How your age affects your savings

Most people have a firm understanding that if you save while you’re young, this will set you on your way to achieving your long-term goals. However, life is what happens when you’re making other plans and, even with the best intentions and a basic financial awareness, planning for your future can easily fall to the bottom of a long to-do list.

During your twenties, you may have focused on having fun, then had various pressures in your thirties, such as a home-loan, young family or new business, that pulled the reigns on your financial planning. All of a sudden, you can find yourself in your forties and realise you haven’t stashed enough under the metaphorical mattress to maintain your lifestyle into your golden years.

Many a 40-something unfortunately doesn’t have a well-defined savings strategy, and very few have taken the necessary steps to sufficiently prepare for the future. However, the thing about saving is that the longer you wait to save, the harder it is to grow a sizeable sum, as the benefits of compound interest are best reaped from early on.

Lots of people take the attitude of simply saving what they can, when they can; then counting their chips later on. However, the easiest way to save for future goals is by working backwards calculate what you will need to support your lifestyle choices (be that a comfortable retirement, your children’s education, an around-the-world trip), then work out how much you need to save in order to achieve your goal(s).

Savings guidelines

As a rule of thumb, it is often recommended to have saved at least eight times your final salary before you retire. If you save that amount, you should be able to consistently enjoy approximately 85% of your final salary during retirement.

By setting yourself early milestones, you should be able to stay on track to achieving this goal. For example, it’s a good idea to aim to have saved one whole year’s salary by the time you’re 35 years old, three times your annual salary by the age of 45, and five times your salary by 55. So, if you’re 35 years old and making ZAR240,000 a year, then you should have saved ZAR240,000 by this age too.

Savings tips

  1. Save as much money as you can from as young an age as possible. If you’re in your forties and have been saving at least 10% of your salary for the past two decades, then you should be in a good position and may just need to make a few adjustments to reach your financial targets. However, if you’ve neglected your future entirely up until this point, then you’ll need to run the extra mile to make it to the finish line.
  2. Trust the professionals and relax in the knowledge that your investments are in good hands with experts who have experience in financial management, along with the time and resources to manage your portfolio. By having an independent savings plan, in addition to anything that your employer offers, you will also diversify and spread your risk.
  3. Maximise your savings by making the most of any tax advantages for which you are entitled. Don’t hesitate to arrange a meeting to discuss your options.
  4. Asset allocation and diversification are always important, but they may need to be adapted as you get older. At 40 you still have a while before you retire, so you arguably don’t need to play it too safe just yet. In an article published on Business Insider, Ellen Rinaldi, former Executive Director of Investment Planning and Research at Vanguard, recommends simply “scaling back stocks to 80% of your portfolio and putting the balance in conservative holdings like bonds.”
  5. Be accountable to your goals. It may mean that you have to make some difficult decisions with regards to other expenses, but you do need to prioritise your future while you still have the time, choices and means. It is exponentially easier to save bit by bit to prepare for goals, rather than divert huge sums of cash at the last minute. This is especially the case if you have two big financial considerations, such as retirement and your children’s higher education. However, retirement should arguably be the top priority, as you don’t want to be a burden on your kids, and there are sadly no scholarships for reaching 65.

Reading ratios

Financial risk ratios, also known as solvency ratios, are used to determine the long-term financial health of a business by analysing whether a company carries too much debt. And these ratios can come in very handy when looking to invest or review financial situations.

The solvency ratio is a key metric that can be used to measure whether a company has sufficient cash flow to meet its long-term commitments. The ratio offers a comprehensive measure of solvency, as it factors in depreciation to measure cash flow capacity in relation to all liabilities, such as accounts payable, capital lease and pension plan obligations.

In short, a solvent company’s assets are greater than its liabilities, so it owns more than it owes. Whereas, a company with a low solvency ratio will have less chance of being able to meet its obligations. A liquidity ratio, on the other hand, measures a company’s ability to meet its short-term liabilities, such as paying all creditors and any debt that is due in the following 12 months.

