, shares, tax havens, are all those wonderful other avenues you will need to explore.

Also, the op should be aware of taking "advise" from people, as by law, this can only be done by the spesific individuals as per the relevant legislation.
 

Qui_Illustrati

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Sucks savings 10% on a mortgage, when I can get returns in diversified markets, some in the US, gimming returns over 15% (investment picking is required, to understand underlying assets, industries involved, customer footprint and also who on earth Trump will be going to war with next).

So ya, paying a home loan faster, to save 10% on an "asset" growing at a measly 3-5% in the last few years(check fnb research if you want), not factoring in any maintenance, insurance, liquidity, diversification, etc, sounds like great advise.

So if all the various stuff I am ranting about is garbage, you still have a lot to learn, as tax, RA, tfsa, section 12J, unit trusts, shares, tax havens, are all those wonderful other avenues you will need to explore.

Also, the op should be aware of taking "advise" from people, as by law, this can only be done by the spesific individuals as per the relevant legislation.
I think you missed the point entirely where I mentioned I SAVED just under 2mil in interest on the term of my home loan . A tangible saving.


Here - let me dumb it down for you a little

Had I carried on the trajectory of paying just my monthly repayment for the 20 year period of the home loan - after 20 years I would have paid 2 million rands more in interest.

Due to the fact that I chose not to do that - in the long term I have saved R2 million that would have otherwise gone to the bank.

Due to the fact that I no longer have crazy monthly repayments on my home loan of which a large portion of which would have been the interest alone each month, I can look at taking that same money and investing it in whichever avenue I feel would give me best returns on my investment.

Ergo . . . I have saved both money and time settling my bond sooner. Investments and time go hand in hand, therefore I now have that saved time for my investments to grow exponentially.

I'm guessing you still don't see the logic - but that's fine. I do. And that's all that matters.

And OP - the only sense the guy makes is . . . it's best you get professional advice and not schmucks dispensing advice on an internet forum.
 

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Also, the op should be aware of taking "advise" from people, as by law, this can only be done by the spesific individuals as per the relevant legislation.
That is about the only worthwhile (and very true) thing that Louis said. These types of threads are always dangerous as no-one without the proper FAIS Act qualifications should be dispensing financial advice. Should the op follow any of it and it doesn't work out he can sue the person that dispensed the advice for damages incurred.

I work in the industry, I can either dispense advice or put you in contact with people that can provide you with the necessary advice. In short it will be about debt, and then retirement assets and then income generating assets, but it is all about the details.
 

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So glad
I think you missed the point entirely where I mentioned I SAVED just under 2mil in interest on the term of my home loan . A tangible saving.


Here - let me dumb it down for you a little

Had I carried on the trajectory of paying just my monthly repayment for the 20 year period of the home loan - after 20 years I would have paid 2 million rands more in interest.

Due to the fact that I chose not to do that - in the long term I have saved R2 million that would have otherwise gone to the bank.

Due to the fact that I no longer have crazy monthly repayments on my home loan of which a large portion of which would have been the interest alone each month, I can look at taking that same money and investing it in whichever avenue I feel would give me best returns on my investment.

Ergo . . . I have saved both money and time settling my bond sooner. Investments and time go hand in hand, therefore I now have that saved time for my investments to grow exponentially.

I'm guessing you still don't see the logic - but that's fine. I do. And that's all that matters.

And OP - the only sense the guy makes is . . . it's best you get professional advice and not schmucks dispensing advice on an internet forum.

Yeah yeah, we get it, the bank gave you the number as per the amortization schedule or you googled some financial calculator and filled in the basics to get a number. Do you even know how to calculate it?

So glad you saved the R2m, you have noted that a few times. You still haven't noted where you want to go with all this excess cash now, seeing that the bond is paid?

Look, fully understand why you did it, as to save interest and the safest option for those that want certainty and don't understand the complex world of economics, financial markets, shares etc, however, was this the best option, taking into account the lack of tax benefits and diversified investment vehicles? I don't think that was even a consideration.

PS - There is times in the market when you need to hold onto cash and times to be invested, hence an access bond on a mortgage loan can be utilized in a very effective manner, when this is applicable.

