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The Fat Wallet Show from Just One Lap

The Fat Wallet Show is a show about questions. It’s about admitting that we don’t know everything, but that we’re willing to learn. Most of all, it’s about understanding as much as we can to make us all better investors. Phrases like, “I’m not sure” or, “Let me look that up and get back to you” or, “I don’t know” don’t exist in the financial services industry. If you ever had a financial question you were too embarrassed to ask, you know what we’re talking about. In this business, appearances matter, and nobody wants to seem like they don’t know how things work or what the outlook is for the buchu industry. It’s easy to excuse that little vanity, except that people in the investment industry are meant to service investors - people like you and me who need to figure out what to do with our money. There’s no such thing as a stupid question in this show. If you have unanswered financial questions, this is your opportunity to have them answered in a way that even I can understand. Pop them to us at ask@justonelap.com. Hosted by Kristia van Heerden and Simon Brown
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Now displaying: April, 2018
Apr 29, 2018

Growing up, investments weren’t often a topic of conversation. Even so, I knew that people got rich from property. I don’t ever remember someone telling me this outright. I knew for sure we weren’t the people getting rich. Still, it’s just one of those “universal truths” I absorbed as a kid.

Looking back, I realise it’s because I grew up during a property boom and a lot of people really did get rich from property. Share investments weren’t accessible or easy to understand. Financial products were sold by unscrupulous insurers who gorged themselves on the hard-earned cash of their clients. The vast majority of the population were excluded from the financial system. Property was a great way to accumulate assets and build wealth under these circumstances.

That is no longer true. The market has changed. Legislation has changed. Easier, cheaper, less risky ways of building assets are now available to everyone with a proof of residence and identification. Property is suddenly one of many ways to get rich.

In this episode, Simon and I discuss the role non-share investments can play in your portfolio. We think through two listener questions - one around S12J companies, the other, property.


Garth wants to know what we think about venture capital investments.

Since I started listening I have opened an account with Easy Equities. I’ve set up a budget, started with a financial plan, and invested in ETFs & normal shares.

My question is around Venture Capital Companies. Is it wise to buy Private equity, and get the tax relief? Or is it only for high income individuals? There is a lock in period of 5 years I see as well. This is similar to the MTN BEE shares bought a couple of years back.

I am trying to diversify my portfolio and looking at all avenues to spread the risk with the bulk being in Shares/ETF's of course.

Ros has a property investment success story.

I bought my first home - a small 3-bed townhouse in which I still live - in 1999 for R180,000 - got a loan from my dad and paid him off (including interest which he did charge me!) in two years. Then I bought a rental property in the same complex for R370,000 (including all costs of purchase) in 2004 - got a bond for R280,000 which I paid off within 3 years. I then bought a second rental property (mistake!) for R707,000 (incl. all costs) in late 2013 for which I liquidated some Satrix Top 40 and accessed the remaining capital in the existing bond, which I decided to pay off at the end of 2017. I've left the bond open and use it as my emergency fund or to help with short-term cashflow issues if a client pays me late (I'm a freelancer).

The rental income that I get from the two properties means I hardly have to work at all to cover my monthly expenses.

But with the property market currently where it is, I do agree with you that it makes no sense to buy an investment property today. The first rental property has seen capital growth of around 127% over 14 years (approx 9% pa), and then there's all of the rental income. The second property has seen capital growth of around 13% over 4 years. The two properties are of similar size in the same complex, so the difference is purely down to timing - the first was bought when property values were still going through a high-growth phase, the second when property growth had plateaued out.

We talk about this excellent JSE Power Hour presentation by Magnus de Wet in this episode. 


Jonathan made the best case I ever heard for not swearing on the podcast. So good, in fact, that I’m actually considering it.

Personally I don't mind that you swear. I understand the need for creative and relaxed expression on the podcasts, which is breath of fresh air compared to radio shows.

The only problem is that it excludes mothers who have children in their cars. Yes, there are some dads that take their kids to school but invariably it’s the mom.

The result is that mothers don't end up as being financially literate in the household. As a husband, I can’t get my wife to listen to your podcast because she won't listen to the swearing. As a household, we have shared decision-making. It’s very difficult to convince my wife to listen because driving in the car is probably the only time she has to listen to the podcast.

I would very much like to improve the financial literacy of moms, especially stay-at-home moms (my wife by the way is a professional and still works) but alas, she is excluded from your otherwise excellent podcast.

I could even suggest that you take a poll in which you ask your listeners whose wives won't listen to the podcast because of the swearing and thus you could gauge from your listeners themselves.

