Emergency cash reserves?

[air]

www.mrmoneymustache.com
http://www.reddit.com/r/frugal
http://www.reddit.com/r/personalfinance
http://www.reddit.com/r/financialindependence
http://www.reddit.com/r/simpleliving

can't buy time.

 

[Paul_S]

www.mrmoneymustache.com

I'm afraid most of those frugal concepts and ideas will fall on deaf ears in South Africa.

One thing I am very aware of is the cost of private transport.
If I could get rid of my vehicle it would make a huge difference to my bank balance.
R4200 repayment + R1500 for fuel for work + R567 for insurance + R500 for wear and tear items = R6767 per month. That's over R9000 on gross salary assuming a 35% personal income tax rate. :wtf:

Unfortunately a lot of employers (including mine) insist that an employee has personal transport to get to and from meetings, etc. and it's difficult to get reliable public transport in rural areas which I frequent for pleasure.

 

[Pho3nix]

I'm afraid most of those frugal concepts and ideas will fall on deaf ears in South Africa.

One thing I am very aware of is the cost of private transport.
If I could get rid of my vehicle it would make a huge difference to my bank balance.
R4200 repayment + R1500 for fuel for work + R567 for insurance + R500 for wear and tear items = R6767 per month. That's over R9000 on gross salary assuming a 35% personal income tax rate. :wtf:

Unfortunately a lot of employers (including mine) insist that an employee has personal transport to get to and from meetings, etc. and it's difficult to get reliable public transport in rural areas which I frequent for pleasure.

Why such a expensive repayment for your car?
Can't you downgrade?

 

[OrbitalDawn]

I'm afraid most of those frugal concepts and ideas will fall on deaf ears in South Africa.

One thing I am very aware of is the cost of private transport.
If I could get rid of my vehicle it would make a huge difference to my bank balance.
R4200 repayment + R1500 for fuel for work + R567 for insurance + R500 for wear and tear items = R6767 per month. That's over R9000 on gross salary assuming a 35% personal income tax rate. :wtf:

Unfortunately a lot of employers (including mine) insist that an employee has personal transport to get to and from meetings, etc. and it's difficult to get reliable public transport in rural areas which I frequent for pleasure.

Why R500 every month for wear and tear? How fast do you go through tyres, brakes, wipers etc?

 

[Paul_S]

Why such a expensive repayment for your car?
Can't you downgrade?

No deposit, no residual and not the best interest rate in the world.
The wife has a hatch back (RunX) which is too small for trips with pram, kid, etc. so I had to purchase a sedan with a large boot.
However my vehicle finance is nearing the end of the term so I owe less than most second hand vehicles on the market now.
I burnt my fingers on second hand vehicles (wear and tear) and now a new vehicle (high monthly instalments) so there just does not seem to be a way to win this game.

Also have you seen the prices of vehicles now days? You can't get a decent size sedan below R200K any more (although Toyota just brought out a "cheap Corolla").
The monthly repayment for an entry level Polo Vivo sedan (R142 100) will be over R3300 (no deposit, no residual, 10% interest, 54 month term). Ford Fiesta's, Honda Jazz, etc. are even more.

 

[OrbitalDawn]

I burnt my fingers on second hand vehicles (wear and tear) and now a new vehicle (high monthly instalments) so there just does not seem to be a way to win this game.

Sure there is. Buy 2nd hand from a reputable and proper dealer. Make sure there's a proper warranty and motorplan.

Neither I, nor anyone I know, has ever had problems with 2nd hand cars.

 

[Paul_S]

Sure there is. Buy 2nd hand from a reputable and proper dealer. Make sure there's a proper warranty and motorplan.

Neither I, nor anyone I know, has ever had problems with 2nd hand cars.

Where are you going to purchase a decent size, used family sedan still under warranty and with a couple of years of motor plan left for say under R75 000?
The second hand vehicles I've purchased were all older than 6 years because I couldn't afford more recent models.

 

[F1 Fan]

I have 3 months salary saved....that could last a while if I cut back..

 

[OrbitalDawn]

Where are you going to purchase a decent size, used family sedan still under warranty and with a couple of years of motor plan left for say under R75 000?
The second hand vehicles I've purchased were all older than 6 years because I couldn't afford more recent models.

But how are those your only options? Under R75k or brand new at R200k, or whatever?

Look at 1/2 year old cars and you'll save a lot over a new one.

 

[chicken247]

Today is the 13th and I have R1100- left in the bank. Everthing has been paid for this month. No emergency cash left -> Smoked it.

 

[Paul_S]

But how are those your only options? Under R75k or brand new at R200k, or whatever?
Look at 1/2 year old cars and you'll save a lot over a new one.

I agree - you'll save a lot by purchasing a slightly used vehicle.
I purchased a R200K vehicle and will end up paying nearly R300K taking interest into account.
That same vehicle now costs just shy of R300K new which is totally out of my budget.
Due to changing personal circumstances (family) my next vehicle purchase will have to be second hand with a maximum budget of R100K which simply isn't enough for even a 4 year old vehicle priced at R300K new.
So I'm either forced to buy something newish (which I cannot really afford) still under motor plan and warranty for a lot of money (R150K to R200K instead of R300K new) or I have to buy a 6 to 10 year old vehicle and battle with maintenance.
Our second hand market vehicle market is way over priced.
Hence my comment about being screwed both ways.