That is about the only worthwhile (and very true) thing that Louis said. These types of threads are always dangerous as no-one without the proper FAIS Act qualifications should be dispensing financial advice. Should the op follow any of it and it doesn't work out he can sue the person that dispensed the advice for damages incurred.

I work in the industry, I can either dispense advice or put you in contact with people that can provide you with the necessary advice. In short it will be about debt, and then retirement assets and then income generating assets, but it is all about the details.

And as for a financial adviser, don't think they are all knowing, in the end, most is just some sales person, with basic qualifications, selling predefined products form their institutions. Most doesn't even understand the basic underlying investments or the assets thereof. The only real benefit of a financial adviser, is to give you the options of the various products. In the end, it's a sales person chasing commissions, that's why the life insurance and income protection is the be all and end all for financial freedom. CFA is the actual guy doing all the work and creating wealth for you.

Look, what do I know, at least my diversified portfolio is showing health real US dollar returns (yeah, I measure my portfolio against a 1st world economy), I have liquidity and can financially and physically immigrate, without having a concern of assets being stuck in one place, apart from my house, but that is a small chunk of the portfolio.

Here's some good reading as a start for the OP:




Most of the local asset managers have insightful reading material, which is a good starting point.

And a reminder, fees can be negotiated with a financial adviser.
 

erosennin1111

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I've looked at Easy Equities/Alan Gray/Alexander Forbes/Prudential/Old Mutual but even more lost.

Okay so lets start here! All of the above companies are fund managers and do the same thing except for Easy Equities.
Easy Equities is a nice platform to buy shares (shares, equities and stocks are synonyms). This means you need to take responsibility for your own choices as far as investing. To avoid all that you go to a fund manager. They create a big old fund with their choice of shares/property equities/bonds/currency... you just need to make contributions to the fund.

A financial adviser helps you to choose which fund. The problem with a financial adviser is that once you have made your fund choice they will take fees from your investment. They charge two types of fee:

Initial: This a percentage for every contribution made to your fund, if you pay R5000 monthly they will take a percentage of each R5000 paid
Ongoing: This is an ongoing monthly percentage of your investment's worth

Your adviser will either charge one type or both.

Currently 26 so hopefully I did not wait to long. I have no Idea where to start. I currently do not have a Pension,RA,TSFA or any sort of Investments.

You get three types of investments with a fund manager-

Local Unit Trust:
The default investment that allows you to invest as much money as you want for as long as you want. You're able to withdraw your money from this product at any time.

Tax Free Investment:
An investment that only allows you to invest R33000 per tax year, you can do this for about 15 years before you reach the max allowed amount of R500 000. If the amount you invested grows to R2 000 000 that entire growth of R1 500 000 is tax free.

This product is considered a long term investment because if you withdraw from the investment it takes from your lifetime limit. If you add R33 000 in the 2019 tax year and withdraw that R33 000 in that same year, you will now be stuck with a lifetime limit of R466 000.

Retirement Annuity:
You can contribute as much money to this product as you want but you can only withdraw the money at the age of 55 or older. When you do retire out of a retirement annuity you can only take a maximum of one third of the full amount, the rest of the money needs to be put into a Living Annuity. The benefit of a retirement annuity is the tax rebates, what does that mean?

You are taxed by SARS according to the following table: SARS personal income tax table
If you earn R300 000 and contribute R50 000 to your retirement annuity, SARS will tax you as though you only earned R250 000 for that tax year.

Niche Products:
Endowments, Preservation Pension funds, Preservation Provident funds and Living Annuities. I don't really want to talk about these but Pension and Provident funds are investments created by your work for you as an employee. The equivalent of a pension or provident fund for private individuals is a retirement annuity.

I got a lot of suggestions to go see a professional financial adviser/planner but their fees seems so excessive or is it actually worth it?

See my info on Financial advisers above.

If I have R5000 a month to put away how to I split it? Would also to contribute Annually(larger sums)

You can run a debit order, by most fund managers the minimum for the debit order is R500. These debit orders are not compulsory and you're permitted to cancel at any time. You can also make lump sum contributions at your own discretion.
You can also split your contribution to different funds within a single unit trust/tax free investment/retirement annuity.

Do I put portions towards RA/Investments/TSFA do I put everything in RA?

