Funny how things happen at the same time!
In this post we will give you our Homeloan Junction Budget Tool and refer to a Moneyweb Today article. The Moneyweb post arrived just as I put the finishing touches to the HLJ Budget Tool. Serendipitous, I would say!
So why the Tool?
Most of us don’t have a budget. We live from hand-to-mouth, month-to-month and while away our time and our money on necessities and fancies. The danger is that as this forms a habit pattern, we wonder where the money’s gone and why there’s so much month. Month after month, year after year, we live as if there is no tomorrow financially. Often, if we’re really honest with ourselves, we take on bad habits in the process – we eat, drink and smoke too much. After all, life is stressful, you know. Then, we may rack up some unexpected medical bills in the process as we get older. All part of life, you know.
6% of South Africans can retire comfortably. In case you wonder about the other 94%, they don’t retire comfortably by level of degree.
What we mean by that is that the next 6 % below the “comfortable 6%”, live a little less than “comfortable”. Starting to experience the world of retirement myself a little, I have family in their 80’s. Retired since age 58, 25 years later they’re finding prices very high. Thank Goodness, they have not squandered their money but things are tight – much tighter than when they retired.
What we learn from this is that retiring with income that rises, or is supplemented with assets that may be sold, is wise financial planning. So, the next 6% behind the second 6%, is probably already not ready to retire at all in South Africa; of a truth, the situation quickly becomes dire and a Government pension of about R1600 per month, rising at 6-7% per annum, does not satisfy even basic needs.
Everything in our beautiful, tortured country points to sadness as we ponder these thoughts. My wife read me an article the other day that said one of the greatest gifts you can give your children is to not be a burden to them in your retirement. Oh may that be a simple goal for you when you finish reading this blog!
Get the full Moneyweb article here – MONEYWEB-TODAY-ARTICLE.pdf
Using elementary Excel, I have created a Tool for you to budget. Customise it for your own circumstances and please note that the numbers are just examples, so put your own in.The Tool allows for your Gross Income. It then deducts your direct expenses like UIF, Income Tax etc to arrive at your Net Income Before Expenses.
Then it deducts two kinds of Expenses: Need To Have’s and Want To Have’s. Call them what you want and re-arrange the items as you wish [after all, we need a little retail therapy or entertainment some time J] but just be true to yourself. Question what you earn and what you spend honestly. Commission earners especially project their earnings – like true sales people, they often believe they are going to earn more and spend less than they really do over the long-run. Don’t fool yourself. And, if you really want to test your reality, then commit to an extra amount repaid monthly on your bond and see how good you are at sticking at it.
You can download your copy of this tool here –HLJ-Budget-Tool.xls
The point is, every few hundred Rands you save in this exercise could literally put you into the top 6% at retirement. And, keep you there.
Now to the final points……….
1. I am not a financial advisor, so speak to yours and begin to commit to a long-term savings plan. Retirement Annuities, Satrix, DBX’s etc are great vehicles to discipline your savings. And, by the way, remember some Life and Disability cover for those you love, if you don’t make it.
I have tried to teach all financial levels of people the simple fact of compounded interest. By the way, Albert Einstein called it his “most profound” learning. Two elements for now:
- R100 invested for 10 years and 20 years at 8% is R18294.60 and R58902.04 respectively. The compounding is not a straight line as interest on interest continues to kick in the more you save.
- The inverse of this, which the Insurance industry correctly calls “the cost of delay”, is that if you want R60000 , then the faster you start saving the less you have to save. R60000 costs you R101.86 over 20 years and R327.97 over 10 years, both at 8%.
2. I am a banker, so back to the tired old truth that your bond is a good place to save. Whatever interest you save is at your bond rate after tax.
For example, at a bond rate of 10%:
Years to go: 20
Total Paid: R1852841.56
Interest spent: R1052841.56
Payment increase of 20%: R9264.21
Years to pay: 12.83 years
Total paid: R1426688.00
Original total payment less new total payment: R1852841.56-R1426688.00 = R426153.56
SAVING AFTER TAX: R426153.56
Homeloan Junction cares. This blog may seem trite and simplistic to some. To others, it may just be the spark of new financial life. If it touches one life today then the last two hours writing and calculating has been worth every minute.
Yours in Property