Personal finance basics, flowchart

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,062
#1
Hi folks,

I'm helping out some family in SA get on their feet financially. I'm hoping to find some local information to arm them with - I've been living abroad for so long I'm completely out of the loop.

Specifically, I'm looking for two things:

1. A list of all the basic things an adult should have - anything the law requires (tax? something else?) and anything that you really should have (a bank account, a will, retirement fund, whatever).

2. A personal finance flowchart that's relevant for South Africa. There are some great ones, eg for UK and US but I haven't found anything that's relevant for SA.

Lastly, is there a personal finance specific forum or wiki somewhere where I can do some reading to prepare myself with? Something that explains what sort of options are available for saving/insurance/medical aid with some information on pros/cons, tax implications, etc? Something like https://old.reddit.com/r/personalfinance/wiki/index

Thanks
 

3WA

Executive Member
Joined
Sep 25, 2012
Messages
5,555
#3
1.) Bank account
Home loan/Rent
Medical aid
Life insurance, if you have dependents (that you like)
Pension fund/Retirement annuity
Tax-free saving account for long term, or some sort of high-interest account for short term saving
Medical gap cover
Car and home insurance

And a will
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,062
#5
Thanks to everyone who replied. I'm a bit behind - life throwing sticks in my spokes...

Thanks for this. Incidentally, the link just gives me a 500 error, the search doesn't work on the site, so I ended up searching the title form the URL and found it on Amazon. Turns out Takealot is blocking part of the outside world IP space - hopping on a VPN with endpoints in SA fixed that.

I just finished the book, and I have some thoughts:

1) Is the book available in SA specific to SA? The one I got from Amazon (UK) is adapted for UK readers. So it uses £, talks about ISAs and the uk government pension. I know enough to know what to ignore/substitute as I'm reading, but my family won't.

2) It's a decent book. For those who haven't read it, it starts with where to start, and goes through getting out of debt, establishing an emergency fund, sorting out pensions, and finally, investing. The writing style is irreverent and humorous, and not as dry and serious as every other finance/investing book I've read.

3) The author swears like a ****ing sailor. I don't mind - I am a sailor! But even I roll out my best sondagskool afrikaans when I'm visiting the family, and I don't see my mum getting much past the cover.

The website for the book has a flow-chart along the lines of what I was looking for, but it's very generic - nothing SA specific:

https://www.likeafuckinggrownup.com/etc/flowchart.html

Tax-free saving account for long term, or some sort of high-interest account for short term saving
I had no idea this was a thing now. Ho-lee-fook! If I weren't living abroad I would open an account today! Given the high interest rates in SA, you have no idea how awesome this is. I did some spreadsheet modelling on this. At 33k per year and a 500k lifetime limit, assuming full contributions each year, it will take just over 14 years to reach the limit. Netbank offers 8.6% for a tax free 12 month fixed deposit. I'd be lucky if I can break 1% here.

I'll keep bashing away at this and update this thread if I learn anything more useful.
 

jman

Expert Member
Joined
May 9, 2014
Messages
2,308
#6
Oh are you in the UK? Yeah the original one was specific to SA. Can be found at any book store really.

Don't you get a tax free account in the UK? Who would have thought.. Oh and you don't want your TFSA in cash, you want ETF's in it for max growth
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
24,551
#7
Thanks to everyone who replied. I'm a bit behind - life throwing sticks in my spokes...



Thanks for this. Incidentally, the link just gives me a 500 error, the search doesn't work on the site, so I ended up searching the title form the URL and found it on Amazon. Turns out Takealot is blocking part of the outside world IP space - hopping on a VPN with endpoints in SA fixed that.

I just finished the book, and I have some thoughts:

1) Is the book available in SA specific to SA? The one I got from Amazon (UK) is adapted for UK readers. So it uses £, talks about ISAs and the uk government pension. I know enough to know what to ignore/substitute as I'm reading, but my family won't.

2) It's a decent book. For those who haven't read it, it starts with where to start, and goes through getting out of debt, establishing an emergency fund, sorting out pensions, and finally, investing. The writing style is irreverent and humorous, and not as dry and serious as every other finance/investing book I've read.

3) The author swears like a ****ing sailor. I don't mind - I am a sailor! But even I roll out my best sondagskool afrikaans when I'm visiting the family, and I don't see my mum getting much past the cover.

The website for the book has a flow-chart along the lines of what I was looking for, but it's very generic - nothing SA specific:

https://www.likeafuckinggrownup.com/etc/flowchart.html



I had no idea this was a thing now. Ho-lee-fook! If I weren't living abroad I would open an account today! Given the high interest rates in SA, you have no idea how awesome this is. I did some spreadsheet modelling on this. At 33k per year and a 500k lifetime limit, assuming full contributions each year, it will take just over 14 years to reach the limit. Netbank offers 8.6% for a tax free 12 month fixed deposit. I'd be lucky if I can break 1% here.

I'll keep bashing away at this and update this thread if I learn anything more useful.
Your percentages are not equivalent. Inflation is quite different.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,062
#8
Oh are you in the UK? Yeah the original one was specific to SA. Can be found at any book store really.

Don't you get a tax free account in the UK? Who would have thought..
I was, so I'm familiar with the products there. Yes, they do have a variety of tax free accounts (called ISAs). I'm in Hong Kong these days though.

