A Simple Way to Budget

The ‘50/30/20 rule’ was coined by Elizabeth Warren, who was named as one of the 100 most influential people in the world by Times Magazine. If you want to create and begin your budget, then here are some recommendations on how to split your income. 

Your After Tax Income

If you are self-employed then you will need to differentiate between your personal and business finances. You should then pay yourself a salary into your personal account from your business finances. If you are a commission earner, then this is useful as your business income might vary month to month. The personal income that you have in your private bank account will then be your normal salary and will be treated as such. 

Track Your Money

You need to keep track of your spending for a month and write everything down. You need to keep track of all your home repayments and other bills as well as those smaller expenses like the morning coffee you get on the way to work, for instance, and so on. 

Know Your Needs

Next is to differentiate between your needs and your wants. Your needs are the payments that you have to make that will impact your quality of life. For instance, you need a home, you need to eat and so on, so your need payments will be groceries, utility bills and housing. 

Your car will also be a need, both the repayments and petrol as you use your car to get to and from work. If you don’t own a car, then you must include transport into your budget as a need. 

If you have a credit card that is carrying a balance, then the minimum repayment that is required each month is classified as a need because if you miss a payment then your credit score is impacted negatively and you might be charged late fees. 

The ‘50/30/20 rule’ states that 50% of your net income should be set aside for your needs. 

Cap Your Wants at 30%

Your wants will include things like dining out, haircuts, DSTV, movies, clothing and so on. You may find that you are spending more on your wants than you think, which is why it is a good idea to write all of these down. 

According to the rule, only 30% of your net income should be spent on your wants. 

Have a Financial Goal and Save

You need to think about what you are saving for. Are you saving for retirement, your kids education, to be debt free? At least 20% of your income should be going towards your saving goals. 

So Why Does the ‘50/30/20 Rule’ Work?

The rule keeps things simple and with your finances split into 3 categories with a maximum percentage attributed to them, you will know where your money is going each month. The rule is also flexible, for instance, if you spend less on your needs then you are able to save more, so you can make the plan work for you. 

Maintaining consistency with your finances each month is by managing your money each month. With the rule, you can save for your future but also have enough to enjoy life now and have your needs covered. 

Eskom to Be Allocated Much of R230 Billion It Needs by South Africa

In order for Eskom to remain solvent, they will soon receive a large portion of the R230 billion it needs over the next decade said South African president Cyril Ramaphosa. This announcement comes just four months after the National Treasury gave Eskom a three-year bailout of R69 billion and will place even more pressure on the government’s finances that are already stretched. 

Allowing Eskom to become insolvent isn’t an option as the utility supplies about 95% of the nation’s electricity and if it ceased to operate then the economy would be crippled. 

In his state of the nation address, Ramaphosa said that the financial position of Eskom remains a grave concern. With the current committed funding from the government outlined in the 2019 budget, Eskom will be able to reach its obligations until October 2019. 

A cross default would be caused on remaining debt if Eskom were to default on its loans. This would then have a huge impact on its already constrained finances. 

Eskom has been left with over $30 billion in debt due to an under-investment in new plants as well as years of management disturbances. On top of this, Eskom generates an insufficient income in order to cover its costs and the poorly maintained power stations held by Eskom are old and are not able to keep up with energy demands.

In the first quarter, the economy contracted an annualised 3.2%, which is mainly owed to Eskom having to implement a number of rolling blackouts, in order to avoid a national grid collapse. 

Tito Mboweni, the Finance Minister will give more details of the additional support that will be allocated through special appropriations bill in due course according to Ramaphosa. 

Article Source: https://businesstech.co.za/news/finance/324617/south-africa-to-allocate-eskom-much-of-r230-billion-it-needs/

What to Avoid When Looking for Car Insurance

In South Africa, it is not legally required for car owners to have car insurance, however, it is an important cover to have. Fixing a car after an accident can be expensive and car insurance is a good financial tool that drivers can have, which will protect them if this was to happen. 

car insurance

If you are looking for car insurance, then you need to avoid making these mistakes. 

Not Making a Comparison 

Petrol prices are unstable at the moment and the cost of living seems to have gone up in general, but when it comes to car insurance, you shouldn’t go for the first deal that you find and can afford. 