Another important calculation is debt ratio, also known as gearing, which is a solvency ratio that measures a company’s total liabilities, as a percentage of its total assets. Basically, the debt ratio shows how many assets a company would need to sell in order to be able to pay off all of its liabilities. This ratio measures the financial leverage of a company, so a company that has more liabilities than assets would be considered to be highly leveraged and, thus, more risky for lenders.

The debt ratio determines the proportion of a company’s assets that are financed through debt. For example, a debt ratio of more than 0.5 means that more than half of the company’s assets are financed through debt. Whereas, a debt ratio of less than 0.5 means that most of the company’s assets are financed through capital. By calculating this ratio, investors and creditors can analyse an overall debt burden, as well as a company’s ability to pay off debt.

Reading ratios

There are several ratios that can be used to measure strength and sustainability. When reading ratios, it is important to bear in mind the following:

  1. Look at the big financial picture
    Use several sets of ratios to get a complete understanding of a company’s financial health. For example, when analysing the potential of a company to pay back its external debt, its liquidity should be measured, as well as its solvency. Making any assessment based on just one set of ratios can provide a misleading view of a company’s finances. 
  2. Ratios vary from industry to industry, and scheme to scheme
    Ensure that you make fair comparisons, and don’t compare apples to oranges. It’s only meaningful to compare financial ratios if companies are part of the same industry. 

    A solvency framework should also promote growth in an industry while ensuring healthy competition amongst different schemes. For example, while it is important for financial stability to be maintained by medical schemes in South Africa, it is also important to bear in mind that there isn’t necessarily a one-size-fits-all solution, so individual circumstances need to be considered. 

  3. Evaluate trends
    By analysing ratio trends over a period of time, you will be able to see if a company’s situation is getting better or worse. By doing this, you will gain a deeper understanding of whether any negative ratios are a result of a one-off event or indicate a serious issue with the company’s fundamentals.

South Africa

Likewise, when analysing the potential of a country to service and pay back its external debt, its solvency and its liquidity are two big issues to be considered. However, as ratios can be affected by varying factors, and a country arguably can’t be treated in exactly the same way as a big company, there is some controversy as to how both of these should be measured.

That said, the bottom line is that South Africa has a long way to go to improve its status, and the country’s economic outlook remains shaky. Business and consumer sentiment have plummeted, and over ZAR50-billion in revenue deficit has left a gaping hole that urgently needs to be filled. After South Africa was downgraded to junk status, the Finance Ministry has stated that “the 2018 budget will outline decisive and specific policy measures to strengthen the fiscal framework.” However, according to an article published on Biz News, “no matter who is president, Minister of Finance or SARS Commissioner, the national numbers will be the same at the national budget speech on 21 February 2018. A complete disaster! South Africa’s debt-to-GDP ratio will remain above 4%.”

Political instability has certainly taken its toll on the economy, and citizens wait with baited breath to see if the tide will turn under Cyril Ramaphosa. Chief Executive of Nedbank, Mike Brown, was quoted in an article published on CNBC to have said that “the February budget statement is South Africa’s last chance to demonstrate the structural reforms and fiscal consolidation that are required to improve economic growth prospects and prevent Moody’s from also downgrading the local currency debt to below investment grade.”

With the 2018 budget speech around the corner, South Africans are preparing themselves for various tax increases, and emotions are generally running high with regards to some of the potential changes. Tax implementations that have been recently explored include an increase in personal income tax rate and the fuel levy, but the government may well cast the tax net even wider in order to raise additional revenue to mitigate the mind-boggling shortfalls of 2017.

For example, the treasury has already signalled that a sugar tax, referred to as a Health Promotion Levy, will be established from April. The proposed tax will increase the cost of soft drinks by up to 11%, which will not only generate revenue, but aims to bring medium- to long-term health benefits to South Africa. However, it could also come with investment cuts and further retrenchments, and it has been argued that its implementation won’t raise enough money to make a substantial difference.

If you are ever unsure about any investment analyses or tax changes, or how anything affects your personal financial situation, then don’t hesitate to arrange a meeting.

Budgeting tips and tricks for the upcoming tax year

South Africans can expect more changes on the horizon in this upcoming tax year, as the Ministry of Finance attempts to mitigate the financial failings of 2017. After being downgraded to junk status last year, the country is well and truly hanging its head in financial shame, and it is clear that there is a lot of work to do to improve (or simply stabilise) the situation.

