Are You Self-Employed? Here is What You Will Need When Applying for a Home Loan

If you are self employed, then you might find it a little more difficult to get home loan compared to if you had permanent employment with a regular income. But even if you are self-employed it is not impossible to get a home loan. If you have put in an offer that the seller is likely to accept and if you are likely to get a home loan approved, then you need to be prepared and have all your documents ready before the agreement is signed. 

The criteria used by banks to evaluate your bond application may differ slightly between one another, but generally, you will just need to prove that you have a regular income and that about 30% of your average net income can be used for a home loan. 

The bank will want proof of your income and profit, which you can get by obtaining a letter from an auditor that proves it. If you are a shareholder in a company, then you will need to obtain a letter from an auditor that confirms your shareholding percentage. 

You will also need to provide the bank with your latest bank statements from your personal account. Some banks will ask for 3 months if you have a fixed income and if your income is varied they may ask for as far back as 6 months. Also, you will need to give them the latest bank statements for 6 months for your business account and the last two years of financial records. 

The bank may also ask for your latest tax certificate and in some cases, they may ask for the last three years, so it is a good idea to have this on hand if it is asked for. 

If you are divorced and part of your regular income includes maintenance so that you are able to qualify for a bond, then you will need to provide a copy of your divorce decree that states it should be included. 

If you have lease agreements in place, where the income thereof is included in the income statement, then the rental amount will need to be current. You may also need to provide copies of these agreements. 

It may seem like getting all this documentation in place is a pain, but the banks will want to make sure that you have regular and dependable income. Most of the paperwork that you may need is part of regular business and personal accounting, so it shouldn’t be too hard to get everything in place. 

New Fuel Prices for May

The new fuel prices will kick in on the 1stof May and here are how the prices will be affected according to the Department of Energy. 

93 Petrol and 95 Petrol will increase by another 54 cents per litre and diesel will undergo an increase of 1 cent per litre. On top of this, 3 cents will be added to illuminating paraffin per litre and gas will be going up considerably by 84 cents per kg. 

Here are the changes to fuel prices this May:

  • 93 Petrol: increase of 54 cents per litre
  • 95 Petrol:increase of 54 cents per litre
  • 0.05% diesel: increase of 1 cent per litre
  • 0.005% diesel: No change
  • Illuminating paraffin:increase of 3 cents per litre
  • LPGAS:increase of 84 cents per kilogram

The fuel price increase has been attributed to the weakening rand/dollar exchange rate as well as that of the global increase in oil prices. 

Even though the rand has weakened in the past week, the average exchange rate that is used in determining the basic fuel price has aided in reducing petrol prices by around 13 cents per litre. 

However, due to the United States imposing sanctions on those that purchase oil from Iran, the global oil price has reached new highs, which is a huge factor contributing to the increase in local fuel prices. The sanctions have removed about 1.1 million barrels of oil per day from the market and a barrel costs over $75. However, there is news that Saudi Arabia will have more replacement barrels than what has been lost from the Iranian production. 

Article Source: https://businesstech.co.za/news/energy/313724/this-is-the-official-petrol-price-for-may/

Get Your Budget Under Control by Asking These Questions

The cost of living is on the rise in South Africa with increased fuel costs and slow economic growth. This is why many South Africans are now looking for ways to make their money go further. 

By asking these questions, you can get your budget under control. 

Where Does Your Money Go?

Do you know where your money is going every month? If you are not sure then you need to go through your transactions for the past few months and determine where you spend the most money. Find what is costing you the most and assess how you are able to reduce the spending in these areas. 

Do You Use the 50/20/30 Plan?

The 50/20/30 rule does work for those that have a monthly income. With this plan, 50% of your salary is used for necessities like utility bills, your rent or bond and groceries, 20% is for your savings which includes your retirement fund and 30% is for your lifestyle like clothes, entertainment and holidays. 

What Saving Goals Do You Have?

If you have a goal in mind, then it will be easier to stay away from the money that you are building up in your savings account. You need to keep in mind what you are saving for like a holiday, education or to pay off debt. Having something to save for will keep you motivated. 

Are You Tracking Your Money?

