Investing for income

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Moneywaster

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Good day.
I'm new to this forum so I have not yet search for or read threads that might help me without posting this question.

My problem. I'm 40 years old and still poor. I must have made mistakes and poor choices, at least I'm honest about it, because there are people with smaller salaries than me that lives in better houses and drive more expensive cars. I want to grow up and also start by doing the right things.
I was financially secure in the past so did not really worry about my finances and investments as I was married to a rich wife. Unfortunately that all changed when she decided to divorce me.. I know its no excuse but its greatly the reason for my lack of funds at my age.

I do have a steady job for the last 19 years and will receive an adequate pension if all goes as planned. But as nothing is certain, I need to get a way to become financially secure again.
What can I do besides getting a new rich wife :D or a better paying job?

What I have in mind is to get an income based investment account? I want to start with only R15000.00. I know its pathetic but its a start. I want that account to pay out all interrest on a monthly basis into my normal savings account. That will boost my monthly income and make it possible for me to save a bit more every month as I will have a littlebit more spending money. All my extra money and savings will be transferred into this account making the balance increase and thereby further increasing my monthly income.

Where is the best place to put my money, riskfree?

Any other suggestions?
 
Retail Savings bonds might be the answer? Although i'm not really sure what your are trying to do... You want to invest the 150K but you don't want it to grow because you will be using the interest to boost your monthly income...
 
R15 000 will not give you anything worthwhile immediately to add to your salary. Even at 6% interest you'll get less than R150 a month (i think) and the worth of the money would be eroded by inflation

You need to invest is something with above inflation growth like shares for 10 years to get that R15 000 to a sizable amount, something like satrix divi with the quarterly dividents reinvested back into it .

Another option is if you have some credit (credit car, personal loan, shop loan) in the region of this amount to settle it, you will have extra cash in your wallet every month.

Disclaimer: I'm not a financial adviser. This is just my opinion and I'm not liable for any outcome based on my opinion.
 
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supersunbird said:
R15 000 will not give you anything worthwhile immediately to add to your salary. Even at 6% interest you'll get less than R150 a month (i think) and the worth of the money would be eroded by inflation
Click to expand...

Yes, R150.00 pm is nothing. But that initial investment will grow and that R150.00 will grow almost on a monthly basis. I do intend to boost this account with any and all spare cash I get, including 13th cheques etc.
 
It wont grow if you take the interest out and interest growth will be below inflation. Yes, it a good idea to have a emergency fund, "experts" recommend 3 month savings of income amount. If thats you goal thast good too, but you cant be taking out the interest income at such a early stage.

Disclaimer: I'm not a financial adviser. This is just my opinion and I'm not liable for any outcome based on my opinion.
 
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I see the inflation rate is something at 6%, that was in January. That means I only have to grow my innitial lumpsum with less than a R1000.00 for a year too keep tred with inflation? Is this correct? That means that even if I take all the interest I must just ensure too add R100.00 pm in order to beat inflation. That is just for the first year or so though.
I intend to plough back at least R300.00pm even up to R1500.00pm depending on how my month was. It will take some time to reach R1000.00pm interrest, but that is my plan. I have 25 working years left. If I can continue with this plan and don't ''borrow'' any funds from it, it should greatly assist my monthly income and pension fund at retirement.
 
If you are looking for a risk free option, you won't receive much reward.
Look at nedbank's retail bond: http://www.nedbank.co.za/website/content/interrestrates/local.asp
You can receive around 7% interest, but the funds are locked up for two years.

Capitec has a savings account with around 6% interest rate for amounts < 10K. They allow each client to open up a max of 4 savings accounts.

If you invest at around 6% interest and take out the interest every month, you will only receive R75.00 every month. Minus the bank charges of around R4.50 (Capitec), you will only receive R70.50. It's not that much.
Use: http://absa.co.za/Absacoza/Calculate# to calculate your returns.
If you go the capitec route, you will need to open up two savings accounts (in order to get the 6%), with a total bank chargers equaling R9.00.


If you don't have any debt, I would suggest going a long term route. Invest in a Satrix Investment Plan or Allan Gray's Equity Fund or even Coronations Balance Plus fund. These are all long term, so +5Years.

Disclaimer: I'm not a financial adviser. This is just my opinion and I'm not liable for any outcome based on my opinion.
 
You want to take out and put back at the same time? No, that amount is too little for any meaningful income to be achieved. You need to grow it and to do that you need be earning inflation plus. To do that there has to be risk and thus your requirement for a risk free investment is not aligned with your goals.

Can't have your cake and eat it
 
A capital contribution of R15,000.00 and a monthly contribution of R150pm every month (4%), for the next 20 years is going to yield you less than R90,000 - which will be worth about 1/3 of that then.

As an earlier poster said, do you have short term debt to clear first?
 
Also remember that any interest earned (e.g. from any form of savings account) is taxed at your marginal rate of tax. But it is never too late to start a culture of saving.
 
To hijack the thread (sorry OP - but it relates to you too ;)

I did Financial Management over a decade back and since I didn't use it, I've pretty much forgotten everything :/ However one thing I do remember, it time value and present value. In words R100.00 in 3 years, you'd multiply by .96

They gave us that .96 figure though ... And a table with a host of factors.