If we are to create gender equality in financial literacy, let’s get more women involved.

  • I take the point on kids in the car.
  • I disagree with the view that women are more offended by the swearing than men. In fact, every email we’ve ever received about swearing has been from a man.
  • That said, I’d love to hear from you on this. This show is about inclusion, which, ironically, is why we swear in the first place. We want to feel comfortable ourselves, and we want our users to feel comfortable.

Richardt let us know about a very cool tool for Sygnia investors.

Sygnia has this excel sheet which allows you to select all the funds you like on the first tab for a Reg 28 compliant investment, and then once you click Generate, on the second tab it will show you the complete breakdown of fees and total asset class allocation!

It has been updated following the budget speech.

  • It’s very cool. It includes the actual rand amounts too, so you’re not just working with a percentage.
  • If you contact customer service they send it to you.

 


Nicole is following up on the tax issue on global funds in tax-free savings.

You made a comment on having global funds in your tax free savings account.

The issue is that you pay dividend tax on dividends issued in the countries where the shares are held. The tax gets deducted from your dividends before they’re paid out to you or reinvested. If you receive dividends in a TFSA, you don’t pay local DWT, but you can’t avoid the international tax.

I have the Ashburton global 1200 and the sygnia 4th industrial revolution in mine and I'm trying to figure out if these would result in the problem you identified.

When I received local top 40 dividends last week, my offshore dividends were a line item. I hold these outside of my TFSA and I noticed that I paid local DWT on those. That’s also a line item in my statement. What we’re trying to work out is if there’s an offshore tax that was already deducted and not included as a line item in my statement. Getting an answer to this question is proving to be really hard.  


Jacques has a question about his retirement tax break.

Is the  27.5% on the total pay you receive, i.e monthly salary + overtime + bonus + ......

or is it my basic cash salary before all those extras only?

My company contributes 15% of my BASIC salary (+ my 7.5%). If SARS gives us a tax break on 27.5% on total salary, that means my current contribution is much less than the "22.5%" shown on my payslip.

If I could spare enough to save the full 27.5% of my total earnings, what do I do with the extra money? Retirement annuity or Tax Free Savings account? Is there something else? HR seems to be unsure about increasing my contribution deducted directly from my pay.


Denzil wrote us in episode 94 about his Liberty RA. We made a fire under him. He also has a question about moving TFSAs.

I decided it’s time to kick these guys to the curb.

I’ve started the process to transfer my RA from Liberty into my 10X RA.

The FA was not too pleased and tried all the tricks in the book. He even then asked me who I’m moving to.

I informed him about 10X. He had no idea who they were!! I even told him about this a year ago, so much for keeping tabs on the disruptors!!

I’ve also started the process to withdraw my the other investment from them. I’ll be maxing out my Easy Eq TFSA for the year. 50% to my Emergency fund (taking it to my comfortable 6 month level). The rest will go into my Trading Easy Eq account. Again, crazy FA not happy, and has all excuses. So all is good and here's to my money actually now growing(well lets hope so!!!).

When you transfer a TFSA from one account to another TFSA Provider, do the contributions count in the year I added them, or does a transfer count for this years R33k cap?


Gerhard knows he missed the boat to win the book, but he wanted to contribute his mind-blowing financial fact anyway.

The single biggest tip I have on finances: never ever buy anything that someone is trying to sell you.

If you didn’t initiate contact the answer is always no, no matter how awesome the deal.

Saves you from being overcome by superior salesmanship and buying something you didn’t want all the way to being scammed.

Apr 22, 2018

We spend so much time talking about bad financial products. Is there such a thing as a good financial product? If so, where would you find them?

Listener Bronwyn got badly burned with financial products in the past. She’s been paying 15% fees on an Old Mutual education policy and took out a Discovery retirement annuity that hasn’t returned anything above her contributions for the past six years. Now her financial advisor wants her to invest in Body Corporate Bridging Solutions, which apparently guarantee a return of 17.5%.

In this episode, we provide a checklist for buying financial products. When comparing similar financial products, think of the following:

  • Fees

Let this be your point of departure. As winner of books and life, Ronel, explained last week, “If I get 10% growth, and inflation is 6%, there is only 4% left for growth and compounding. If I pay 3% or 4% in fees, I will only get back what I put in, adjusted for inflation.”

  • Guaranteed returns far above retail bond rates

As Simon points out, the government is the only party that can realistically guarantee returns, because the government owns the printing press. You can check government retail bond rates website here.

