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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: September, 2019
Sep 29, 2019

Earlier this week we introduced ourselves to the education department at the financial sector conduct authority (FSCA). They recommended we spend some time on what you can do when you feel like you’ve been wronged financially. In this episode we discuss what rights you have on your financial journey. We also offer some ideas of where to go if you need to report shenanigans. 

We help you find the answer throughout your financial journey:

  • Debt 
    • If you didn’t take on the debt
    • If you feel like you have been treated unfairly
    • If you’ve been handed over
    • If you can’t take on any more debt
  • Savings
    • If your money got stolen
    • If you’re not getting what you were promised
  • Insurance
    • If your insurance company isn’t paying out for things you feel you should be covered for
  • Investments
    • Fraudulent investments
    • Bad market conditions
    • Losing money
    • Bad returns
    • Pyramid schemes
  • Advice
    • If you received the wrong advice

The bleeped version is here.


Win of the week: Hilois

I have just finished the latest episode highlighting rookie mistakes, and I have made a BIIIG one.

Earlier this year I moved from my company providing a provident fund with Momentum, to a company that does not include a retirement option. I decided to get an RA. Conveniently I received a call from a 3rd party consultant for Discovery (where I have my medical aid). I was in a rush (and obviously hadn't started listening to The Fat Wallet Show) and signed up for an RA with 3.5% fees, not including the consulting fees (EEEEEEEEEK!).

Luckily this only started in May, and before I completely fund someone's Merc I would like to make a move, but I now feel completely overwhelmed with where to look and not to be ripped off.

Do you have any recommendations for where to open an RA, and look for life / dread disease and disability cover?


Enesh 

I am a Surgeon and have been offered shares in Cure Day Clinic in Midstream. The shares are unlisted, but I can buy in at R250k for 2.5%.


Megan

Are there any tax benefits I can claim or get with a retrenchment package? How would you suggest I go about it? 

Is there any way I could get more of the money in my pocket, even if it is at a later stage? I'm not sure if I would get the money in a lump sum or installments. Not too sure how it works. 

My plan is to settle all debt, mostly my car. I can then fund my emergency fund and my flip-a-table fund.

I have a TFSA that I haven't put money into this financial year.

That's about what I have in place. I want to put money away for both my parents to say thank you to them for standing by me. My mom is in her 60s and my stepdad in his 70s. I get the feeling I am their retirement plan. So this needs to be part of whatever I'm planning with the money. 

In the meantime, I'm doing online Teaching from my apartment. That's $10 an hour. I'm busy finishing the TEFL course which will increase my rate by $5. So that's an income for me. I know I can claim back a bunch of things with working from home and sorting out my own tax. Although it's a priority, it's not high up on my list. The big thing is to sort out the retrenchment package benefits, get my parents sorted, cancel debt and have my six months flip a table fund.

If you have any suggestions, even if where to read up, that would be great. 

Sep 22, 2019

fw_230919The downside to doing my job is that I don’t get many opportunities to talk about my own financial insecurities. As with most things, there’s a distance between theory and implementation. I have my bad habits and anxieties around money as much as the next person.

Billy’s question around minimalism and frugality gave me an opportunity to talk about some of the things with which I struggle. An ever-present challenge is finding a balance between spending and saving. I’m always too far in either camp. You can accuse me of many things, but lacking the courage of my convictions is not one.

Far be it from me to tell you what to take from these episodes, but I do hope our conversation sheds some light on the importance of the process. It’s a lifelong journey, full of surprises and challenges and new joys. That’s what makes it fun.



Win of the week: Billy

I saw Simon in Woolies the other day (I was like a silent groupie lurking in the shadows). Next time, I'll buy you guys a bottle of bubbles to say thanks for the awesome work!

I'm a 30 year old engineer (another one for Kristia's collection!), and in great part thanks to you guys, I recently moved to a smaller place, got rid of a bunch of useless kak, and also scaled down on my car. This also extended to my finances, where I scrutinized all my financial products, cut unnecessary costs, negotiated better insurance premiums, and started to actively put money away in cheaper investment vehicles (such as Easy Equities).