According to an article published on BusinessTech, the “government is looking to implement a total of ZAR30-billion in tax hikes and more than R50-billion of spending cuts in 2018” to help cover its revenue shortfall. Trusts, companies, domestic residents and expatriates are all potential targets in the February 2018 budget review (21 Feb), and taxpayers wait with baited breath for their fate to be announced.

After the Medium Term Budget Policy Statement (MTBPS), which was delivered in October 2017, a number of analysts noted their concern that South Africa has already reached its limit in terms of how much it can extract from taxpayers. In an article published on Biz News, the author argues that “the South African tax base cannot support the current debt trajectory… There are simply not enough wealthy South Africans to make even a small dent in the mountain of debt. Even the new super tax bracket of 45% on taxable income above ZAR1.5-million, imposed from 1st March 2017, is only scheduled to collect an additional ZAR4-billion from just 103,000 taxpayers.”

Although it may be the case that everyone is already overstretched, it’s important to still be prepared for substantial further tax increases, and to plan accordingly in order to protect your financial situation. Don’t be complacent, as it is likely that these increases will not just affect the wealthy, but almost all South African taxpayers may well see an increase in personal tax.

Given that additional strain may soon be placed on the country’s tax base, while debt levels rise and controversial taxes, such as the carbon tax, are explored, here are 7 tips and tricks that will help you to budget for the upcoming tax year.

  1. Project your budget for the next fiscal year through “zero-based budgeting”. This is a technique by which all expenses must be justified. Start from a zero base, and analyse all your needs and costs based on whether they serve you, rather than simply continuing to budget for something because you have always done so out of habit. 
  2. Crunch the numbers by looking at all incoming and outgoing costs carefully, no matter how big or small. By keeping track of your spending, it will hopefully become apparent whether you can cut back on certain costs. For example, this could be as easy as finding a cheaper mobile phone plan or eating out less at restaurants. 
  3. Regularly assess your progress by making a ‘money date’ with yourself to review your financial portfolio, and ensure you are sticking to your budget. If you are having difficulties or wish to make any changes, don’t hesitate to arrange a meeting to work out how to get on track. And if you achieve any notable goals, then think of small rewards that will serve as motivation to keep going. 
  4. Budget for growth by prioritising the things that will increase your financial wealth and well-being in the long-term, as well as keep your bills paid in the short-term. Don’t neglect your savings, as investing in your future now (even if it’s only a small amount each month) can significantly help to achieve your goals. 
  5. Arrange a meeting with your accountant to ensure you understand your tax liabilities for the upcoming tax year. Once you have determined these, you can budget accordingly and review whether you are entitled to any personal deductions. 
  6. Automate your savings by contributing to a financial plan by direct debit. It’s also a good idea to take advantage of the technology at your fingertips by downloading any apps that could help you to budget or find deals easily. 
  7. Shop smartly by signing up to loyalty schemes at your favourite stores, then rack up the rewards or plan your purchases around special offers. Buying in bulk and saving coupons can also be useful.

Given the country’s current deficit, along with the recent announcement that the government intends to implement fee-free higher education, which is estimated to cost an additional ZAR40-billion, it is safe to assume that tax increases this year are going to be substantial. Start making preparations now to allow for these changes, and budget for your future.

Show the love this Valentine’s Day

In recent years, Valentine’s Day has gained the reputation of being a Hallmark holiday that promotes Lindt rather than love. So, before you rush off to the shops to buy a big bunch of flowers or box of chocolates, you may wish to take a moment to reflect on the meaning behind the day and how you can best show your affection. Romance without the rands…

The origins of Valentine’s Day remain somewhat mysterious. Its initial roots are argued to go way back to a fertility festival held on 15 February that was dedicated to a Roman god the traditions of which were believed to guarantee fertility and ease the pain of childbirth. However, the rise of Christianity resulted in pagan rites being outlawed, and the festival was replaced with another annual highlight that revolved around the story of Saint Valentine.