There are a number of apps out there that help us to track our exercise, eating habits and so on and you will even find ones that can help you to track your money. There are free budgeting apps that help you to stay on top of where you are with your money. 

Are You Battling to Pay Off Debt?

You shouldn’t be wasting your money by paying interest on debts. You should start by paying back some of your smaller debts and those that carry higher interest rates as these can add up quickly. 

Also, saving for a large purchase beforehand can mean that you could pay cash and avoid debt altogether or you will be able to put down a large deposit and borrow less, so that you can speed up the repayments, which will then save you money.

When you are looking to make your money go further you need to have a budget and a plan in place, so that you can see where you can cut costs and save more. 

What is Risk Cover and Why Do You Need It?

Have you heard the term risk cover before, but aren’t entirely sure what it means or if you need it? Risk cover is a long-term insurance that offers financial protection against major life events like disability, critical illness, retrenchment or death.

When you are confronted with a major life event, only then will the value of having risk cover part of your insurance show its true value. 

How Does Risk Cover Work?

Risk cover is there to protect you as well as those that are dependent on you. By paying a monthly premium, your insurer will pay an agreed amount, which is called the sum assured if a claim is ever made. 

The premium that you will pay will depend on your individual risk profile, which the insurer will assess before the policy is taken. 

With long term insurance, there are four main risks that are addressed. 

If you are to ever be diagnosed with a critical illness like cancer, Alzheimer’s, Parkinson’s, heart attack or stroke then you will receive cover for medical expenses as well as cover for other expenses associated with your lifestyle. 

If through an illness or an accident, you become disabled and are no longer able to earn an income then your insurance will pay out in order to cover the loss of these earnings. 

If you become retrenched from your job, then this cover will protect your income for a certain number of months immediately after. This provides a buffer for you and your family whilst you find new work.

If you were to pass away, you want to make sure that your family will be fine financially without you, which is where risk cover steps in. It will provide financial cover for you when you are no longer here.  

The main purpose of risk cover is to provide for your loved ones and dependents if you die, however, many people overlook the fact that if you are unable to work your expenses will not just disappear. You will then need to have cover for critical illness and disability in place.

In order to choose the right risk cover for your needs, it is a good idea to speak with a financial advisor or broker to ensure that you have the cover you need. 

Risk cover helps to secure and maintain you and your family’s lifestyle by removing the financial burden if you are faced with a life changing event

How Much Should Your Retirement Be By The Age of 40?

Retirement is an important part of life for working South Africans, but often we find that we have a disconnection between the now and the future. Many of us will rely on our employers’ retirement fund in order to provide an income when we retire and for the majority of us, this is our only formal savings. However, more often then not this money is not enough to sustain us in retirement. 

This means that we should actually be saving more so that we are able to enjoy and have enough money to live on when we retire. 

Over a million retirement fund member’s behaviours and retirement outcomes were analysed by the Alexander Forbes Member Watch. It found that each year, 50% of fund members that retire get less than 20% of their pensionable salary as an income in retirement.  

There is then a disconnection between our contribution and what will happen when we retire. 

Most members fall into the lowest category for contributions. If you are saving 13% of your pensionable salary for your whole working life, then you will be getting less than R60 for every R100 earned at retirement as a pension income. However, if you are saving 17%, then R75 for every R100 is achievable. 

So how much should you have saved by the time you are 40? Based on a 75% replacement ration, at 40 years old, you should have at least 3.2 times your current annual salary saved up and by the time you are ready to retire at 65, you should have 12 or more times your annual salary. 

One way to increase contribution rates without affecting your take home pay is auto-escalations of contributions over time. This means that every year a small increase is implemented when your salary is increased, which will lead to an improvement in retirement benefits. 

Also, retirement funds are tax incentivised, which makes contributions a sensible way to save. The benefit then of contributing more is a greater tax deduction. 

Whilst your retirement money is in the fund it is able to grow without being taxed, so you will pay no tax dividends, no capital gains tax and no tax on interest. The only time you will pay tax is when you withdraw the funds. 