  • Counter-party risk

Investments are for the long-haul. As winner of books and real life, Lesigisha, pointed out, the principles of compounding relies on time, not money. If there’s not much information available about the company taking your money, be very careful. Counter-party risk should be considered alongside fees, though, in the case of older, bigger corporations who probably won’t go bust but happily pocket your investment returns.

  • Active or passive

Simon and I spend a bit of time discussing this point. The SPIVA report indicates that actively-managed funds underperform the market year after year. However, if an actively-managed fund makes you feel more comfortable, don’t forego it just because we say so. It’s your money, after all.


Win of the week: Sean worked out if you’ll be better off at Absa or EasyEquities. He also worked out how many years it would take him to make back the penalty.

ABSA’s new inactivity cost is essentially R40.25 per every two months, but only charged five times as there would be a trade in the beginning of the year,

This adds up to R201.25 per year for the next 14 years (R2 817.50 excluding compounding or about R6 780.98 at 15% growth adjusted back with 6% inflation).

After that the fee is R241.50 per year until you remove the money, which assuming my daughter is financially savvy will be a long time as she is only 18 months old today.

Anyway before getting myself worked up about ABSA essentially stealing a month’s income from my daughter, I decided to objectively look at the numbers (boring Excel attached to check calcs) and do a comparison between EasyEquities and ABSA

For my family it’s cheaper to use the EE platform by quite a bit,

We will pay off the moving of the two ETFs in just under two years.

For someone using a monthly deposit it may be better to pay into ABSA until the TFSA allowance is maxed out and then only move to EasyEquities.

Hope this helps some peeps.

Click on the link below to download the spreadsheet.

ABSA vs EE


Shout-out to Lean, who recently started listening and seems to be going through the episodes front to back. They wrote about tax on whisky, from many moons ago.


Claire wrote to say my newsletter editorial really hit her in the feels. 

Your "editorial" this morning really struck a chord with me... Of course that's how they make their money. And the same goes for any of the other things we buy, oh so complicated: wine, perfume, cars, homes blah blah ~ have a great week!


Chas wants to know if we have transcripts.

I have listened to most of #96, then I was interrupted by a phone call so I lost the thread.

I am 78 and a bit deaf so I battle to keep up with your rapid delivery. Do you provide a transcript that I can study in my own time or is there a way I can pause to digest what you just said and then go on again?

I always want to learn more about investing.

Thanks for a lively intelligent show.

Transcripts are for one day when we grow up. It is our highest priority in terms of this show.


Thinus has a question about structuring his pay cheque.

When allocating your salary to different "pockets", should you use gross or nett salary?


Alexander sent this great email about selling his house.

When selling a primary residence does one pay CGT for the amount above R40,000 regardless of what you have spent on the house?

We sold our house for R50,000 less than we bought it for about four years ago.

We paid more than R500,000 towards our loan (which was mostly interest of course)

We spent about R100,000 on renovations before we moved in.

After the sale we end up with R70,000 in our pocket.

Of the R500,000 (paid into the bond) R120,000 went to the principal amount.

We sold for R50,000 less than the principal amount.

In my book, it’s a loss of R530,000 (500k + 100k -70k). Or may I only deduct the renovations? Which is still more than the 70k, but in principle can one only deduct physical improvements?

Living there cost us a fuck-ton of money.

Obviously we are getting very little out of this deal, but even if we made R600,000, I would be able to prove that it cost us much more to live there so there is no "gain".

What can I deduct from the money we get from selling a primary residence?

How does this compare to a buy-to-let property?

If you can deduct a bunch more for a buy to let, would it be worth it to buy and let to yourself?


We’ve had a few more emails from people who are upset about Absa’s fee increases. John says this is not the first time.

I bought a small amount of the Absa NewGold ETF years ago and had never done anything else with them.

They sent me a letter (in the POST) about 18 months ago telling me about a new minimum admin fee, payable quarterly. On my pretty small account it amounted to an admin fee of something retarded like 10% a year!

After querying it and getting a shrug of the shoulders, I thought FUCK THEM!! I did some research found EasyEquities, sold my ETF, was below my CGT threshold and reinvested two days later with my newly minted Easy Equities account at a newer, much higher base cost.

With EasyEquities being such a user friendly, reasonably-priced platform, I've subsequently invested multiple times what I originally had with ABSA. Their, EasyEquities’ gain.


We foolishly forgot to pick a winner for Sam Beckbessinger’s book Manage your money like a fucking grownup. Njabulo, who writes for us, snuck in his submission.

Whatever your investment or savings plan is, it is important to consider inflation and fees. If the investment can't outperform inflation after fees, that investment is making you poorer.