Valentine was a Roman priest who secretly married young people during a time when it was forbidden, as unmarried soldiers were thought to be better fighters because they didn’t have the fear of leaving a wife behind. He was eventually imprisoned and sentenced to a three-part execution consisting of a beating, stoning and decapitation for his crime of defying the then-Emperor’s edict. However, by remaining resolute in his belief about the sanctity of marriage (in spite of the risks and his eventual punishment), he is regarded by many as a martyr to his Christian cause; and 14th February the date of his execution is now celebrated as a day of love. He also allegedly healed the judge’s blind daughter, and he ended a letter he wrote to her with the words “from your Valentine”, which has become a focal part of the modern love missive.

Nowadays, the amorous event is celebrated in a variety of ways across the world. In South Africa, for example, some women pin the name of their sweetheart to their sleeve, and this is how men can discover that they have a secret admirer.

The cost of love

For the average South African, spoiling that special someone on Valentine’s Day can become quite a costly affair, but you can still be romantic without splashing too much cash unnecessarily. The key is to plan in advance and budget accordingly. Also consider more experiential or bespoke gifting options that are personal to your relationship.

Savings tips

Write a list of things that your loved one loves, along with how much each thing costs  be this a night out at the cinema, or a gift of jewellery. Once you have an idea of prices, set a feasible budget and make a plan of action that sticks to this.

You can sweep someone off their feet while keeping yours on the ground. And blowing all your savings on one day isn’t actually very romantic if it means you wind up begging for loans or eating plain pap for the rest of the year. It’s better to be realistic about what you can afford, and prioritise meaningful presents or experiences over sheer decadence. Alternatively, you may wish to consider skipping some luxuries now so that you can save enough to make your other half happy on the big day itself.

You can also spread the love without breaking the bank by making a gift rather than buying one. For example, rather than getting into debt by taking your date for a seven-course tasting menu at a fine dining restaurant, try creating a romantic atmosphere in your home and cooking a delicious dinner that you both can enjoy by candlelight.

Furthermore, if you want to do something particularly special, have a look for any deals that can make an enjoyable day more cost effective. You can still have fun at a low price, and a bit of effort and consideration can be worth far more to someone than simply picking up a large bill.

How to avoid the retirement crisis

South Africa is currently in the midst of what is widely referred to as a ‘retirement crisis’, which could intensify if the issue isn’t addressed properly soon. After a period of excellent investment returns that have, up until recently, somewhat masked the fact that retirees in living annuities haven’t saved enough, local retirement fund members have now entered a lower-return environment, which will only exacerbate the problem.

Only a small percentage of the population is believed to be in a position to maintain their standard of living in retirement. And, according to a survey conducted in late 2016, approximately 30% of working South Africans have no formal retirement provision whatsoever.

Early withdrawals of retirement savings are considered to be one of the main reasons for this dire situation. And a variety of economic factors may be responsible for this concerning attitude to withdrawals.

Notably, disposable income has come under pressure in recent years, which has resulted in many people falling into debt or struggling to meet their daily needs. Many citizens earn less than R5,000 a month and are in survival mode, and a lack of financial literacy is also arguably an issue, as many people don’t understand the benefits of compound interest, or don’t realise the impact that early withdrawals could have on their future.

Roughly a quarter of the population also doesn’t believe that they will even reach retirement age, and recent changes to the Taxation Laws Amendment Act have caused some people to fear that the government could take their retirement money.

The process of retirement reform is slowly taking its course in South Africa, and compulsory annuitisation in the provident fund space is potentially on the cards. However, as South Africa doesn’t have the option of being bailed out by the fiscus, it is more important than ever that all citizens prepare for their retirement and plan how best to achieve their financial goals.

Here are 5 tips that could help you to avoid being part of this ‘retirement crisis’.