Oh and you don't want your TFSA in cash, you want ETF's in it for max growth
Agreed. But in HK we have no capital gains tax, so it makes no sense for me to have an investment account anywhere else. But the idea of a fixed term savings account with high interest rate is appealing. But even if I could get one (I can't, you have to be a resident and FICAd), there's the issue of the impeding tax changes. It's still not clear how that's going to affect my ability to have assets in SA without being considered tax resident (which brings my HK earnings in scope).
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,062
#9
Your percentages are not equivalent. Inflation is quite different.
Maybe so but 8.6% is above SA inflation. Anything I can get here is below local inflation. I'm planning to come back to SA sooner or later anyway, so that changes my considerations somewhat.
 

3WA

Executive Member
Joined
Sep 25, 2012
Messages
5,555
#10
Ho-lee-fook! If I weren't living abroad I would open an account today! Given the high interest rates in SA, you have no idea how awesome this is. I did some spreadsheet modelling on this. At 33k per year and a 500k lifetime limit, assuming full contributions each year, it will take just over 14 years to reach the limit. Netbank offers 8.6% for a tax free 12 month fixed deposit. I'd be lucky if I can break 1% here.
There's a reason we get that interest rate - cause we bloody hell need it.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,062
#14
There's a reason we get that interest rate - cause we bloody hell need it.
Agreed! But like I mentioned, it's well above inflation:

https://www.inflation.eu/inflation-...ric-inflation/cpi-inflation-south-africa.aspx

Getting interest that's double inflation on any savings account in developed countries is unlikely or is going to come with some or other catch (fees, usually).

if you need to buy a book to manage your personal living finances you are doing it wrong xD
Ha ha true! But maybe if you're doing it wrong, you need to read the book? ;)
 

Steamy Tom

Expert Member
Joined
Jan 23, 2019
Messages
1,823
#15
Agreed! But like I mentioned, it's well above inflation:

https://www.inflation.eu/inflation-...ric-inflation/cpi-inflation-south-africa.aspx

Getting interest that's double inflation on any savings account in developed countries is unlikely or is going to come with some or other catch (fees, usually).



Ha ha true! But maybe if you're doing it wrong, you need to read the book? ;)
yeah fair point, but it really isn't hard to understand basic finances (we aren't talking about investing/building wealth here - unless that is what OP meant but i gather that isn't the case) - in short, spend less than you earn and the easiest way to do that always is to lower expenses. unless there are compelling circumstances you should never finance anything that isnt a house, with a car as a close possibility, and even then you shouldn't take on more than you can afford. Anything else - no cash no purchase.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,062
#16
yeah fair point, but it really isn't hard to understand basic finances (we aren't talking about investing/building wealth here - unless that is what OP meant but i gather that isn't the case)
Correct. Family is in their early 60s, living well beyond their means (but doesn't seem to understand that), unprepared (or at least underprepared) for retirement, and financially illiterate. I'm planning to visit soon and stage an intervention. Not gonna be fun but the better prepared I am, the more likely I'll be able to leave an impression. That's why I'm trying to familiarise myself with the products/tools available in SA.

in short, spend less than you earn and the easiest way to do that always is to lower expenses. unless there are compelling circumstances you should never finance anything that isnt a house, with a car as a close possibility, and even then you shouldn't take on more than you can afford. Anything else - no cash no purchase.
I agree this is pretty obvious. But like so many things, people will fight hard against making changes if it will compromise their comfort/lifestyle. It's just like weight loss. People will rationalise all sorts of bullshit because they don't want to accept the hard reality of what they need to do.
 

Steamy Tom

Expert Member
Joined
Jan 23, 2019
Messages
1,823
#17
Correct. Family is in their early 60s, living well beyond their means (but doesn't seem to understand that), unprepared (or at least underprepared) for retirement, and financially illiterate. I'm planning to visit soon and stage an intervention. Not gonna be fun but the better prepared I am, the more likely I'll be able to leave an impression. That's why I'm trying to familiarise myself with the products/tools available in SA.



I agree this is pretty obvious. But like so many things, people will fight hard against making changes if it will compromise their comfort/lifestyle. It's just like weight loss. People will rationalise all sorts of bullshit because they don't want to accept the hard reality of what they need to do.
sadly their biggest hurdle is coming to terms with that and at the end of the day it is near impossible to help people who wont help themselves. At their age they are already fscked for retirement honestly, but its good you are trying.

I have family in the same boat and i honestly don't know what we will do when they are forcibly retired.

I would start by getting them to list and categorise their monthly expenses. from there take their net worth, savings etc and ask them how they plan to make the two meet up for the rest of their expected life.
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
24,551
#18
Maybe so but 8.6% is above SA inflation. Anything I can get here is below local inflation. I'm planning to come back to SA sooner or later anyway, so that changes my considerations somewhat.
The inflation you're giving is the government bread basket one, which isn't really accurate.

Most savings accounts are 5-5.5% if instant, then you have the higher tiers that are longer withdrawal etc.

UK tax free is an ISA, and they do have over 2% return for 12 month fixed accounts, but most are 1.4% marker if instant and they usually do a bonus at the end of 12 months of around 0.9%, which definitely beats your 1.8% inflation which is a lot more accurate a CPI than the south African one.
 
Top