Retirement funds are usually flexible in terms of contributions, which means you are able to contribute more if you are able to. If you do not want to contribute more to that fund, then you are able to contribute to a tax-free savings account or a retirement annuity, which are both good options.

Planning and saving for your retirement is a must and even though you may feel that it is still ages away, you want to be able to enjoy your golden years and saving and contributing now will mean that you can.

Source: https://businesstech.co.za/news/banking/310214/heres-how-much-you-should-have-saved-by-the-age-of-40/

The Vehicle Finance Option that Is Gaining Popularity in South Africa

When you are looking to buy a new car, you will have a few options available to you in order to pay for the car. It is exciting going out to buy a new car, but you need to make sure you ask questions and understand your finance options and the purchasing process. 

Budgets are getting tighter and as a consumer, you will need to understand all your options before you buy a new vehicle, so that you can get the best deal and one that you are able to afford. 

A popular vehicle finance option that is growing in popularity in South Africa is Guaranteed Future Value (GFV).

This option appeals to those that are looking to avoid any risks at the end of the term and with this option, you are able to drive a new vehicle every three to four years.

Customers need to know what options they have available, so that they are able to make the best financial decision, especially as the country’s market is constantly changing. 

As soon as a vehicle leaves the showroom floor, it will start to depreciate in value, which means it will start to lose value. A GFV plan helps you to calculate what the future value of the vehicle will be as long as the condition, mileage and maintenance agreements are adhered to. Consumers can plan ahead and know exactly what their car will be worth once the contract period, which is usually three to four years, has ended. 

At the end of the contract, the customer can either enter into another GFV deal, own the car by settling the outstanding amount or return the vehicle and walk away as long as all terms have been met. 

Apart from GFV, there are other vehicle finance options available. 

The first of these is instalment finance, which is a straightforward option. The monthly repayments are determined by the cost of the car minus any deposit that has been made. The term of this option is generally between 12 and 72 months. You will pay lower monthly instalments when you go for a longer term, but you will be paying more in interest. 

The other option is paying instalments each month but with a balloon payment. This is similar to the above, however, with this, you will only finance a percentage of the total that the vehicle costs and the remainder will need to be paid at the end of the deal, which is the balloon payment. You will benefit from lower monthly instalments, but at the end of the contract, you will have a debt that will need to be settled or refinanced. 

How to Create an Emergency Fund and What are the Benefits?

You have probably heard the term emergency fund a lot and that you need to have one, but if you have no idea how to create an emergency fund or the benefits thereof then keep reading to find out more. The fact is an emergency fund is there for when an unexpected emergency crops up and you need funds to pay for it. By planning ahead and having an emergency fund in place can help you from falling into debt

emergency fund

So how do you create an emergency fund?

Get Your Budget Sorted

As soon as you are able to, you should start saving and any amount no matter how small is better than nothing at all. Once you get into the habit of saving, it will become easier. 

If you think you will struggle to manually put money into a savings account every month then you can arrange a debit order, so that your savings are debited from your account with other debit orders and you won’t need to worry about making a deposit each month. 

What Is The Best Account for an Emergency Fund?

It is pretty easy to start an emergency fund as you will only need to open a separate account and put money into it. The account should be accessible, reliable, safe and from a reputable institution. 

However, your savings can lose value if it is placed into account that doesn’t have an interest rate that matches inflation. You need to put your fund into an account that earns at least 6.5% interest. 

The next thing is that your account has to be accessible so you can access funds when you need to. There are savings accounts that can make it difficult to get your money when you need it, so look for an account that allows for instant transactions without penalties and a good interest rate. 

So, now that you know how to get started with your emergency, it’s time to discover the benefits…

The Benefits of an Emergency Fund

Having an emergency fund is essential to protect you from any unexpected expenses that may crop up, but an emergency fund can benefit you in other ways. 

It Can Grow

One of the major benefits of having an emergency fund is that it can grow with interest when the money is just left to do its thing. The more that you have in your account then the more interest it will earn, but the type of account will determine how much it will earn. 