You will find that insurance companies have different offers to one another as well as different benefits and will charge different prices, so an offer that may seem affordable might not offer adequate cover. This is also true of more expensive options, just because it costs more it doesn’t mean that it’s a good deal. You can be over insured and pay for benefits that you don’t need. 

As with anything, you should find a range of deals from various car insurance providers that suit your budget and take a look at what each deal offers before you make your decision. The car insurance option that you go for should be affordable and offers the benefits that you need for your type of car and lifestyle. 

If you do not understand anything in the fine print or in the terms and conditions, then contact the insurance company and ask them to explain until you do understand the policy.

An easy way to compare car insurance quotes is to use a website that finds offers for you. These sites will ask for your details once and will then source you the best car insurance offers based on your needs and your car. This can make it easier for you to compare offers. 

Keep reading for more mistakes you need to avoid…

Just Taking the Cheapest Option

It is important to be able to afford your car insurance and it is an essential factor to consider when you are choosing your car insurance, but it shouldn’t be the only factor. You also need to take into consideration how much time you spend driving, where your car is parked day and night and if you are the only driver or not. 

Asking yourself these type of questions so that you can determine as to whether or not the cheaper deals match your needs and your potential risks is important.

The car insurance you choose will then need to be cost effective, meet your risk profile and offer adequate cover if you were to be an accident or if other events occur. 

Not Telling the Truth

You might be tempted to claim fewer driving hours, not having an accident record or that your car is kept in a secure location at night in order to try and get a cheaper rate. However, if you lie on a legally binding policy document then it could mean that your claim is rejected. Not only that the quotes you receive will be incorrect as they are based on false information. 

car insurance claim

This is also true if the information you gave your insurer has changed. For instance, If you now spend more time on the road because you have moved further away from work or if you move to gated a community and your car is now safer at night. If these type of changes have occurred, then it is advised that you update the information with your insurer as it may affect your monthly premium. 

Once you have found a policy that is best suited to your needs, make sure that you read the fine print and if you have any questions then ask these before you sign, so that you understand your policy. 

Once you are happy with your policy, your monthly premiums and what you are and are not covered for then you can sign and have the cover you need for your car and have peace of mind that if anything were to happen you are covered. 

There isn’t a Choice, South Africa will Have to Increase Eskom Funding

According to the National Treasury Director General Dondo Mogajane, South Africa doesn’t have a choice anymore when it comes to Eskom and will need to increase financial support, whilst pushing reforms at the state-owned power utility. 

In February, the company laden with debt was given a three-year bailout of R69 billion. However, Eskom chairman Jabu Mabuza and the finance minister Tito Mboweni have said that this just won’t be enough. 

In an interview meeting of the Group of 20 finance ministers and central bank governors in Fukuoka, Japan Mogajane said the decision is to be finalised, but there isn’t a choice. Its an issue of how much and when. 

Eskom is taking pressure as they continue to be in more than $30 billion of debt, where more than of this was guaranteed by the government. There is rumour that the state may have to take that over by a conversion into government bonds. 

Mogajane went onto say that in the next few weeks, the government will be sharing views on the kind of support and when as well as how they are going to synchronise the milestone that they are looking for. 

The director general said in return, the state would be looking for changes from Eskom. Their tax revenues are money that should have been meant for other things. 

Additional support for Eskom will probably put pressure on South Africa’s fiscal balance.  Eskom’s contingent liabilities have already been factored in by credit rating companies according to Mogajane. 

Article Source: https://www.moneyweb.co.za/news/south-africa/south-africa-has-no-choice-but-to-increase-funding-for-eskom/

The Rand is Expected to Get Worse

As it stands South Africa’s rand is heading towards its worst week against the dollar since October. Amid rising political risks and concerns surrounding the country’s economic outlook, technical indicators show that more pain is on the way for the currency. 

The gross domestic product data that was released earlier this week showed that this is the worst quarterly performance that South Africa has experienced in the three months through March since 2009. 

The African National Congress is currently facing infighting within its party over the mandate of the country’s Reserve Bank, which aggravated losses, which is leaving investors questioning if President Cyril Ramaphosa has the support he needs in order to advance his reform agenda.