I know that both of you have decided to actively keep your living costs low, and I recently read an article where Simon mentioned that he decided to scale down a lot and move to a smaller apartment with his wife. The idea of having very few possessions to tie me down, whilst having plenty of money put away appeals to me quite a lot. I've realised more and more that having lots of things means having lots more to worry about. Physical clutter, financial clutter and emotional clutter are different sides of the same die. As much as we like to think finances are separate from other aspects of our lives, everything feeds into our overall well-being, freedom and contentedness. 

So, thanks to you guys, I've developed a bit of an aversion to unnecessary "kakkies" - specifically financial and insurance products laden with complex "kakkies" that only serve to obfuscate real costs and returns. I like Kristia's idea of investing in one ETF (or at most very few), and not over-complicating my portfolio, as more products could mean more blind spots.

To get to my question: Being minimalist seems like a full-time struggle - an active raging against the beast of financial dependence. What are the principles you both follow to keep your living costs low? What did you cut down on that made the biggest difference? Also, how do you prevent the activity of keeping costs low from becoming a cumbersome penny pinching exercise that ends up defeating the purpose? 


Donal 

While all this was going on, I was also busy researching possible brokers that I could use to purchase Vanguard All World (taking Patrick McKay's advice!). 

I ended up with a company called Degiro. While their fees are low, they are nothing like the "easy" I'm used to with Easy Equities. Their registration process is a bit of a pain in the ass and their online trading platform is not as user friendly. 

I jumped through all the hoops and signed up for a Basic Account. I made my first lodgement and did my first Vanguard purchase. I did a small amount first to test the water. All went well and I was ready to plunge all my funds in. 

At this point I got a little nervous and did a bit of triple-checking online just to make certain that there were no negative comments out there about Degiro. 

Apparently, when you hold a Basic Account, they have the right to lend out your shares to other investors who use them for the purpose of short selling. I guess it's their way of making some cash on the side using my shares. If you don't want to allow this, you need to open a Custody Account, which means that they cannot lend out your shares. The catch is that they charge 3% on all dividend payouts for a Custody Account - compared to 0% for a Basic Account.

Is this type of lending out of shares by a broker commonplace? Do you know if EasyEquities do it? If they do, then I would feel a lot more reassured to carry on with my Basic Account. But if you guys think it's unusual for a broker to do this and it carries a high risk, then I’d rather close my Basic Account and sign up for a Custody Account and take the 3% hit on dividends.


Captain Pants

I plan to pay off my bond within the next six months, which will be 10 years early. A scenario I hope many Walleteers will experience in the future. 

While looking forward to redirecting my repayments towards ETFs, I'm wondering what are the best practices when paying your bond off early?

As far as I know there are two options:

  1. Almost pay it off and then adjust the bond repayments to a negligible amount.

A benefit of this would be that the bond stays open as easily accessible cheap debt. However there would be a fee of at least R69 per month for the next 10 years (~R8,280).

I would not be the owner of the property - the bank would still be. So I would be unable to mortgage it (correct?), but can dip into the flexi-bond if need be.

What monthly amount should I aim for? Would the bank allow me to pay off R1 per month + fees for the next 10 years?

  1. Pay off the bond in full, close it and become the owner.

I understand there may be a fine attached to this. If it is less than fees I would pay over the next 10 years it may be worth it?

What are the benefits of truly owning a property? 

Also, is it possible to overpay your bond? ie. have a positive balance in it? Would that earn interest?

Is there anything I haven't considered?

Will wait by the wireless for your response.


Karabo

I have rental properties. I've been saving my emergency fund in their bond accounts. The challenge is that this emergency fund reduces interest paid on the properties in effect increasing my tax liability on income earned over the year. Income earned on rental property is taxed as income.

Where else can I invest my emergency fund to reduce my tax liability on these rental properties. Should I still keep the emergency fund in the bond accounts or save it in a different account.


Stephnie

When each of my nieces (who are now 2 and 4) were born, I invested a once-off lump sum into SATRIX Top40 ETF for each of them. 

I opened an account on the SatrixNOW platform for this purpose, and currently both lump sums are invested in a single account. 

The account is in my name. My plan is that the investment will be my gift to each of my nieces on their 21st Birthdays, and they can then decide whether they want to cash in the investment, or keep the ETFs.