See what a retirement annuity entails above, I'd suggest using up your tax free allowance. The tax free only allows R33 000 per year, if you skip your 2019 contributions you cannot make a R66 000 contribution the following year.

Do a buy stock, share etc?

Not if you do not know what you're doing, it's much simpler to leave your money with a fund manager.

HOW TO CHOOSE A FUND? This is the most important question you need answered:

A fund is basically made up of these assets: Equities, property equities, bonds and money.
The above list is in order of most volatile to least volatile.
Volatile assets generate larger returns in the long term (5 or more years) whilst the least volatile assets generate a fairly consistent interest rate.
When choosing a fund you can either choose to go into an equities only fund, safe assets only fund or a combination of both.

4. Growth, would be nice if we can actually go on some nice vacations now and again. Mostly disposable if I am wording it correctly.

For short term savings you're going to want to go into safer funds that consist mostly of bonds and money.
For the long term you're going to want to go into an equity only fund, do this for your tax free investment.

1. Retirement Income - Covering all my expenses at that time

Interest bearing funds generate about 7 to 8 percent interest rate annually, you need R8 600 000 to generate R602 000 interest annually.
That works out to about R50 000 a month.
BUT you also need to take inflation into account, minus 5 percent from the performance of your fund.

5. Would like some security maybe foreign investments as well as local.

Fund managers offer direct offshore investments (where you invest in dollars, you need to send dollars to the fund manager to invest) and feeder funds (these are also invested offshore but allow you to invest in Rands).
 
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A lot of advice on saving money above, and all valid. I've pretty much paid off my bond, and leave just a tiny balance to keep it open, in case I need to pull the cash out for an emergency or big investment elsewhere. My cars also paid off about 4 years ago and haven't replaced them and don't intend to. The feeling of not having to pay for a car and homeloan every month is so liberating and the extra cashflow can be used to build up your savings or fund those nice to haves.

But one point I'd also like to add is that saving alone can only go so far. You'll reach a point where if you want to save more you will just need to earn more, be it from a better job or from investments or side hustle. Therefore you will always need to push yourself and constantly learn and reinvest in yourself
 

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So glad



Yeah yeah, we get it, the bank gave you the number as per the amortization schedule or you googled some financial calculator and filled in the basics to get a number. Do you even know how to calculate it?

So glad you saved the R2m, you have noted that a few times. You still haven't noted where you want to go with all this excess cash now, seeing that the bond is paid?

Look, fully understand why you did it, as to save interest and the safest option for those that want certainty and don't understand the complex world of economics, financial markets, shares etc, however, was this the best option, taking into account the lack of tax benefits and diversified investment vehicles? I don't think that was even a consideration.

PS - There is times in the market when you need to hold onto cash and times to be invested, hence an access bond on a mortgage loan can be utilized in a very effective manner, when this is applicable.




And as for a financial adviser, don't think they are all knowing, in the end, most is just some sales person, with basic qualifications, selling predefined products form their institutions. Most doesn't even understand the basic underlying investments or the assets thereof. The only real benefit of a financial adviser, is to give you the options of the various products. In the end, it's a sales person chasing commissions, that's why the life insurance and income protection is the be all and end all for financial freedom. CFA is the actual guy doing all the work and creating wealth for you.

Look, what do I know, at least my diversified portfolio is showing health real US dollar returns (yeah, I measure my portfolio against a 1st world economy), I have liquidity and can financially and physically immigrate, without having a concern of assets being stuck in one place, apart from my house, but that is a small chunk of the portfolio.

Here's some good reading as a start for the OP:




Most of the local asset managers have insightful reading material, which is a good starting point.

And a reminder, fees can be negotiated with a financial adviser.

Sure thing bud. Sure thing 😂
 

Pansyfaust

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Okay

Many comments on which course of action is better, and two diverging but valid points from the "2 million saved" @Qui_Illustrati and physically emigrating dude @LouisABC ;). Maybe the lesson from both of those recommendations is that the best course of action is the one that helps you sleep better at night because you understand the choices and made a choice that you understood was better for your risk appetite?