On top of this, state-owned companies like Eskom and South African Airways are back in the headlines, but for all the wrong reasons, which has added to investor worries. 

According to S&P Global Ratings, South Africa might not be able to continue supporting Eskom. The state-owned airline, which is currently leaderless is searching for a new chief executive as well as in discussion with the bank over their debt terms. 

On Friday, the rand fell by 1.2% and traded at 0.6% weaker at 15.0891 per dollar by midday in Johannesburg. The decline this week was then to 3.4%. 

Until real progress is made at implementing structural reforms, the South African economy will continue to have a weak underlying trend and the outlook of such will remain challenging. 

It looks like the rand does have space to fall, which is shown in the rand’s relative strength index. This is a momentum indicator that shows whether a currency is overbought or oversold. The measure is still lower than the 70 level, which would signal to some traders that the dollar is overbought. 

At 14.98, it breached the 75.4% Fibonacci retracement level and the rand may target the September high of 15.70. 

Article Source: https://businesstech.co.za/news/finance/322123/the-rands-bad-week-is-set-to-get-worse/

How is Brexit Affecting South Africa after an Election and a Resignation?

Monday the stage was set for the two main parties in Britain to start their battle over a no-deal Brexit in the hopes that they will be able to win back those voters that left them for the new movement led by Nigel Farage and other smaller parties in the European elections. 

So what does this new turn of events hold for South Africa? In regards to creating a new trade regime that will allow South Africa a soft landing from Brexit, Britain is holding the ball right now according to the Department of Trade and Industry. 

In both countries it has been an eventful month. In South Africa the fifth government administration was dissolved in order to make way for general elections and in the UK, Theresa May announced her resignation a week ago. 

Spokesman for trade and industry, Sidwell Medupe said that trade relations between SA and the UK has gone unchanged. They are still in discussions with their British counterpart, that is led by George Hollingbery. 

However, in an attempt to improve government efficiency, President Cyril Ramaphosa announced that the Department of Trade and Industry would be merged with the Department of Economic Development. This will then mean that the remaining engagement will most likely be led by Minister Ebrahim Patel.

Medupe went on to say that South Africa is trading with the UK in accordance to the partnership agreement with the EU and that trade is governed by the economic partnership agreement. 

The UK is still part of the EU and in regards to the agreement their have been negotiations between the two countries with the aim of minimising any disruptions that may come from Brexit. 

The engagements with Hollingbery will not be affected by the resignation of May. Once the UK has left the EU they will be considered the UK and the aim is for South Africa to try and create an agreement before they leave. Medupe also said that these discussions are continuing but they are in an advanced phase. 

Article Source: https://www.fin24.com/Economy/South-Africa/an-election-and-a-resignation-later-how-does-brexit-affect-sa-now-20190531

Carbon Tax Eats into Petrol Price Cut for June

Over the past month with the South African rand and the international oil prices, petrol prices have been on the rise and now the dust has settled for June’s fuel price. This month it seems that the petrol price will remain stable according to the Automobile Association, who is actually predicting a price decrease of around 1 cent based on the month end data that was released by the Central Energy Fund. However, diesel will probably go up by about 24 cents a litre. 

This then means that 93 Unleaded inland will be about R16.47 and 95 ULP will be about R16.66 inland and R16.02 at the coast. 

However, these prices are not under normal circumstances as in fact petrol would have decreased by about 10 cents a litre and the hike on diesel would have been limited to 14 cents. The new Carbon Tax that was announced in the February Budget Speech has eaten up the decrease. This Carbon Tax is set to kick in at the beginning of June, which adds 9 cents to petrol per litre and 10 cents per litre for diesel. 

Of course the carbon tax has been highly criticised and Heinrich Volmink, executive head of The Organisation Undoing Tax Abuse said that a carbon fuel levy that doesn’t have a clear showing that it will be used specifically for climate change seems to be deceitful. 

The fuel price situation is not set in stone and will continue to unfold in the months to come as there are a number of issues that could impact oil prices further in 2019 and the AA has warned for further economic storms ahead. 

Article Source: https://www.iol.co.za/motoring/industry-news/june-petrol-price-cut-to-be-swallowed-by-carbon-tax-24253323