Is there a way to work this figure out?
 
Dolby said:
To hijack the thread (sorry OP - but it relates to you too ;)

I did Financial Management over a decade back and since I didn't use it, I've pretty much forgotten everything :/ However one thing I do remember, it time value and present value. In words R100.00 in 3 years, you'd multiply by .96

They gave us that .96 figure though ... And a table with a host of factors.

Is there a way to work this figure out?
Click to expand...

Inflation is a sort of compounding interest, except you lose value. So if you assume inflation of 6 % compounded p/a, you'd get (1-0.06)^n after n years. So after 3 years, a future value of R100 has a present value of R83
 
Moneywaster said:
Good day.
I'm new to this forum so I have not yet search for or read threads that might help me without posting this question.

My problem. I'm 40 years old and still poor. I must have made mistakes and poor choices, at least I'm honest about it, because there are people with smaller salaries than me that lives in better houses and drive more expensive cars. I want to grow up and also start by doing the right things.
I was financially secure in the past so did not really worry about my finances and investments as I was married to a rich wife. Unfortunately that all changed when she decided to divorce me.. I know its no excuse but its greatly the reason for my lack of funds at my age.

I do have a steady job for the last 19 years and will receive an adequate pension if all goes as planned. But as nothing is certain, I need to get a way to become financially secure again.
What can I do besides getting a new rich wife :D or a better paying job?

What I have in mind is to get an income based investment account? I want to start with only R15000.00. I know its pathetic but its a start. I want that account to pay out all interrest on a monthly basis into my normal savings account. That will boost my monthly income and make it possible for me to save a bit more every month as I will have a littlebit more spending money. All my extra money and savings will be transferred into this account making the balance increase and thereby further increasing my monthly income.

Where is the best place to put my money, riskfree?

Any other suggestions?
Click to expand...

As other people have said, get rid of debt first.
 
There is an old Chinese proverb 'The best time to plant a tree is 20 years ago. The second best time is today'.

It is never too late to start, and even R15000 is good for a start. As you pointed out you will be adding surplus cash to the amount. If you stick to that then you will be surprised by the amount you can accumulate.

Like others have said, get rid of your debt first. You pay more interest on debt than you will ever be able to get on a investment.

You options regarding investments is many.

EDIT: Nevermind, just saw you mentioned risk-free.
 
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Don't think we dont want you to safe, we'd love you to safe.

Its just that you cannot start withdrawing the money now. One needs to grow the "capital amount", as they call it. You have to grow it for around 10 years then you will be able to start taking income out of it, and not everything, because you need it to grow more still.

And if you get a 6% interest rate, official inflation is 6.3% and real inflation is more. Your money will loose purchasing power slowly. You need to invest in some kind of asset class that beats that. Retail bonds barely beat it at around 8%. Shares are historically able to give you better than any other asset class and will give you the best growth over 10 years if you reinvest the income you get from dividends.

Disclaimer: I'm not a financial adviser. This is just my opinion and I'm not liable for any outcome based on my opinion.
 
UnUnOctium said:
Inflation is a sort of compounding interest, except you lose value. So if you assume inflation of 6 % compounded p/a, you'd get (1-0.06)^n after n years. So after 3 years, a future value of R100 has a present value of R83
Click to expand...

Thanks!
 
First off I am a professional and I hope that the following will not be offensive in anyway.

I commend you for all the honesty,but here is the raw facts

1)on your information,the interest payable on R15000 is 6% currently if you are lucky x 1/12 = R75 (No interest on interest reinvestment because you are not reinvesting in anything,you are hoping by the fund paying out more you will save more,which is a crude Human flaw. When people earn more that spend more,where as the idea is to earn more,and live at the same level accumulating and reinvesting savings

2)What is an Income based investment account?
If you would like to start saving and be comfortable at the end of retirement and as we say in the business, live at your current lifestyle the amount required,will adjust for inflation,for 25 years(as you have 25 years to retirement age) and we will bring that back to an amount you require to put away per month to achieve this comfortability.

It is next to impossible to assume anything as, I dont know what you earn per years, Do you have children,Do you currently have debt,ie bond car,What are your monthly expenses.

But lets try

Saving R1000 rand,Having it reinvested ontop of itself ,NEVER withdrawing until date of retirement(assuming this is just an interest account,nothing to do with pension fund) 25 years of saving R1000 per month at 6% interest

Future value = R 692993.96
A nice simple rule (general) is to say.The amount you earn per year x 3 (gross annual) is the amount you will need for comfortability

Hope this helps and i wasnt offensive.Just trying to help
 
To make it simple. Just put your money on the JSE via a broker. Then choose 2 shares that are well diversified. They do about 60% PA and mostly do not follow the trend. They just go up and up.
I have been making a living off these 2 for a long time now and they are the most steady stocks on the JSE.
CML - Coronation Fund Managers. Well diversified.
AVI - Food manufactures. When all else falls, this will go up and up.
These 2 stocks will give you a steady income.
I have been trading stocks for 15 years and now have settled on the above 2 and no more trading.
 
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