32 accounts have high interest rates, but you are not able to access the funds quickly without having to pay a penalty. You should shop around for a savings account and find one that offers instant access with no penalties and a good interest rate. 

emergency fund

You Can Avoid Costly Debt

Large unexpected expenses can come at any time and they are usually urgent expenses like a car repair, vet bill, roof repairs and so on and these are not costs that we usually budget for.

If you don’t have an emergency fund in place then you will have to use credit, which will only increase the cost of the expenses down the road. 

With an emergency fund, you are able to cover these expenses without having to resort to a loan. Or it may partially cover the cost, so you can take out a smaller loan, which will reduce your debt. 

When You Have Savings Getting a Home Loan Can Be Easier

When people start looking to buy a house they put a lot of emphasis on their credit scores. Whilst your credit score is one of the most important factors in getting a home loan approved, you need to know that when you apply, a lender will also look at your finances. 

Having savings shows the lender that if anything were to happen like a job loss, you will still be able to make the repayments. Savings can also lower your risk status as well as the interest rate on the loan. 

Sleep Easy

Having a solid emergency fund in place can give you peace of mind and you will sleep better knowing that you are able to manage any unforeseen expenses. When you are able to minimise financial stress, other areas of your life will improve. 

Creating an emergency fund is a practical way to use your money and putting money aside each month can help you to prepare for those life surprises. Get started now and start saving and enjoy the benefits of having an emergency fund in place. 

Discovery Bank Is Coming and Will Be Competitive

Discovery Bank has gained some buzz as a new bank in South Africa and with that in mind, they aim to make themselves competitive in terms of its fees, interest rates and rewards. 

Source: discovery.co.za

Adrian Gore who is the Discovery Chief Executive said that they conducted research on banking fees. The research was based on 12 000 clients, 611 000 transactions and R800 million in transaction value.

From the research, it was determined that consumers pay on average a monthly fee of R206 per month. The survey showed that this average would differ according to income with low-income earners paying about R132 per month, middle-income earners paying R214 per month on average and high-income earners pay on average R309 per month. 

Discovery Bank will be offering basic transactional accounts as well as structured accounts that would incorporate transactional and savings accounts and credit cards. 

Discovery 1, Discovery 1 Plus and a Vitality Savings account make up the offering from Discovery Bank. 

The first of these, Discovery 1 will be a basic transactional account that would offer a savings account and a credit card. 

Discovery 1 Plus will be on a bundled basis, which means that consumers will be charged on a pay as you transact basis. This would include savings and transactional accounts, a credit card and dynamic interest rates. 

The Vitality Savings account will have zero fees, Vitality cashbacks and rebates that would be paid into the account and a dynamic savings rate.

By June this year, Discovery Bank aim to launch its healthy banking and their family banking. With the healthy banking product, healthcare benefits would be offered to Discovery Bank clients and family members can take advantage of the family banking benefits.

The survey also showed that customers with a positive balance in their accounts received zero or very little interest with the exception of one or two banks. Discovery plan on offering a reasonable interest rate on positive balances. This could be a 5% rate, but can be possibly 1.5% higher depending on a client’s vitality status. 

As it stands Discovery Bank has already started rolling out their product offering to certain members. So far, 50 000 people have come forward to open bank accounts, which include Discovery staff, Discovery cardholders and members of the public that applied for early access. Gore is hoping that by June, tens of thousands of people will have joined and then they will be ready to open for new business. 

Discovery Bank is set to open fully to the public by July. 

Also, there will be a Vitality Money loyalty program that would range over 5 levels. The bank would also be offering dynamic saving rates and borrowing rates depending on the clients’ Vitality money status. 

Article Source: https://city-press.news24.com/Business/fees-rewards-and-interest-rates-make-discovery-bank-competitive-20190405

Silly Things to Do with Your Money

There are some financial transactions that can be considered silly as these financial mistakes can lead us to lose some of our money or even end up in fines or penalties. Here are some of these silly things that people do with their money and that you will need to avoid. 

Saving Money in a Low-Interest Account

We all know that we should be trying to save money and many of us will have some cash in a savings account, however, a good proportion of us will allow this money to sit in a low -interest account.