Mr Emigration talks about not paying off a depreciating asset faster(car) and he's somewhat right--but he ignores the pragmatic reality MOST people have. Mr Emigration might have been able to buy his first car completely cash, not everyone is able to. The reality, however, is that as a 26-year old, the likelihood of still needing a loan for a car is very real. Let's construct a realistic timeline. First job out of varsity at 20/21, you need a car, and if you are smart you buy your first car as a second hand clunker and with 90-100% finance as most people don't have the luxury of living rent free at parent's home to save a huge deposit on a car. After paying it off and wanting a better, maybe safer car at 26 with a family, the second car is a non-clunker if you've done proper saving and budgeting, and will likely be 30-50% financed, By the time you get to the third car you should be paying for that without financing.

This is the route most people should follow. So yes, paying off a depreciating asset is not usually the right way, but for most people erasing a car payment is an easy win for saving cash to roll into the next car/investment that they can then pay for without using debt. Investment should be done realistically, not in a best case scenario. We are not machines, and the act of paying off debt faster AND investing is an excellent habit to cultivate. So yes, paying it off does not make sense in a pure financial sense, but it makes sense pragmatically.

As for the house saving-sure, paying off a house seems logical, and for most people it's the biggest asset in our personal portfolio. But the opportunity cost of this money going into a house is what Mr Emigration and Mr 2 Million saved are arguing about. This is the cost of losing the gains the money put into the bond could have made had it been put into something else, like equity. Mr Emigration is saying that simply putting the money into a bond means Mr 2 Million has not thought about the opportunity cost of not using that money elsewhere, and that he has potentially lost return over time. Whereas he might have saved 2 million in interest cost over 20 years, he also missed out on potentially making 4 million over 20 years had he stuck that money into the market--i.e a nett return on that money of 2 million more than the money saved. This is simply based on the idea that equities usually over a long period of time outperform property as an investment--and in South Africa we a probably due for a declining property market for the foreseeable future thanks to the fuckwits in charge.

HOWEVER, it's usually a mix of both that is REALISTICALLY achievable for most people. Had you put all your extra bond cash into local equity instead of the bond in the past 6 years, you'd have been better off sticking that money in a bond--the local returns have been absolutely SHITE and you are simply treading water, and there's no sign that the local market will pick up.

International return though, that's been better ;)

oooookay. Onto the "not financial advice" advice for @Anzarrah


Most of what pervy sage @erosennin1111 has said is a great list of things you need to use for going forward-Read and understand everything he's said there.

However, i'd like to say that choosing an investment should be based on your personal comfort levels. A passive ETF is a low fee offering that returns the market performance. The fees of this are usually 2-3% lower than most active fund managed unit trusts. I go for passive simply because choosing the 15% of fund damager who outperform the market is a risk I don't feel like taking.

Another thing I want to say--you are saving R1000 for your kid. What vehicle are you using to save though? If you are saving this cash for them to use in 18 years, then perhaps think about opening a Tax Free savings account for them and investing in equity in there for them? Long term growth on this should outperform any other investment by the pure fact that the returns in this are not taxed at all and equity has outperformed many asset classes over time. Caveat--this money should not be touched, once it's in a TFSA consider it spent and not available to withdraw(you can withdraw it, but you reaaaalllly shouldn't until your kid is ready to use it--and even then they themselves should leave it to compound for longer). This is the power of compounding --if you were to dump R33k into his TFSA this year, by the time he is ready to retire at 55, this single contribution should give them a monthly retirement income of an equivalent of R10 000 in today's money (i.e, 55 year inflation adjusted amount equal to R10 000 in today's money)

A TFSA is a powerful savings and retirement vehicle for everyone, but ESPECIALLY don't underestimate how useful it can be for your kid. They have the longest TAX free compounding wealth creation potential of anyone in your family right now, use that and use it hard.

And thirdly: do you have an emergency fund? This is money you need, as it states, for unforeseen emergencies. This is small, Like excess payments, or big, like portions of a hospital bill that medical aid does not cover. Or simply for if you or your partner lose income from getting retrenched? Work out your total monthly expenses(literally everything essential and strip out all the rest), and try to set around at least 3-6 months of emergency fund in case shit hits the fan. This cash should be in a easily and quickly accessible interest bearing(32 day money market) or interest saving(Bond) account. For me, the most attractive option is currently Tyme bank as they have a 9% p/a interest rate on a max 100K investment, and it can get bumped up to 10% if you wait 10 days to withdraw. For most people, bond interest is higher than or equal to prime, so it makes sense to have an emergency fund in the bond access account. If you manage to get a cheaper bond that's lower than some investment returns, then you are flexible on where to stick it.

