MyMoney Online

The 3 most pressing (financial) questions asked in 2014

Amongst the many questions asked in response to my feature on Weekend Breakfast during the year some stood out as more pressing that others.

The common thread was that people were struggling to make ends meet and needed advice on how to manage their money better.

Are money market accounts safe investments?

After the demise of Africa Bank South African invested in money market funds learned the hard way that these investments were not as safe as they were made out to be. The Reserve Bank in its rescue plan ordered that a 10% "haircut" be applied to investors to help recover some of the

losses. Side pockets have been created in some accounts whereby the investor cannot touch the money or earn interest it until the bank is in a better position to pay back. Doesn't look likely at this stage!

The lesson learned is that the money market is as safe as the banks trading in them. This risk is found where the bank cannot pay back the debt it is trading in.

My view is that Africa Bank took on too much risk in an economy which has been struggling. Most banks are sound and the likelihood of this happening again is quite small. Therefore, money markets are still relatively safe investments.

Should I cash in my pension fund and pay off my debt?

Earlier this year the Minister of Finance tabled a report in parliament concerned over the fact that more and more South Africans were withdrawing from their pension funds. This was probably as a result of being under financial pressure and seeing the funds as a way to get back on their feet.

The problem is not only the tax that is payable on withdrawal ( up to 32% depending on your tax rate), but also in the lost opportunity to compound the returns of the funds into the future. If you work out the amount the funds will be in the future effectively earning interest on the taxable portion then the cost is huge.

In most cases pension funds should be left alone and only cashed in as a measure of last resort. If you really have to.

What is the ideal balance in my budget?

Governments and businesses are governed by detailed budgets which help them navigate through economic cycles. Households should also adopt the approach is creating detailed budgets. It follows the principal of " If you can measure it, you can manage it" Essentially, a budget is a measurement of expenses against income. What comes into the household and what goes out.

An ideal budget should allocate: 30% towards provisions for your financial plan. i.e. Insurance, pension, medical aid, savings and investments.

30% towards debt on cars, houses and credit 40% towards the costs of living

When compiling you budget you should split the expenses into "Must haves" and "Nice to haves". This will give you a clearer picture of where you can trim your costs a reallocate to the the savings portion.

Difficult to get right but budgeting is an essential element in a successful financial plan.

Make contact with Paul, or access more of his opinions pieces at www.investforlife.co.za/


Recommended

by NEWSROOM AI
Read More
Why women must be far more careful with their money than men

Why women must be far more careful with their money than men

Ray White talks to personal finance guru Warren Ingram, who reckons women should take financial planning more seriously than men.

Where to best save and invest so your children can one day go to university

Where to best save and invest so your children can one day go to university

#FeesMustFall, but don’t hold your breath. Take matters into your own hands to ensure a tertiary education, says Warren Ingram.

How to get a tax refund from Sars

How to get a tax refund from Sars

The Money Show’s Bruce Whitfield interviews Daniel Baines, author of “How to get a SARS Refund”.

13 tips for saving hundreds (nay, thousands!) of rands each month

13 tips for saving hundreds (nay, thousands!) of rands each month

The economy is toast. Personal finance expert Warren Ingram shares 13 highly effective tips for making ends meet.

How to get a bank loan approved almost instantly

How to get a bank loan approved almost instantly

Personal financial advisor Samke Ngwenya discusses five steps you should take to get your bank’s approval in no time.

4 ‘places of safety’ for investors to consider (though there is really only one)

4 ‘places of safety’ for investors to consider (though there is really only one)

The JSE is struggling. The rand is toast. Trump’s trade war has markets rattled. Advisor Warren Ingram discusses places of safety.

Popular articles
Are you ready to 'Walk the Talk' with 702 & MTN?

Are you ready to 'Walk the Talk' with 702 & MTN?

The annual MTN Walk the Talk with 702 takes place on 22 July this year, under the theme 'Walking for South Africa'.

Madiba’s private secretary Zelda la Grange opens up about money (hers and his)

Madiba’s private secretary Zelda la Grange opens up about money (hers and his)

Bruce Whitfield interviews La Grange about her and Madiba's attitude to money (hopes and fears, successes and failures, etc.)

You’re either a ‘money slave’ or a ‘money master’ (says author of 'My Money')

You’re either a ‘money slave’ or a ‘money master’ (says author of 'My Money')

The Money Show’s Bruce Whitfield interviews Sugar Creek financial expert and author of “My Money” Gerald Mwandiambira.

How to make money through ‘buy-to-let’ (using very little of your own money)

How to make money through ‘buy-to-let’ (using very little of your own money)

Bruce Whitfield interviews Francois Janse van Rensburg, author of “Making Money through Buy-To-Let in South Africa".

'More black farm workers are killed than white farm workers'  - Johan Burger

'More black farm workers are killed than white farm workers'  - Johan Burger

Following a spate of farm murders in the Cape, the policing expert says there aren't enough stats available on farm killings.

Soulful Sundays Playlist: Sunday 11 June 2017

Soulful Sundays Playlist: Sunday 11 June 2017

Favourites to feed your soul on Sunday.

3 easy questions could bag you R2000!

3 easy questions could bag you R2000!

WIN R2000! But only if you can prove you're a whiz of the MTN Biz Quiz by answering the following three questions...

Blesserfinder: Matching you with a sugar daddy near you

Blesserfinder: Matching you with a sugar daddy near you

Is social trend Blesserfinder, where girls are allegedly matching up with rich 'benefactors' in exchange for sex, a real thing?