  1. If you change jobs, don’t just cash in your retirement savings. And even if you quit the 9-to-5 grind, consider not completely exiting the workforce. Part-time work that you enjoy may still bring in a significant sum per month, and will reduce how much you need to dip into your savings.
  2. Don’t underestimate how long you may live. Due to the prevalence of HIV/AIDS, South Africa may tragically have the lowest life expectancy in the world, but the US Census Bureau has noted a change in prospects for the country. By 2050, the population of people over the age of 65 is expected to jump to 5.6 million, up from the 3.1 million that it was in 2015.
  3. Factor in healthcare costs. Medical costs will undoubtedly rise each year, so be sure that you have appropriate medical aid, as well as enough savings to pay for any expenses that aren’t covered.
  4. Don’t ignore major expenses that could affect your monthly budget. These could include foreseeable events, such as helping your children to pay for university fees, but could also include less predictable occurrences, such as needing to fix a car or fly abroad for a wedding.
  5. Simplify your finances. If you have multiple savings accounts, it may be worth consolidating them so that you have a better idea of your overall asset allocation and can avoid any overlaps. You may also benefit from a revised fee structure or enhanced compound interest.

The retirement crisis doesn’t have to directly affect you, so long as you take some simple steps now to prepare in advance for your future. Don’t hesitate to arrange a meeting to discuss the best ways to ensure you will have enough savings to sustain you throughout what will hopefully be a long and happy retirement.

Original source:

aarp – Achieve retirement planning financial goals

moneyweb – retirement crisis could get worse

Hooray for RAs

Retirement Annuities (RAs) have been around for a long time, and are basically private pension plans that help you to save for retirement. As we near the end of yet another tax year, we move into a period that is often referred to as RA season, which is a good time to weigh up the advantages of this investment product.

Over the years, RAs have evolved into much more flexible and affordable investment vehicles than they once were, and investors can now benefit from “new-generation” RAs on linked investments platforms (LISPs). These offer a vast selection of underlying unit trusts, and they allow contributions to be made at the investor’s discretion, without penalties for missed contributions.

The most significant benefit of having a retirement annuity is the tax deductibility of contributions. According to an article published on Fin24, as of 1st March 2016, “all contributions to pension, provident and RA funds are consolidated and are deductible up to 27.5% of the greater of remuneration or taxable income, capped to R350,000 annually.” An investor can expect to receive an annual tax refund in line with their income, and this RA rebate can considerably boost your retirement benefit.

Capital gains tax normally needs to be paid for any discretionary investment, but this isn’t the case with an RA. Interest and dividends are also not taxed in an RA, which means that the entire growth of your investment is tax-free, which makes a significant difference over the long-term.

Do be aware that when you do finally retire after the age of 55 and are finally allowed to take up to one third of your RA in cash, you will have to pay tax on the proceeds taken. However, a portion of the lump-sum benefit is tax-free and the rest is taxed on a sliding scale. And, as you have deferred paying tax on the proceeds, a larger investment amount has had the chance to compound tax-free over time.

Come retirement, the other two thirds of the proceeds from your RA will be used to purchase an annuity, which will then provide you with an income to sustain you in your golden years. You will need to pay tax on your monthly “income”, but many individuals’ personal tax rates decrease after they retire.

An RA presents another advantage when it comes to estate planning, as it falls outside of your estate, so the proceeds from your RA will be paid directly to your nominated beneficiaries when you pass away, without the estate duty or executor’s fees. For the most part, your money is also protected from the claims of creditors, which is another yay for RAs.

In spite of this list of positives, many investors feel uneasy when it comes to retirement annuities and are reluctant to consider them as an investment option. However, it’s important to understand that RAs have evolved significantly, become much more affordable, and new regulations have been implemented to minimise risk and force investors to diversify. This may not be considered as a positive thing by everyone, as Regulation 28 of the Pension Funds Act does restrict investors to a maximum of 75% allocation in shares, which many people debate as shares have managed to outperform all other asset classes over the long-term. However, this risk management method was implemented to benefit broad spectrum investors in different environments, and it offers more investment protection when markets become volatile.

If your objective is to specifically save for retirement, a retirement annuity could be the best vehicle for you. So don’t hesitate to arrange a meeting this RA season to discuss your options and goals.