The rationale for an emergency fund is that if you start investing every scrap of disposable cash you may be illiquid when you need money, so then in order to pay for an emergencies you are forced to cash out some investment money or worse, take a personal loan, or not have access to your RA money till 55, you need a safety net of liquid cash available. Some people suggest credit cards are a stand in for emergency fund--and they are useful for it--but you need to have the capital somewhere in order to pay back the credit card debt in full, or you're stuck paying a huge interest bill.

Also, as for accounting for the "worst" emergency, something else you need to consider, since you have a family, is death and disability cover should anything happen to you or your partner. Figure out how much income would be needed to help cover the shortfall should either of your income generating capacity be cut short.

Lastly, the fees you are paying for investment products are a huge drag on the performance of your investments. You can find many passive products that charge 1% and under, so shop around and go for the one you can reasonably understand. If you want, I can give you a referral you to a few places? (Disclaimer, you and I would both get something out of the referral)

If you don't wanna take up a referral, no probelmo: look at places like 10X, ETFsa, easy equities, SATRIX, SYNGIA,CORESHARES....

Also, not to shit completely on active products, but If you want an active investment product because you feel you agree with the fund manager and their returns/style, go ahead, as long as you make an informed choice.

Other than that, dude, you are 26 and starting WAAAAY ahead of a lot of people (including myself). You are already making the commitment now, and are not late to do this at all.

If I can say something though: really really really think hard about how much value a financial advisor brings to the table--95% of the time, they are simply selling a product and getting a return for doing very little. A 1 % advisor fee seems like a little when your investment is R10000...1% of 1 million is R10 000 a year for doing nothing but selling you something 20 years ago.

okay, Wall of text crits carbonite for 9000
 

Anzarrah

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Thanks for the advice.

Some answers to your questions.

Taking a look at all the different sites and risk calculators(not sure how accurate they are) , it seems I'm a moderate to high. However the realist in me keeps telling me that something more stable for the sake of later income should be considered.

We are currently saving our sons money in a Nedbank TFSA .

I currently have a 7 day notice savings account with 2 months worth of expenses as a emergency fund.

Atm my savings is in 32 Day notice - this is why I need to place it elsewhere.
 

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Thanks for the advice.

Some answers to your questions.

Taking a look at all the different sites and risk calculators(not sure how accurate they are) , it seems I'm a moderate to high. However the realist in me keeps telling me that something more stable for the sake of later income should be considered.

We are currently saving our sons money in a Nedbank TFSA .

I currently have a 7 day notice savings account with 2 months worth of expenses as a emergency fund.

Atm my savings is in 32 Day notice - this is why I need to place it elsewhere.
Is the Nedbank TFSA a money market/cash investment? Is it in his name or yours? Do you know the fees? If it is, the returns on those are really just tracking inflation + a few percent, and with fees, might actually be treading water in terms of wealth generation. If it is simply an interest bearing account, consider putting that investment amount into equity through another platform? This is not advice, just me saying that equity over the long term will always beat out a money market account. If you do decide to put the money into another platform to buy equities(ETFs), do a transfer, not a withdrawal.

As for the other 32Day savings account, is that money you want to use for investing only?
 

Winston1990

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I am by no means the perfect example or financially as savvy as someone for is qualified in the field, but I am of similar age and circumstances and will give my view point / what I have done:

I am 29, bought my first (and still only) property at 26. Nothing fancy - very affordable in a good area. I do have a pension fund with my current employer where they put down 10% and I put down 7.5% towards the pension fund.

I have a savings account which I use for any unexpected expenses, expected expenses like tires and car services, and to save for shit I want. I am also a member of PPS where I have life cover, critical illness, disability, income protection and a profit share account which is tax free and accessible at the age of 60 / upon death or when I cancel my membership.

The girlfriend also just bought her first property - also nothing big and fancy but in a good area.

The idea for us is to rent out both properties within the next year and move in together. For the next couple of years both of us will have to chip in some money to cover levies etc, but that will eventually fade away and we will break even and start making a profit. So the two properties will be paid of by tenants and when we are older the income will fund our kids varsity / generate additional income for us or we sell off the properties if required in the future. In the meantime we will rent for a while as it is cheaper, so we can save up quicker for our next, bigger property and put down a decent deposit and pay the lawyers.