Jen was the Win of the Week in episode 90 for figuring out that people who don’t earn a steady income can still structure their savings by doing it by invoice paid instead of by month.

As a self-employed person without a fixed income, I can't structure a pay cheque because I don't get one. But I can apply the same methodology to each amount that I receive.

Since my last email to you about this, it has been going well (although April has been a kak month so it has not been easy).

On the odd occasion when I have been tempted to forget about my system in favour of instant gratification, I just listen to beginning of episode #90 again where you discuss my email. Straight away I am committed all over again, like I would be letting you down if I didn't stick to my guns. I know I should be motivated by how happy future me will be, but sometimes it is hard to think for two people at once.

The second brain wrinkling fact, and this isn't mine but a repeat of what you said, is the idea that our total income over a lifetime is a finite amount. Every time you spend money on something,  there is something else you can't spend money on. Has that bit of information affected my spending habits!

You are changing my life and I have turned into a bit of a fanatic about all this. I am constantly annoying the crap out of everyone I know because I am trying to convert them all to The Fat Wallet Show, for their own good.

This, as well as iTunes reviews and mentioning us when you deal with any financial services provider really helps us. Thanks!

Apr 15, 2018

This is another themed-by-serendipity episode. Last week Edwin mailed with a dilemma: how do you choose between being a good citizen or family member and having money? Whatever you spend on your family, kids or pets or donate to charity is money not going towards your savings goals. Does that mean you should forego those things altogether?

Money and morality are closely linked, but so is money and health, as Christoff pointed out. Having a lot of money but never having any fun is completely pointless. A lot of money at the expense of having children is not going to make you happy (if you want children). Sitting on a mountain of money and never helping anyone else is going to bankrupt you morally. Spending your life trying to get rich but neglecting your health is going to lead to sickness in retirement. What’s the point of that?

We discuss strategies to navigate these questions and completely fail to choose a winner for Sam Beckbessinger’s Manage Your Money Like a F*cking Grownup giveaway. Something to look forward to next week!


Win of the week: Jacques Kasselman. He found us by accident on iTunes and immediately panicked. After reading his mail I realised that he actually didn’t need to panic at all.

Where to start to get on track? I think the best thing would be to get rid of my debt of over R1500 a month, excluding interest on my vehicle loan.

I started paying off my debt by having a liberty investment I had for 6 years (R500/pm - 1.67% growth above what I put in) pay out and pay off my most expensive debt first. That's R700 that can go to the next card/account and then the next and so on.

Is this the right strategy or should I rather look for somewhere else to invest that money, eg. TFSA, ETF and slowly pay off the debt over time?

The way I understand from what I have learned from you guys so far is get rid of debt, then create an emergency fund while simultaneously slowly starting to save/invest and increasing the savings/investing part as the emergency fund gets closer to 3 months salary.

TFSAs

SARS gives us R23,800 tax free interest already. Is it still beneficial to contribute to an TFSA at possibly lower returns if we are still far from reaching that limit? Saving the R500,000 cap for when one day we pass the R23,000 limit? Reaching the R500,000 limit would take about 15 years if you contribute the max of R33,000. As I am 34, I still have 31 years left if I am unable to retire early.

PENSION

My employer requires 22.5% pension contribution monthly, deducted from my salary (me=7.5% company=15%). At the moment its split between Allan Gray and the company fund.

I plan on increasing the percentage towards retirement to max as soon as I can get the rest in order, or at least a little better.


Stefan responded to Frank, who wanted to know where to keep his Lazy system cash while he waited for entries.

I have four EasyEquities accounts and I get interest on all cash in my accounts. There’s a cash management fee, so it's not the best cash account, but it's not like I'm getting nothing.


Fred has an interesting question about TERs. He is invested in an Allan Gray Balanced Fund through a financial planner. The TER of the fund is 1.44%. In addition to that, he pays an admin fee of 0.40, an advisor fee of 0.50% and a management company fee of 0.79%. Just for the privilege of buying the fund he’s paying 1.69%.

I looked up the fund costs on the Allan Gray website, and I have some bad news. The TER is 1.45%, but excludes “other expenses” of 0.02%, VAT of 0.15%, and transaction costs of 0.07%.

3.38% total cost.

The problem is, you don’t see the TER. It costs you money, but you don’t see the money.


Pieter is putting his emergency fund to work. He banks with FNB, and he’s really made the most of that infrastructure.