At the time that I opened the investment, I just stuck the money into SATRIX and didn't think too much beyond that. But now I am starting to think about how to ensure that this investment will be as tax efficient as possible and as fee efficient as possible.

If my understanding is correct, if my nieces decide to cash in the investment when they turn 21, I would be liable for the capital gains tax since the account is in my name. Is that correct? Is there any way that I can avoid or lessen the capital gains tax burden on my nieces' investment? 

If my nieces want to keep the ETFs when they turn 21, will I be able to transfer the ETFs to them? (i.e. is it possible to transfer ETFs to a stockbroking account in their name?). Are there are taxes or fees I should be aware of, aside from the usual charges incurred when transferring an investment from one platform to another?

Would there be any benefit in opening investment accounts in my nieces' names now, and transferring the ETFs to them now? 

If you have any other thoughts on how I could structure and handle my nieces' investments to be as optimal as possible - I'd love to hear it.


Maureen

I've inherited some Kruger coins and would like to get a fair value for them. Is there a website that will give me a fair price on any given day? Also, I've heard you say not to sell them to a Scoin shop. Where can I sell them for the best price?


Justin

I am in the process of paying a student loan and an unfortunate car loan. I have a little money left that I would like to make use of and not just lie in my account adding temptation. 

I am lucky enough that my parents still help me out and I have medical and a Providence fund with the company I work for, so I can't really see the desperate need for an emergency fund. 

Should I put the little money left into a TFSA or should I start an emergency fund anyway? If I should start one, what is the best way to go about it rather than hiding my money under my pillow were all it does is finance the dreams of buying bubbles?


Ben

My parents stay in France (not near Champagne unfortunately) and they are UK citizens. They have a unit in a complex in SA that they are going to sell. They would like to gift/loan us the money to help us buy a house with a granny flat where they can then stay when they visit.

My understanding is that the tax on gifts are 20% for everything above R100k, so we thought of doing something like a low-interest loan in order to circumnavigate that tax. Do you perhaps know who can advise us on this to ensure we do this right?

Sep 15, 2019

Our first ever paid episode of The Fat Wallet Show is courtesy of the Index and Structured Solutions team at Absa CIB. If you see one of them, show them some love. 

In honour of this newfound wealth and the cool products that made them possible, we decided to dedicate this episode to financial risks that aren’t market-related. In November we’ll follow this up with market-related risks and explain how those freaky new ETFs hope to bypass market risk.

We spend some time in this episode on the most sinister of all non-market risks - inflation. We’re all subject to it, yet we so easily forget to account for it. We also cover the risk of losing your income, fraud, counter-party risk, tax, divorce, death, income disparity in households and over-insurance. We offer some ideas to help you prepare for these risks.



E&H

My partner is in his early thirties and I am in my late twenties and we have some questions about offshore investing. 

- we like investing passively in the stock market, ie index funds

- we try to save aggressively and are inspired by the FIRE movement

- we assume that the rand will likely continue to lose value in our lifetime

- we plan to emigrate within the next 5-10 years, partly for lifestyle factors, and partly for the purposes of studying and gaining new skills. We might be keen to return to SA later on. 

- we are hesitant to invest if the investment pays out in rands, and essentially want to start contributing to an offshore fund that we can access in the foreign denominated currency once we've emigrated. 

  1. what is the cheapest way to get money offshore?
  2. what are the currencies/offshore accounts that you could recommend?
  3. what is the best way to invest our money to achieve our goals?

Jon-Luke

I’d love to know what you guys think of this offering from Investec:

Guaranteed 40% over 42 months - Effectively 11.43% P/A (not compounding?) - meaning if you invest R10,000 you will make R4,000 profit.

If you were to put the R10000 into African Bank at 9.20% (Compounding) you would make R4 428,16 profit.

So I guess the Investec offering has the possiblity of making quite a bit more - but how is this worked out exactly… And what are the chances of the S&P 500 going up by that much...


 

Sep 8, 2019

If you’re reading this, you are one of the few survivors of last week’s internet dumpster fire. This week, Simon and I spend time putting together a model to help you make sense of the news. We focus specifically on when a news report should move you to action and when you should just walk away. 