That is what I have done thus far!

For you who does not have a pension fund accumulating at the moment, my suggestion would be:

1. RA - It is like a pension fund as far as I understand. You cannot touch the money until you are 55 so you know it is going towards retirement and you cannot screw it up. The problem with this as far as I understand, like a pensions, you can only access 1/3 of it upon maturity. What if you need more cash to buy that little house at the ocean? Next step...

2. TFSA - You can access all of the money whenever you want and whatever has been accumulated at maturity is tax free. Be disciplined enough to not touch any money until you are retired or the time is right. If you withdraw any money, you can never replace it. You have R500,000 for yourself for your lifetime. If you withdraw R10,000, you are left with R490,000 no matter what. Here is where compound interest will be very beneficial. It will enable you to have a larger lump sum when you retire to do hat you need to do.

3. Many might not agree, especially in SA with the current economic climate and uncertainty - At this stage I still feel a second property can be beneficial. It is an investment which someone else will pay off for you and it will generate additional income for you in the future. Doesn't have to be a mansion - just a two bedroom flat in a decent area. Gone are the days where people want to stay in large houses our in country areas (Well, some still do). The majority are looking for safe, lock up and go small places close to work / hospitals / schools / gym / malls.

4. Get your Will in order - very important and many neglect it.

With the above, have a savings with easy access for emergencies, unforeseen and foreseen expenses and for whatever you and your family want to save up for (Holidays, PC stuff....whatever).

Even though financial advisers can be good to speak to, and many of them offer their services free as part of your banking services (Nedbank Young Professionals account) - I would still say be wary and don't just trust anyone. Take whatever they tell you and do your research. Many of them sound fancy and use terminology which you do not understand, and many times you will feel embarrassed to ask questions. It is their work and many of them earn commission, hence I say be wary. Some do not earn commission but fixed salaries. NOTE - not saying all financial advisers are bad, just saying be cautious.

Lastly, the financial market has many options and everyone might have a different opinion / advise - but remember you are unique and your financial situation is unique. You go through different stages in life and things change. Now you might only be able to put away R5,000 per month, so you need to go with options which takes this into consideration and is best for it. In 10 years you might have R40,000 to put away, so there will be other investment options more suitable at the time. There is no one size fits all!
 

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1. First Pay of your bad debt. Credit cards, overdrafts and personal loans first. You can then tackle home and car loans. Pay off whatever uses the highest interest rate first.

2. Get insurance. This includes income protection to make sure you still have a salary if you should lose the ability to work.

3. Build up an emergency fund. You should build up a large enough fund so that you can live of it and cover all your monthly expenses for 5-6 months. You can save this money in a 32 day account or something similar that gives you fairly easy access to it, but still gives you a reasonable interest rate (you want to try to keep up with inflation at the very least)

4. Now you can invest

5. Stay away from RAs/pension funds, they all a scam.


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Possibly side tracking the thread but it could be some useful advice if OP doesn't know much about shares as well.

How does one go about buying shares to own them as far as I understand if you buy through easyequities and other brokers, one doesn't actually own the shares ? I could be wrong, would be keen to here the possibilities here with lowest fees options.
 
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Pansyfaust

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1. First Pay of your bad debt. Credit cards, overdrafts and personal loans first. You can then tackle home and car loans. Pay off whatever uses the highest interest rate first.

2. Get insurance. This includes income protection to make sure you still have a salary if you should lose the ability to work.

3. Build up an emergency fund. You should build up a large enough fund so that you can live of it and cover all your monthly expenses for 5-6 months. You can save this money in a 32 day account or something similar that gives you fairly easy access to it, but still gives you a reasonable interest rate (you want to try to keep up with inflation at the very least)

4. Now you can invest

5. Stay away from RAs/pension funds, they all a scam.


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Why are RAs a scam? I mean, they force you to invest more locally, so that's a shit thing. But they do earn a rebate and offset some tax at maturity when you withdraw your 1/3rd.