 

[OrbitalDawn]

I agree - you'll save a lot by purchasing a slightly used vehicle.
I purchased a R200K vehicle and will end up paying nearly R300K taking interest into account.
That same vehicle now costs just shy of R300K new which is totally out of my budget.
Due to changing personal circumstances (family) my next vehicle purchase will have to be second hand with a maximum budget of R100K which simply isn't enough for even a 4 year old vehicle priced at R300K new.
So I'm either forced to buy something newish (which I cannot really afford) still under motor plan and warranty for a lot of money (R150K to R200K instead of R300K new) or I have to buy a 6 to 10 year old vehicle and battle with maintenance.
Our second hand market vehicle market is way over priced.
Hence my comment about being screwed both ways.

Yeah, we are kind of screwed whichever way you look at it. Maybe a Vivo Hatch or something?

 

[Freaksta]

www.mrmoneymustache.com
http://www.reddit.com/r/frugal
http://www.reddit.com/r/personalfinance
http://www.reddit.com/r/financialindependence
http://www.reddit.com/r/simpleliving

can't buy time.

As much as I totally agree with the first link our country can't apply all the principles, especially vehicles in most cases. Otherwise i would still recommend reading the blog.

Another thing to do is to literally track each expense your have I have started this from day 1 after I graduated (granted it's only been 1.5years) but I can already see how some of my expenses have spirled out of control, especially food, takeaways and restaurants.

 

[mandana]

I have 1 month salary saved. The issue currently is that I have CC debt which the savings can wipe out with some to spare but this makes the "emergency cash reserve" less. I'm nervous to pay off the CC in one go because knowing Murphy something will happen that will put me right back in debt again. It's because of emergencies that I owe money on the damn card.

Also cancelling DSTV, cancelling a data contract with TM at the end of this month, downgrading my other mobile contract to something cheaper in June and closing my store cards (end April) will go along way to adding more money to the CC payments, which I hope to have finished in 3 months from now...

Saving is difficult

 

[Other Pineapple Smurf]

Today is the 13th and I have R1100- left in the bank. Everthing has been paid for this month. No emergency cash left -> Smoked it.

Same boat, I got R1101

If I had not bought my house last year, I would be debt free today (newish car paid off and old debt) with 10 months savings. This is assuming that I don't mind downgrading to 1Mbps ADSL using free 1GB from ISPs and living off two minute noodles.

Damn house takes all my money, just spent R4K installing new a kitchen sink wife wanted (DIY).

 

[Other Pineapple Smurf]

....
Saving is difficult

Only if you have no goals for that money.

My wife and I were surprised how easy it was to save once we set a goal of buying a house. Overnight we stopped all expenses (eating out, luxury food, random trips to the store, etc). Will add that we were so focused on our goal that we did not notice or care about the sacrifices we made.

When we eventually stood back after we bought the house, it then became a thing of its a pizza takeaway or a new plant, a family trip to the Spur or something new for the bathroom.

 

[ld13]

I have 1 month salary saved. The issue currently is that I have CC debt which the savings can wipe out with some to spare but this makes the "emergency cash reserve" less. I'm nervous to pay off the CC in one go because knowing Murphy something will happen that will put me right back in debt again. It's because of emergencies that I owe money on the damn card.

R10000 owing on card increasing at 20% interest or ~R2000 per year.
R10000 odd available in savings gaining at most lets say 5% interest or ~R500 per year.

You are thus losing ~R1500 per year in the above situation. Probably a bit more if you take compound interest into account.

It makes perfect sense to wipe out the CC debt completely. Remember that your "emergency cash reserve" does not need to be in cash. You can still use your credit card in a case of emergency.

 

[Other Pineapple Smurf]

.... Remember that your "emergency cash reserve" does not need to be in cash. You can still use your credit card in a case of emergency.

This is why I'm sitting with old debt I'm still paying off. Credit Cards!

I understand the whole concept of debt mechanisms as cash flow in business (I'm writing my UNISA accounting reporting exam next week) but that only works in business where for example purchasing R20K worth of retail stock for a busy period on credit is actually a good thing as you will pay back the amount within 3 months with minimal interest.

But for personal use, it should never be considered. I know people go on about the whole interest free system if used correctly but you are spending money that never belonged to you. The business argument always comes in with lost opportunities for not having used your credit card, but unlike business there is no financial gain or incentive to actually do this for personal use.

Save up and pay for it when you have the cash.

 

[HavocXphere]

But for personal use [..] there is no financial gain or incentive to actually do this for personal use.

I agree that most people should perhaps give it a miss rather as it can backfire viciously, but I think there can be scenarios where it results in financial gain for a person.

e.g. I can borrow at 8% right now and invest that cash into RSA retail bonds at 8.25% (6%+2.25%). Ignoring the fact that the one is linked to repo while the other is CPI linked, that is pretty much a risk-free quarter percent. If I'm willing to take on a bit more risk I can invest that in say Satrix which should easily outperform 8% by a good couple percent. Thats income on money that as you say "never belonged to [me]".

Obviously thats a pretty dicey plan but I'm sure one can come up with more viable plans...especially when it comes to property.

I know people go on about the whole interest free system

Its the other way round. The cost of providing the "interest free system" is already factored into the cost of the product, so unless you take advantage of the interest free period you have already taken a hit relative to your peers that do. Think more of a shopping account than a CC here...the "cost" built into the product price is easier to see.

I personally try to think of it as a fire...it can cook your food but it'll burn down your house if you don't know what you're doing.

 

[MrGray]

Are we talking cash that's instantly on hand or money that might be sitting in RAs, endowments, unit trusts, equity in property, your car, etc? Don't have much cash on hand at the moment, but if I had to live without an income for a while reckon I could free up enough to live for a couple of years although I would probably lose a lot of value.

Seems like on balance there are a lot more ppl with no reserve than 2 yrs ago?