  1. I have a cheque account that my salary gets paid in. I have a bit of extra money to cover the "shit I did not budget for". I move most of my expense money to my credit card so it is positive. This earns me a tiny bit of interest and I win back quite a lot in ebucks.
  2. I have a linked savings pocket with 1 months expenses in it. It earns interest, has no account fee and money is available immediately.
  3. I am building up 3 months living expenses in a 32 day notice account that also earns interest and has no account fee.

So the plan is: for small unplanned things, you just use money in your account. If the paw paw hits the fan I can live a month with my savings pocket money. When I start touching that money I can request "next months salary" from the 32 day notice account without incurring costs.

If I can build up > 3 months in my notice deposit, I will move that to bond ETF or something that gives better return.

This way I have no fees and costs, acceptable interest and money available now.


Gerhard needs help with life insurance.

I love your war on fees. It’s helped me a lot in making my decisions around investing.

Is there a similar type of thing in the life insurance side of the world?

My life insurance is with Liberty, and it is fully a grudge purchase, but I do have 100s of children so kind of have to have something.

Are there new style life insurance companies that you guys are aware of, like a 10X but for life insurance?

I asked the 10X team and they didn’t know of anyone.

However, I did get some suggestions.

Have a look at brightrock.co.za. It looks like a new school type of business, but it’s majority shareholder is Sanlam.

The other suggestion was FMI. They’re a division of Bidvest Life.

Craig Gradidge from Gradidge-Mahura investments said:

The insurers who are "traditional" and reasonably transparent are Sanlam, Old Mutual, Hollard, PPS.  The 2 that integrate are Discovery and Momentum.

With Brightrock benefits structure is still something they need to work on...as always, the answer of which is best is usually determined by client requirements, their lifestyle and health conditions, etc etc

Poor Josh is stuck between a rock and a hard place with his RA.

I recently started working at a Big Four bank

I come from a company that used 10X as a provider. I didn't know how lucky I was back then. I am 26, so I need an aggressive portfolio.

The fund options we have are somehow administered/managed by Old Mutual and the options are:

  1. Allan Gray global balanced portfolio - 51% equity allocation, 1% fee on SA based assets, and performance related fees of between 0,5 and 2,5% for foreign assets. I'm staying fucking far away from this one. Assholes.
  2. Coronation global houseview portfolio - 49% equity allocation, looks like a fund of funds so fees on fees will apply here, but doesn't look that bad. Still shitty though.
  3. Investec balanced fund - 41% equity allocation, 23% bonds allocation. Fees are reasonable at 0.54% for local assets and 0.75% for international assets. I ended up choosing this one due to the lower fees, but it's so conservative, so shitty.
  4. Nedgroup core diversified fund - 50% equity allocation, 7% bonds. Fees are good at 0,58%. But again, lower equity exposure. Actually looking at this now, this option looks the best out of a shit bunch.

The rest are so shit they aren’t worth mentioning. Think old mutual, Tanquanta cash pooled fund (yes, seriously).

So, my question is - do I bite the bullet and just throw as much as I can at the Investec/Nedgroup funds, or maybe lower contributions to the least I can and then open a portfolio with a better RA provider like a Sygnia/10x etc in my personal capacity?

I'm leaning towards the latter. But this would probably mean some complications come tax return time? I don't suppose I can go to a massive corporate’s benefits department and tell them that my options are terrible, give me better ones?


Jorge wants to invest in a living and guaranteed annuity, but he wants to know how to make that decision.

What are the practical implications and values considerations should be taken into account when opting for both a guaranteed and living annuity?


We have an excellent article on justonelap.com/retire about the difference between these products.

Entries to win Manage your money like a fucking grownup by Sam Beckbessinger.

We asked you for the one fact that changed the way you thought about your finances.

Christoff’s point is about health.

When you realise that you need to save up for a potentially very long retirement (30+ years these days!), we do all this planning to ensure that we’re “taken care of” financially, but what about our physical health?

If we’re going to live for another 30+ years after retirement, we’d be enjoying those years a lot more if we’re fit and healthy, right up to nearly the end.

I’m 43 and take good care of myself, but I look around at my peers (school friends, cousins, colleagues, etc of the same age-group) and a LOT of them already suffer from heart problems, hypertension, cholesterol, various forms of cancer, diabetes, and what have you!  It’s very depressing to think of having the benefit of living in the 21st century, with enough technology to keep us alive for so many more years, when most of those years are going to suck!

Just as compounding works for/against your finances, it does the same with our health.  Poor daily habits will eventually catch up with you, so we need to keep our attention on this very important factor if we’re going to enjoy our hard-earned and cleverly-invested wealth.


Phemelo found The Fat Wallet Show in January and has made massive strides in his financial life.