I guess it's the fact that you cant access before 55, but my thinking is unless you're planning on doing FIRE, and RA can be useful if you know what it's pros and cons are. The problem is an RA is sometimes all someone has, which is then quite shit as you're putting most of your eggs in our shitty SA basket.

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Pansyfaust

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I am by no means the perfect example or financially as savvy as someone for is qualified in the field, but I am of similar age and circumstances and will give my view point / what I have done:

I am 29, bought my first (and still only) property at 26. Nothing fancy - very affordable in a good area. I do have a pension fund with my current employer where they put down 10% and I put down 7.5% towards the pension fund.

I have a savings account which I use for any unexpected expenses, expected expenses like tires and car services, and to save for shit I want. I am also a member of PPS where I have life cover, critical illness, disability, income protection and a profit share account which is tax free and accessible at the age of 60 / upon death or when I cancel my membership.

The girlfriend also just bought her first property - also nothing big and fancy but in a good area.

The idea for us is to rent out both properties within the next year and move in together. For the next couple of years both of us will have to chip in some money to cover levies etc, but that will eventually fade away and we will break even and start making a profit. So the two properties will be paid of by tenants and when we are older the income will fund our kids varsity / generate additional income for us or we sell off the properties if required in the future. In the meantime we will rent for a while as it is cheaper, so we can save up quicker for our next, bigger property and put down a decent deposit and pay the lawyers.

That is what I have done thus far!

For you who does not have a pension fund accumulating at the moment, my suggestion would be:

1. RA - It is like a pension fund as far as I understand. You cannot touch the money until you are 55 so you know it is going towards retirement and you cannot screw it up. The problem with this as far as I understand, like a pensions, you can only access 1/3 of it upon maturity. What if you need more cash to buy that little house at the ocean? Next step...

2. TFSA - You can access all of the money whenever you want and whatever has been accumulated at maturity is tax free. Be disciplined enough to not touch any money until you are retired or the time is right. If you withdraw any money, you can never replace it. You have R500,000 for yourself for your lifetime. If you withdraw R10,000, you are left with R490,000 no matter what. Here is where compound interest will be very beneficial. It will enable you to have a larger lump sum when you retire to do hat you need to do.

3. Many might not agree, especially in SA with the current economic climate and uncertainty - At this stage I still feel a second property can be beneficial. It is an investment which someone else will pay off for you and it will generate additional income for you in the future. Doesn't have to be a mansion - just a two bedroom flat in a decent area. Gone are the days where people want to stay in large houses our in country areas (Well, some still do). The majority are looking for safe, lock up and go small places close to work / hospitals / schools / gym / malls.

4. Get your Will in order - very important and many neglect it.

With the above, have a savings with easy access for emergencies, unforeseen and foreseen expenses and for whatever you and your family want to save up for (Holidays, PC stuff....whatever).

Even though financial advisers can be good to speak to, and many of them offer their services free as part of your banking services (Nedbank Young Professionals account) - I would still say be wary and don't just trust anyone. Take whatever they tell you and do your research. Many of them sound fancy and use terminology which you do not understand, and many times you will feel embarrassed to ask questions. It is their work and many of them earn commission, hence I say be wary. Some do not earn commission but fixed salaries. NOTE - not saying all financial advisers are bad, just saying be cautious.

Lastly, the financial market has many options and everyone might have a different opinion / advise - but remember you are unique and your financial situation is unique. You go through different stages in life and things change. Now you might only be able to put away R5,000 per month, so you need to go with options which takes this into consideration and is best for it. In 10 years you might have R40,000 to put away, so there will be other investment options more suitable at the time. There is no one size fits all!
If you were thinking of buying property as investment, why have you chosen property itself over listed property stocks? Listed property is income and cgt , whereas investment property is income + costs and maintenance etc.

Basically, if you took whatever money you are getting with a bond and put that into listed property have you seen what the return would be over time?

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Winston1990

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If you were thinking of buying property as investment, why have you chosen property itself over listed property stocks? Listed property is income and cgt , whereas investment property is income + costs and maintenance etc.

Basically, if you took whatever money you are getting with a bond and put that into listed property have you seen what the return would be over time?

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In my case I needed a place to stay. I was not able to rent/buy + take the same amount and invest in listed property stocks. Hence I decided to buy an affordable place suitable for myself as my primary property, instead of renting and paying off someone else' bond.

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