Here’s the formula we came up with:

  1. Figure out what the claim is.
  2. Find evidence that supports the claim.
  3. Find evidence that disproves the claim. 
  4. Ask yourself whether the claim has any bearing on your investment strategy. 
  5. Act accordingly. 

My thought in choosing this topic was that we’d spend a few minutes discussing some mental models to help us interpret the news and the rest of the episode answering questions. 50 minutes into the discussion, I felt like we had barely scratched the surface. For that reason we didn’t get to a single question this week.



Win of the week: Adam

I disagree with the consensus on pet insurance. In all honesty this goes against your rules that you cannot abscond on something like this. If you are a serious pet owner (and not just getting a goldfish because meh) then do it the right way. It's the same argument that instead of having health insurance "you save funds into an index tracker" etc. etc.

You are healthy when young, so the likelihood of a serious health issue is small, but you still have health insurance.

Just don't have a pet if you place a financial cost on it like that.

My dog has had two surgeries, but over and above that throw emergency visits to the vet here and there and insurance has us covered (well mostly - they don't cover dog biscuits).

Sep 1, 2019

FW_020919The biggest challenge in supplementing a parent’s retirement income is whether to save in their name or your own. This week, we help Kim and her sister think through their options to help their mother in retirement. 

Kim

I cannot describe to you how empowering The Fat Wallet Show has been in my life. You have made such a profound impact I can't thank you enough. I grew up in a home with ZERO financial education. Throughout my engineering degree there were no lectures or exposure to the topic of personal financial management. 

As a result of your show, I now have a financial strategy for myself, I feel I am in control and I sleep well at night! I can find and read an MDD and understand it, without feeling overwhelmed and confused. A few months ago I struggled to distinguish between financial products, all these names I didn't know - TFSA, RA, ETF etc. Now I can eat them for breakfast :) You have helped me bring a real sense of peace and security into my life and I will always appreciate it. I recommend your podcast to anyone whom I think would find it beneficial.  

Her mom is turning 60. She started her discretionary investments late, because she was in a marriage where she didn’t have an eye on her finances. When she finally did, she realized she owed SARS a lot of money, which she has paid back. 

She has a company pension fund and started saving some money in a tax-free account, but at a very high fee over over 3%. 

Kim is concerned that her mother will fall short in her investments based on the rule of 300, by about half.

My sister and I want to both invest on behalf of my mother, to improve her circumstances going forward. 

I know you have both said go into safe investments as you near retirement, but my mother needs good growth.

We can collectively invest a lump sum of R80,000 and then a further monthly sum of R10,000/ month.

Invest heavily into local equity. 

If the SA market dips / crashes in the next  5 - 10 years, we're screwed. However, if we assume that mom keeps this for a full 10 - 15 years and only withdraws it when she is 70 - 75 yrs old, perhaps it will provide a nice boost for her later. 

Invest heavily into foreign equity to avoid a local crash.

Is an offshore ETF that invests in international equity still based on the JSE? In the case of an SA Stock Market crash, will this ETF still hold its' selling value ? OR if we want foreign, is it better to invest in USD? We are worried about currency conversion & fees the EE USD option.

Invest 50% in equity and 50 % in bonds.

If the stock market crashes / SA politics goes south, is there be a risk of the government not being able to repay its' retail bonds?

Don't do so much investing on her behalf

If both my sister and I focus on building our portfolios, we can reach a point in five yrs where our dividends/ growth can be withdrawn and given to mom. This is of course not the best idea i.t.o. compound interest so more practically we will stop contributing to our investments and pay mom out of our salaries. 

My mom has no other assets. Even though it will be a huge drain, my sister and I are considering buying her flat to give her security and reduce her expenses.

In a TFSA, if you keep reinvesting your dividends, in addition to your annual contribution, won't you end up exceeding your maximum contribution? If you're in funds that don't pay dividends, your growth will also push above the threshold. I am assuming the limit is on your contribution and not the value of your account?



Christoff

When you invest offshore directly, you only pay CGT on the investment's gain, not on the currency devaluation.  If you on the other hand invest indirectly like with an offshore ETF, you WILL pay CGT on both the investment growth AND the currency devaluation.


Lethabo

I have an RA and TFSA with the same broker. I have noticed that some of my ETFs in my TFSA had dividend payments (yay!!) but the same ETFs in my RA did not. I am not sure if I am missing something but it just seems kinda strange. How do dividends work with RAs?