I’m not all over the show.

I have a financial plan and taking on the challenge of keeping the lifestyle cost the same to avoid lifestyle creep.

My huge eye-opener was there are no shortcuts to this thing - baby steps.

I’ve closed my overdraft, I’m starting to slowly chow the credit card debt, and I started paying my student debt.

The next step is starting to slowly build the emergency fund.


Ronel had an a-ha moment about fees

If I can lower my fees on my Retirement Annuity, I can have sooo much more money.

It blew my mind that if I get 10% growth, and inflation is 6%, there is only 4% left for growth (compounding) and if I pay 3% of 4% in fees, I will only get back what I put in (adjusted for inflation).  That is not my idea of a comfortable retirement ....

So I moved my Retirement Annuities from Sanlam and Old Mutual to 10X.

I am now on a fee witch hunt to cut ALL fees to the bare minimum :)


John Morrison (our retired unicorn) submitted a vote for Khuliso, I think.

When people speak about money I have realized that I must first determine their anchor point and their biases. Then I can adapt this information to my anchor point and confront my biases. Someone investing for future retirement is at a different point to another living off investments in retirement.

I am truly inspired by Khuliso and their kota. Such an understanding of compound interest, time and lowering the cost of living. Really amazing!

You can't help it if your parents were poor and you start poor, but with compound interest in a single generation everything can change. Well done Khuliso!

With ABSA's WTF new minimum brokerage fees in ETF accounts (which is by the way more than a kota) we need to get behind EasyEquities and give them huge support. Is EE the only company that understands not to rip off the poor?


Links to be included in show notes:

Adam sent a link about the three biggest lies about passive investments.

They are:

  • People can’t make their own decisions about which products to buy
      • Very few investors have the time, knowledge or skill to invest their own money.
  • The fees aren’t as low as they claim
      • Passive products available to retail investors in South Africa are still relatively expensive and not that much lower than actively managed funds.
  • You don’t get market return
    • It is easy to compare the JSE/FTSE All Share Index returns with active manager returns and conclude that active managers are not worth their fees. The comparison is flawed. It does not consider risk and it also does not take into account that most of the growth from that index has come from one share – Naspers.

I’m not going to tell you what to think about this. If you understand how these products work, you can make up your own mind.

Apr 9, 2018

If you secretly hate us but haven’t been able to find a different source of financial information, I have some great news! I found a Freakonomics Radio episode that summed up exactly the principles we champion on this show.

In this episode, Simon and I take the financial literacy survey. It’s only three questions, but understanding their answers will enable you to make great financial decisions. If this sounds vaguely familiar, you might be thinking of this podcast we did last year.

Here are the questions:

  1. Suppose you have R100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?
    1. More than R102
    2. Exactly R102
    3. Less than R102
  2. Imagine that the interest rate on your savings account was 5% per year and inflation was 6% per year. After one year, how much would you be able to buy with the money in this account?
    1. More than today.
    2. Exactly the same as today.
    3. Less than today.
  3. Do you think the following statement is true or false: buying a single company stock usually provides a safer return than a collective investment scheme like an ETF or unit trust.

Win of the week: Rob has been coming to our events for ages. He has some ETF investments, but he’s been wanting to trade since the day I met him. This week, he sent this email:

Yes I have done my first trade and  bought my first bunch of shares (7 shares in total - some bits and bobs) (as oppose to ETFs)

I am not sure how I am supposed to feel!

Its bit like sex for the first time - did not know what to expect!


Frederick

My world has been turned upside down! I started listening to your podcast a week or so ago, and fok... my google is broken!! From googling sport all day I now spend endless nights and have sleepless nights on where to put my money and avoid tax as much as possible!

I use to think money is money and my RA is perfect and that life is sorted! I was wrong!

I have an RA (diversified wealth builder) with Sanlam. Any thoughts here please? My FEES (to my knowledge) is 0.65%.

It says “management fee at benchmark %”.

I put some money in monthly with a 10% annual increase. By retirement I should be paid out R11,5m.

Let’s say you live another lifetime after your working life, how much will you need? It’s possible to retire at 60 and live to 100.

https://justonelap.com/podcast-much-money-need/


Frank is trading Simon's Lazy system and wants to know if he can park his money somewhere while he waits for entries. He’s not earning interest on the money that he’s allocated for this trade.


Shamona wants to know if timeshare is worth it.

What are the pros and cons? What should I look out for when buying?


Entries to win Manage Your Money Like a Fucking Grownup. We want you to share the financial fact that blew your mind. We’ll be running this competition for one more week.