Original source:

fin24 – take advantage of RA season

fin24 – does the taxman help you save for retirement

fin24 – regulation 28 and the growth of your RA

fin24 – new retirement fund rules to better protect consumers

taxtim – How SARS new changes affect you

Prepare for additional tax increases next year

Towards the end of 2017, President Zuma instructed South Africa’s minister of finance, Malusi Gigaba, to resolve economic challenges after Standard & Poor’s lowered both the country’s long-term foreign and local currency debt ratings by one notch on Friday, 24th November.

A statement was released about the measures that would need to be taken to trim expenses and increase revenue in order to address the R40-billion deficit identified by the ratings agency and October’s Medium-Term Budget Policy Statement (MTBPS). And an article published by BusinessTech explains that “this would equate to cuts in expenditure amounting to about R25 billion, as well as revenue-enhancing measures amounting to about R15 billion, including, where appropriate, tax measures.”

According to a report by BusinessDay, “Treasury has since confirmed that these amounts were over and above the R15-billion in tax measures and R31-billion in spending cuts for the 2018-19 fiscal year already included in former Finance Minister Pravin Gordhan’s budget in February.” Earlier in the year, Gordhan announced hard-hitting increases in personal income tax for 2017-18, which included a new top personal income tax rate of 45% for the estimated 100,000 individuals who have taxable incomes above R1.5 million.

The government is now looking to implement a total of R30-billion in tax hikes and more than R50-billion of spending cuts in 2018 to cover the economic shortfall with which they are faced. However, following the recent MTBPS, a number of analysts have noted a growing concern that South Africa has already reached its limit in terms of the amount of revenue that it can extract from taxpayers through further tax increases. Kyle Mandy, tax policy leader at PwC, highlights that “the last few years have seen significant tax increases directed at fiscal consolidation in a low growth environment and amid growing concerns of levels of corruption and government inefficiency.”

In addition to tax hikes, massive budget cuts are allegedly on the horizon, which are reported to include cutting social grant payments and reducing the rollout of RDP houses. There are also potential plans to generate more revenue by increasing VAT.

As the government struggles to rectify the increasing public-debt ratio, and appeal to investors and ratings agencies, it’s important to ensure that you stay well-informed about the situation and are financially prepared to make any additional contributions required. Don’t hesitate to arrange a meeting if you would like to discuss any increases that may affect you.

Original source:

business tech – South Africa looking at R30 billion tax hike for 2018

business tech – Zuma considers tax increases and spending cuts following ratings downgrades

business live – budget in a nutshell tax hikes hit south africans pockets hard

Is a tax-free savings account the best option for you?

Many South Africans have started taking advantage of Tax Free Savings Accounts (TFSAs), which were established by the government as an easy and safe way for citizens to increase their savings. When investing in a TFSA, you won’t be taxed on any growth on your investment — you won’t pay tax on dividends, interest or capital gains tax. And when you consider that the interest offered in a traditional savings account is usually less than the inflation rate, it’s no wonder that TFSAs are widely considered to be beneficial savings vehicles.

[DISCLAIMER: This article is not an endorsement of TFSAs over other long term vehicles as every portfolio is unique and may require different investment products. Let’s chat first before making any final decisions.]

Since March 2015, South Africans have been entitled to invest up to R30,000 a year (or R2,500 a month) in a tax-free investment, and contributions are capped at a lifetime maximum of R500,000. While they do obviously have tax benefits, the main goal of a TFSA is to encourage people to save, and R2,500 a month is thought to represent a realistic target.

Many experts believe that any South African with taxable income should take advantage of this investment option (no matter how little or how much money they have to invest), as this ‘mini tax haven’ will dilute their overall tax rate over their lifetime. If investors invest the maximum amount allowed, they will reach the limit in just under 17 years, which means that they will have R500,000 — plus capital growth, dividends and interest — as a tax-free investment. And once they have reached the R500,000 cap, it’s simply a question of watching money grow with the power of compound interest.

However, there are times when a TFSA may not be an appropriate investment tool. Some experts believe that the term tax-free savings “account” has led many people to opt for cash deposits instead of other investments, which could offer better growth opportunities and even lower costs. A TFSA may help you to avoid tax on interest, but investors could see greater capital growth with other savings products.