Brent

I have my TFSA ETFs amounts and allocations bedded down. I am now reviewing my provident fund. Is one able to cash out a provident fund and put it into an ETF? Will there be tax implications for the early cash out? 

Would it be better to decrease the % contribution and start my own ETF investments on the side. My employer does not contribute towards the provident fund. I don’t have an RA.


Nicky 

In an attempt to diversify my portfolio fully, I thought I would buy some bonds.

The fixed rate bond (5 years) is currently at 8.25 % according to treasury website, which is very similar to interest rate offered by Capitec for I think > 100K for 49 month term.

Any advantage of the one over the other?

How are bonds handled in your estate?

How are bonds treated in terms of tax?

If no gov retail bonds have no tax advantage, why would people choose them over fixed deposit?

I am worried I am missing something as surely the government would tempt people into lending them money by making bonds in some way more attractive than fixed deposit.


Keegan

Do you guys suggest using an IG account and buying foreign shares listed on other stock markets? or Should I open an online account as a citizen of an EU Country? 

What are the tax implications? 

I have some extra cash I’d like to invest. The ROI on my investments have been greatest in my business although it is somewhat high risk. Do I reinvest in the business and buy more equipment and try expand or do I look for ways to build up a stronger financial portfolio while I am still young?


Rahzia

I plucked up the courage to stop two debit orders for an RA that I held at Sygnia and a unit trust at Coronation (which charges -1.74% fees). I wanted to contribute to my tax-free account only. I do contribute to a pension fund with the organisation that I work for (8% employee and 15% employer).

My husband and I want to get out of our car and home loan debt within the next six years. We bought the house this year. 

The extra money after the debit orders are cancelled will go towards the debt repayments. We do have about 2-3 months worth of expenses as an emergency fund.

Is it better to put all money into getting rid of debt and then focus on saving/investing as much as possible thereafter?

If we were to do this, it would mean no ETF investing for six years. However, all extra money after the debt has been repaid will go into saving and investing as much as possible. What about the time aspect?

If we don’t put all the extra money we have into paying debt, we won’t meet such an aggressive target of six years to eliminate the debt.


Candice

My husband and I have historically had a terrible relationship with cash and anything finance-related.

We have recently had a baby.

My one requirement for having this baby was that we do it debt-free. We are in our last month of paying off debt and then we are free. We don’t own our cars (corporate cars) and we currently rent our home.

Do I use a broker to start off with or do I try to go at investing on my own and figure it as I go? We both currently have RAs (with the big green company you despise) and medical aid. We have a savings account with 24 hours access for emergencies and a 32-day call. 

I would like to get a tax free savings open for our baby now and then stop contributing to the above savings and rather invest the cash elsewhere, but have no idea where to start?

How do I know where to invest, what to invest and how to trade? Is it not better to use a broker who can advise better?


Anne

I managed to save R100,000 in a savings account. Finally got brave enough to transfer the money to my brokerage account. The plan was to buy Satrix Msci World and Satrix 40. Now I’m just staring at the money. What’s the best plan? Invest all the money on one day? R5000 per month or per week in each fund?

Second question is FNB or Capitec? I earn a salary, have a few debit orders, card transactions draw money once or twice a month and have an emergency fund.


Theresa

I opened an ETFSA investment account six years ago and have a monthly debit order of R500.   The account is in my seven-year-old grandson’s name, but I pay the debit order and his mother is listed as his parent/legal guardian and she has to sign any transaction forms.  

I know it would make more sense to contribute to a TFSA, but I don’t know what to do with the existing account. Should I sell off R33000 worth this tax year and the rest next year to close the account? My daughter has never declared the ETFSA account to SARS.

I’m told I can’t contribute directly into a tax-free account unless it’s in my name.  I wanted to have a little nest egg for him for later but now I’m thinking there must be a better way to invest for him. 

Should I open a TFSA in my name and leave it to him in my will (which would require a trust if he is still a minor when I die) or should his mother open an account for him and pay into it every month from money I give her.  

I already assist with his expensive therapy costs every month as she doesn’t earn much and I am aware there is a limit of R100,000 allowed before tax is payable on donations.

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