I asked author Sam Beckbessinger hers and she said on R10k per month, you’ll earn R19m in your  working life. Mine is that a low cost of living is basically the answer to all your problems.


Lesigisha wrote back after we sent him a shout-out last week.

Thank you so much for the great affirmation I received from the submission of my email, it really really went a long way in validating what I’m doing.

It’s hard to start on this journey, but after doing it for a while one does sometimes get despondent and wonder if this is worth it. Your affirmation has helped reinvigorate me and I go back to it every time someone says they’re waiting until they have a bigger shoe size before they can start making “real money decisions”.


Khuliso’s mind-blowing fact is that you don’t need huge amounts of money to invest. As a result of his mail I spent a lot of time thinking about kotas this morning.

The most mind-blowing fact was finding out that if I can afford to buy a kota (R23.00) or street wise 2 I can afford to invest in the JSE and create wealth.

Even though it's little money, over the long term it makes a difference. In my case the problem was lack of information rather than a lack of money to invest.

I am now very conscious about my spending habits. Whenever I buy takeaways in the back of my mind I keep on thinking of ETFs that I could be buying. When I look back, I see missed opportunities where I could have invested and build wealth.

Apr 1, 2018

It’s becoming increasingly clear that access to money isn’t always the best thing. In last week’s episode, Pieter explained how access to a free house and investments didn’t make him great at money. Fat Wallet bestie and newly appointed spy, Wilhelm, sent us news from the front line this week.

Wilhelm started sorting out his money and sharing his journey with us when he was still a student. It’s been such a pleasure witnessing his pre-income journey. If you can figure out your money situation before you actually have any, how much you earn becomes irrelevant. You’ll be a financial success.

Sadly, the opposite is also true. I certainly learned that the hard way getting into mountains of debt in my 20s. The difference between me and Wilhelm’s new colleagues is that I earned a junior journalist’s salary (basically just enough to make my engineering friends feel sorry for me). The amount of damage I could do to my financial life was artificially limited by the amount of money I earned. Thank goodness.

This week we talk about the dangers lurking behind the piles of money of high-income earners. If you’re a low-income earner, this is good news for you too. These are the traps to watch out for before the dineros start rolling in.

We are giving away a prize for the first time ever. Sam Beckbessinger is the author of Manage Your Money Like a Fucking Grownup. She donated a copy of her book to one lucky Fat Wallet listener. Find out how to win it in this week’s show. You can find out more about the book here

Kris



Wilhelm writes:

The government takes really good care of its young doctors. We get a good salary, but the lack of financial education means that a lot of that money simply gets wasted.

I know of three doctors living in my building who purchased expensive brand new cars (Mercedes Benz A class AMG, Audi RS3) before receiving their first salary (and without receiving any help from their parents). They bought cars on credit using only a contract from the department as collateral, where it has often happened that people do not get paid the first month due to the poor admin/payroll/HR abilities of the DoH. One is paying an interest of 13% over seven years.

In PE we get the opportunity to live in the doctors’ quarters. It’s an old apartment building in an old and rather dodgy part of town, but it is centrally located with adequate security, a brilliant sea view. We get to live here for R1100 per month. My flatmate and I pay R2200 for a three-bedroom apartment.

Many of the new doctors don’t want to live in the flats. They are old, the outside looks a little dilapidated and the first two floors had a history of cockroach problems (which has been sorted out). They justify their choice with, “I’m only here for two years, I’d rather live close to the beach.” They pay between R6,000 and R8,000 per month for two- or three-bedroom apartments. This often excludes water and prepaid electricity or 24-hour security. That is 300-400% more than we are paying.

The last thing I noticed is the absolute ignorance towards savings and investments. Of the 52 interns who started at Livingstone hospital, I’ve chatted to more than 40 of them and only two of us have TFSAs.

One of them even said his financial advisor told him that TFSAs are “only for poor people”. People blindly follow the advice from advisors from companies like Sanlam (which gets sold to us under the Abacon brand), Old Mutual and Liberty with very few people even knowing that 10X, Sygnia and EasyEquities exist.

People have private financial advisors that have them investing in Funds with TER > 3% with many hidden costs. When they asked them about TFSAs, they said “oh yes we can talk about those when you want to get serious about saving!”

From a financial point of view I’m on target to have my TFSA topped up for 2018 within four months. My emergency fund is also growing nicely, already up to three months of living expenses.

I’ve also done a bit of research and found that you can save quite a few rand every month on insurance if you increase your excess payments when you claim. You should only do this if your emergency fund is able to cover the amount of excess that you are taking on (maybe even two or three times over so that one single claim does not consume your entire emergency fund).