You could actually be earning more on your savings. With a low-interest account, you will won’t really see your money grow above inflation. Do some research and find higher interest paying accounts that offer safety for your money and it will soon start to grow. 

Allowing Ourselves to be Squeezed by Tax

There is a number of increases that are already in effect or will be soon. These include the increase in fuel, increases in alcohol and tobacco and increases on luxury goods like electronic equipment, motor vehicles, cosmetics, smartphones and perfumes. The levy on plastic bags and incandescent light bulbs has also increased plus the tax on motor vehicle emissions. Not only this the sugar tax has also been implemented in the form of a health promotion levy which taxes sugary drinks. 

However, there is a little relief as the top four income tax brackets experienced no adjustments and the bottom three experienced a below inflation adjustment. 

With all these increases, you can see that it be time to pull in your belt and cut back on fizzy drinks and luxury items and look for smart investments like a tax free savings account. It is a good idea to get financial advice so you know what is best to do with your money. 

Spending Too Much When We Get Paid

There is nothing better than that feeling when we get our pay cheque, which is usually followed by the urge to go out and spend. We also have the tendency to do the same when we get a large sum of money come in like a bonus or a tax return. 

Whilst we are allowed to spoil ourselves, we should only indulge once in a while and keep a chunk of our money in savings or to save for something practical. 

A good rule to follow is that 20% of your income should go towards savings, 50% should be allocated towards necessities and 30% should be used on the things you want. By following this you should be able to create a good chunk of savings. 

Using Debt to Pay Debt 

About half of South Africa’s credit-active consumers are over-indebted and many will get into a debt spiral because they are using one loan or credit card to pay off another and so on. 

Debt may feel like a losing battle, but it can be overcome. The first thing that you will need to do is stop using all forms of credit. 

Next, tackle one debt at a time and try and pay more on this debt than the minimum and only pay the minimum on other debt you may have.  Once you have cleared that first debt, move on to the next one and so on. If you are struggling with debt, then you can seek the help of a debt counsellor. 

Not Saving for Retirement

Many of us fall into the trap of thinking that we have plenty of time to save for retirement and some of us will cash out our retirement fund early for various reasons. However, you should never cash out your retirement fund no matter what happens. You should start saving for your retirement as soon as you start receiving your first income. 

If at retirement, you receive a lump sum then speak with a financial advisor to set out a plan for your money so that you can enjoy your golden years. 

April is Set to Be a Tough Month for South Africans

This month, South Africans can expect a number of price hikes that will take their toll not only on consumers but also on the already suffering economy. 

From April, South Africans can expect a petrol price hike of R1.34 per litre for 93 octane and R1.31 per litre for 95 octane in inland provinces. Not only that the General Fuel Levy will be kicking in and going up 5cents per litre and the Road Accident Fund Levy by 15cents per litre. 

This means that South Africans will be dipping even more into their disposable income to pay for petrol and for most people it could mean spending a lot more money, which means they will spend less elsewhere in the economy. 

April is set to be full of price shocks and it won’t be good for economic growth. Firstly, the inflation rate will be taken higher and the second quarter growth rate will be suppressed. This also comes after load shedding that added further strain to the struggling economy. 

South Africans with their own cars will feel the impact of the price hike immediately whenever they fill up. Also, the prices of other modes of transport will also rise as the increased costs work through the system. 

Not only that the same will go for the prices of most things, especially food where a large portion of the costs is transport related. 

On top of this, at the end of April, South African will also be paying 9.41% more for electricity, which was announced by the National Energy Regulator of South Africa earlier this month. 

Generally, when there is an increase in fuel and electricity prices, retailers will immediately put up their prices even on stock they already have before the costs have worked through the system. 

It is then advised that consumers start shopping around and use the internet as well as advertisements in local newspapers as a guide. If you are able to find the same thing cheaper somewhere else in your area, then buy it there. 

The Carbon Tax will also be implemented from June 2019, where you can expect another 9 cents per litre added to the petrol price and 10 cents per litre for diesel.

So get ready South Africa, there seems to be some tough times ahead. 

Article Source: https://www.fin24.com/Economy/petrol-price-shock-april-will-be-tough-for-sa-20190331