Although you will save on tax on the growth of your investment, plus you won’t be charged performance fees, a TFSA still has fees and transaction costs that should be considered. It’s also not advisable to go above the annual R30,000 limit, which applies to the combined annual payments of all your approved tax-free savings accounts. If you do, there will be tax penalties — any contributions made in excess of these limits will be taxed at a rate of 40% of the total amount exceeding the limits. Furthermore, you need to be careful not to donate more than R100,000 a year to children or grandchildren, or you will be liable for donations tax.

Paul Leonard, regional head of Citadel, highlights in an article published on Fin24 that tax-free savings accounts “should not be viewed as a one-size-fits-all solution.” TFSAs are not intended for short-term savings. As with any investment vehicle, they are designed for a specific purpose and are best suited to the lower taxpayer who only needs access to an investment in the medium- or long-term. According to Leonard, “you would only benefit meaningfully from the tax-free treatment of money in the TFSA once the value of the investment is sufficient to exceed the annual interest exemption and capital gains exclusion.”

When it comes to saving for retirement, a TFSA could suit you if your income is below the income tax threshold; or if you are uncertain about your job security and may need to access the capital in the case of unemployment; or if you are considering emigrating and may wish to expatriate your capital. It is also appropriate for topping up retirement savings that are over the maximum annual amount on which South Africans can receive tax breaks. However, it is generally recommended that investors first make use of all the tax breaks available for retirement funding investments, then use a TFSA as a complementary tool.

Tax-free investments do have some restrictions that don’t apply to retirement annuities (RAs). For example, if you make a withdrawal, you can’t simply replace it another year in addition to the annual limit. However, compared to RAs, tax-free investments offer flexibility in that you have access to the funds without early withdrawal penalties, so you don’t have to wait until retirement before they are available. And a big bonus of a TFSA is that, not only are your contributions not tax deductible, but you also won’t have to pay tax on any of the proceeds when you access the funds (unlike with an RA).

In conclusion, a TFSA allows you to save without incurring any tax on the growth of your investment and, in order to grow your portfolio, it can be worth making the most of all tax-free benefits available. A TFSA can be a great way to supplement retirement savings or achieve other long-term savings objectives, and it can also provide flexibility if you need funds in an emergency.
However, everyone has their own unique set of circumstances that need to be considered when deciding how to save for retirement. It is, therefore, always worth seeking professional advice and carefully scrutinising any investment to see if it’s your best option. So don’t hesitate to arrange a meeting if you wish to discuss whether a TFSA could help you to achieve your personal financial goals.

Original source:

fin24 – when not to use a tax free savings account

fin24 – how to choose a tax free savings product

fin24 – does the taxman help you save for retirement

Attainable financial resolutions for 2018

Can you remember what resolutions you made last January? Or for how long you kept them?

The trouble with resolutions is that they’re often made half-heartedly, in an annual acknowledgment of our inadequacies and a cursory attempt at self-improvement. Once the hazy days of the holiday season are over and we are faced with the realities of day-to-day life, even the most well-intentioned of us tend to succumb to temptations or old habits far quicker than we would hope.

Our optimistic resolutions soon turn into unrealistic pressures, and our vows to hit the gym every day, or to remove sugar from our diet, don’t seem very pleasant or plausible for long. Having recently read this refreshing article on practical ways ways to make and keep resolutions – perhaps we can turn the tide on ruined resolutions!

The reason why most people don’t manage to stick resolutely to their resolutions isn’t so much a question of intention or desire. People don’t want to set themselves up to fail, but that is what we ultimately often end up doing when we don’t set realistic goals. Although we may be taught that we should reach for the moon, overstretching tends to result in us falling flat on our face, rather than landing among the stars.

The start of a new year is a great opportunity to sweep away the cobwebs and draw back the curtains to start afresh. So, if you would actually like to keep a new year’s resolution, then make it an attainable one. Acknowledge your shortcomings and set yourself up for success in 2018 by giving yourself a goal that you can easily achieve.

If you want to improve your financial well-being, start by working some small steps into your routine. These can include buying less coffee; carrying a reusable water bottle, walking to places instead of driving or taking Ubers; and increasing your monthly savings or debt repayments by a feasible sum that you’ll barely notice (particularly if you automate the amount).