Mary-Ann wants to know if her emergency fund can do better.

I am currently keeping my emergency cash funds of about R100k in my OST account which currently earns me 5.638% - better than a Savings account.

I’ve been trying to figure out if it is worth putting that cash into something like the Newfunds GOVI ETF or Newfunds or Satrix ILBI ETFs.

It seems to me like I could earn closer to 8% there although would need to deduct the TER from that return.

I realise that the capital could fluctuate slightly, but is there significant capital risk to make it not worthwhile? It could get liquidated if required in a few days. I would probably continue to keep a portion as cash for immediate emergencies that could not wait a few days.

What are your thoughts on pros and cons of this strategy? Where might I do better? I hate having money laying around not earning its keep!


Milan has an answer for Georgie regarding her bond insurance. I think he’s going to save many of you a lot of money.

Georgie mentioned having trouble trying to reduce her credit insurance premium. There's an easy way around this issue.

The new credit life regulations state the credit provider must allow the bond holder to substitute the insurance cover as long as it provides the same level of benefits.

In other words Georgie can look to other credit life insurance providers for insurance on her bond and get a quotation based on the outstanding balance of the loan.


Antoine (who shared their thoughts on RA penalties being like debt) has another pearl of wisdom. They say, regarding when to spend and when to save

I heard a good explanation for this on “Money Management Skills”, from the Great Courses series:

Think of your past, current and future self.

If you borrow money, your current self is taking from your future self.

When it comes to a home or study loan, you can argue that future self will also benefit from the house or degree, so it is not that bad.

When you save money, you are sending some money to future self. In this instance, it doesn’t make sense that your 30-or 40 year-old current self can’t do anything fun while you’re still young and active and your future 90-year-old self lies in bed with millions in the bank.

I recently bought a new bike. I am able to buy a very fancy bike cash, but at a certain price the marginal gains are not worth the money you spend at my level of cycling.

Instead of spending thousands extra on a bike that’s a bit lighter, I decided to get a good enough bike and shoot some of that cash to my future 70-year-old self, so that he can use that cash to go on a nice overseas trip.


Last week Keith Mclachlan took issue with ETFs on Twitter. We gave him an opportunity to share his views on our website. Paul reckons he hit the nail on the head:

Because we all wish to improve our knowledge and understanding of investments we should welcome Keith’s view.

I just don’t see any misunderstanding;

He uses ETFs when/if he doesn’t know/understand a market and doesn’t have the time to study/follow it. That’s what we all do. That’s the reason ETFs exist.  

Glad to see my investment strategy mirrors his.


Denzel just discovered fees. He’s not happy. He has questions.

I’m sorry to get back onto RAs again but the fees these f*ckers have been charging me is absurd. Now I know why my FA drives the car he does!!

I have two RAs:

One is with 10X (very happy, even though returns to date are average, market not great)

The other is with Liberty through a FA. They invest in Allan Gray and Coronation.

The fees are just crazy.

See below image of the EAC I have just come across. I’m so angry I didn’t look at this before.

I’ve been with them for two years after moving from Discovery (another mess).

Would it be best if i cancel the Liberty/ AG/ Coronation F*ck up and put it all into 10X? I know it seems obvious, but I have to ask!

I have a Liberty Evolve investment with them too

Again, crazy fees (like 8% it seems!)

I’m thinking of cancelling this and placing this straight into Easy Equities, spread over a year or two of course.

I have an emergency fund of just under three months that i'm building up to be six months where i'd be comfortable

Would it be best to use the evolve investment to get this to six months worth and then put the rest into my Easy Equities TFSA/ Equities?

The only debt I have is my wife's car, Still owe about R200k on this - Pay off first?


Pieter wants to know how to find a cheap car.

In one of your earlier shows Simon mentioned how he figured out the year price (or something) to help him to buy an underpriced second hand car.

I can't remember which episode and I am having trouble figuring it out. Could you please be so kind as to give the formula again?

Subtract the current milage from 150,000 (or whatever you suspect the Death Mileage is for a car). Divide your expected annual milage into the remaining milage for number years until you suspect the car might have no real economic value. Divide that number of years into the price. That gives you a ballpark of cost per year. Now you can compare cars!


Flipi is living in Japan at the moment. They wrote us about RAs a while back, but this week sent pictures of the cherry trees in bloom. Since this show comes out on a public holiday, I’m including them in the show notes. Seeing the Japanese cherry blossoms are a bucket list item for me. Thanks for sending them, Flipi!

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