Write a list of things that you would like to accomplish and a simple way in which each can be done. For example, if you wish to contribute R3,600 more per year to your retirement fund, then you may be able to achieve this by foregoing one monthly meal in a restaurant or halving your weekly cappuccino consumption.

Then sleep on it and choose one or two resolutions, rather than trying to attempt everything on the list. Furthermore, give yourself a manageable timeframe — such as three months, instead of 365 days — and commit to following through for that specific amount of time. Once you succeed, you can then decide to commit to another short period. Additionally, set yourself quantifiable targets instead of vague goals that involve actions like ‘cutting down’ or ‘buying less’. For example, if you currently buy five coffees a week, decide to buy only two a week and make the rest at home.

Attaining a financial goal in 2018 doesn’t have to be stressful if you set yourself fun-size resolutions and break the year up into bite-size pieces. The important thing is to work on improving an aspect of your life for the sake of your future. And what better month to start than January?

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Tread Lightly this Christmas

It’s easy for Christmas to turn into a frenzied flurry of wasteful consumerism, and to find ourselves knee-deep in ripped-up wrapping paper that we discard in a hurry before Christmas lunch. But before you fill black bin bags with gift tags and empty jars of cranberry sauce, pause for a second to think about how you could help the environment this festive period.

According to a report compiled by the World Bank in 2016, South Africa produced 54,425 tonnes of rubbish every day, which was the 15th highest rate in the world. And each household produced two kilogrammes every day, placing South Africa at number 38 in the global waste rankings on a per capita basis. As you can imagine, this amount increases significantly over the silly season, when most citizens tend to purchase (and throw away) even more than usual.

The amount of municipal solid waste is growing fast and, alarmingly, the World Bank’s data showed that only 1% of all waste in the world gets recycled — with the bulk (59%) ending up in landfills or being dumped (33%). With these statistics in mind, try to enjoy a Christmas of consciousness, rather than consumerism. It’s easy to minimise waste and cut costs this holiday if you just follow these five simple steps for starters.

1. Recycle
Cut down on waste by buying less and recycling more. Can you imagine how much of Kruger would be covered if everyone in South Africa laid out all the used wrapping paper on the ground? Luckily, it’s very easy to recycle, as is cardboard from packets of stuffing and empty toy boxes.

Take empty glass jars of mincemeat, pickles and cranberry sauce to the bottle bank, and recycle empty tins of biscuits and sweets. Even the foil from mince pies is recyclable, and don’t forget those empty plastic bottles of cleaning products once you’ve wiped up the gravy!

If you have bought a real Christmas tree, be sure to recycle it, so that it can be shredded and used as compost, which will help next year’s trees to grow. It can even be used as chipping to cover pathways.

2. Reuse
Christmas cards don’t have to be thrown away after the holidays. Instead, you can cut them up and make new cards or gift tags out of them. This will make you extra prepared for next Christmas and save a few Rand, as well as the environment!

And instead of wrapping presents, consider giving them in pretty gift bags. That way you can reuse them again next year and save on paper!

3. Donate
Some relatives are renowned for giving presents that you will never use in a million years. If this is the case, or if you’re given something that doesn’t fit, just smile sweetly and pass it on to someone in need who will appreciate it. There are lots of charities in South Africa that will distribute unwanted goods to those less fortunate, and one man’s junk is another man’s treasure.

4. Compost
It’s estimated that, as a global community, we throw out over 7 million tonnes of food every year. So, if you can’t get creative with the leftover turkey, or once you’ve had your fill of roast veg, throw all the tidbits and peelings in a compost bin. If you don’t have one in your garden, then there are plenty of small holdings that would be grateful for the extra compost ingredients.

5. Plant a tree
Instead of decorating a plastic tree or cutting down a real one, consider buying a living “Christmas tree” with roots. This doesn’t have to be a traditional fir, as plenty of trees or plants make for a great substitute that can be decorated with as many baubles and as much tinsel as you please. The best part is that it will continue to grow year after year, so that you’ll derive a lifetime of pleasure from it, instead of simply discarding it after a few weeks.

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