Your Game Plan to Be Debt Free by December

Are you like many South Africans that are currently paying off credit? In 2020, settling outstanding credit should be a priority for consumers according to the National Credit Regulator. However, this task might seem daunting, but using the snowball strategy could be the way for you to pay off your credit and start the new decade debt free. 

With a plan in place, you can pay your debts off faster, saving you interest and increasing your monthly disposable income.

How Snowballing Debt Works

With the snowball method, you start paying off the smallest debts with the highest interest rates first, which will then release more funds to tackle your bigger debt. A series of small wins will motivate you through your debt pay off. It will make debt seem more manageable and you will have a way to gain control. 

How to Start

The first thing to do is to list your debts in order from the smallest to the biggest. Make the usual minimum payment on all your debts apart from the smallest one, as you will want to pay more towards this one, so that it can be paid off as quickly as possible. Once the smallest debt is paid off, you will have extra funds to use for the next smallest debt. Continue in this fashion until all debts have been paid off. 

Why Does Paying Debt Off this Way Work?

With this method, you are paying off smaller debts, which usually have higher interest rates, which will then free up more money that can be used to pay off the bigger debts, so you will see results a lot sooner. It will also force you to focus on getting your budget from the red to the black. 

More Money Management Tips

There is a number of money management tips to help pay your credit. Here are some top tips for 2020 for managing your money. 

You should only take credit for the right reasons and ask yourself if the value of the item will outlive the credit repayment period. If you are looking to buy a computer, for instance, for your business, then you will be able to generate income that will continue long after you have repaid the credit. 

You need to compare the total cost of credit when taking a loan. Many people will only compare the interest rate, but you need to also look at other costs like admin fees and credit insurance. 

If you are deep in debt then you might want to consider a debt consolidation loan, where your debt is combined into one single loan, which has a lower monthly repayment amount and you only need to keep track of one payment and one interest. 

You will need to settle your full outstanding amount on your credit card if you want to take advantage of the 55-day interest free period. This means you need to clear the balance before the 55 days interest free is over.

A good rule to consider is the 50/30/20 budget. This is where 50% of your income goes towards your needs like utilities, groceries, insurance, medical aid and so on. 30% of your income goes towards your wants like shopping, dining out and hobbies. The last 20% should be used to pay off debts and savings. 

Make this the year that you get out of debt and stay out of debt, so you can be financially healthy.

Do You Want to Invest in Gold but Don’t Know Where to Start? Heres How

Amid the US-Iran tensions, gold kicked off the year approaching a seven year high following an impressive performance in 2019. If you are interested in investing in gold, then there are a couple of ways to go about it. You can either buy gold in its physical form or you can choose to invest in shares that are linked to gold. 

If you choose to go the physical route, then the asset includes medallions like the Mandela Medallion and bullion coins. With this, you would invest in the bullion value as well as the value of the coin itself. With this investment type, you get the bullion value plus any profit that is linked to the collectability of the coins. 

There is also the Krugerrand where the gold price is in dollars and the dollar to rand exchange rate will need to be considered. Investors will still make money even when the rand depreciates as long as the gold price stays steady due to it being protected against both rand and dollar inflation. 

Your other option is to invest in gold shares where you will need to consider more than just the price of gold. Investors will need to consider factors like the exchange rate and the management and operation of the mines as these will influence the profitability of the company concerned. 

David Melvill, an independent investment advisor says that the higher the risk than the higher the return, but it can also lead to the greatest loss, especially if you have a short term investment horizon. Since the 31stDecember 1999, Krugarrands gold has delivered a 12.7% per annum return. For gold bars and the ETF, this serves as a good guideline. 

Gold doesn’t always create an income, but it is thought as a safe bet for investors particularly when there is turmoil. The main reason as to why gold is considered to be a key investment is its insurance against market collapse according to Melvill as it has the potential to protect against rand depreciation. 

Gold as a commodity retains its value as the price of gold goes beyond that of inflation and hyperinflation even if a country’s currency loses its buying power according to Melvill. 

Gold is your best insurance even in the most uncertain times whether its politically or economically. In terms of real money, it is one of the best ways to make sure that your money doesn’t lose its purchasing power and it offers great protection against inflation. 

As a South African, if you put money into gold then it will guarantee bigger benefits when the rand weakens against the dollar as gold is priced in dollars, so when the rand weakens the price of gold in rand terms increases. 

However, you shouldn’t invest in gold alone. Melvill says that is best to have exposure to all four assets classes, which are property, fixed interest assets, hard assets and equities. You need to have eggs in different baskets and according to Melvill, you should have 5-10% exposure to gold. 

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Your Future Self Will Thank You with These 4 Investment 2020 Resolutions from a Financial Advisor

Many of us set resolutions in the new year, but over time these seem to fade, because we lack the discipline to achieve them. However, when it comes to financial goals, you shouldn’t get caught up in the past says Schalk Louw, financial adviser at PSG Wealth. With the new year, you should focus on making better financial decisions and here are some guidelines from Louw that will help you to achieve your financial goals in 2020. 

Have and Set Goals

You need to first identify what it is you want to achieve and why reaching those goals will benefit you, whether its how much you need to retire comfortably or an estimated cost for your next December holiday. Know what your financial goals are and if you need help then get the advice of a financial expert as they will be able to guide you towards your goals. 

Have a Plan

Often resolutions fly out of the window as soon as you realise that you will need to make cutbacks to save money, so you push your goals off for another year. However, your plans should be realistic so that your goals are achievable. It might be impossible for some to start by saving R1000 per month so that they can reach their goals in step 2 of their plan, so rather start with R500 instead and have the goal to increase this amount during the year or every year. 

Invest the money you save that has a good growth rate after all, compound interest is your friend. 

Have a Support Network

Get your family and friends on board with your resolutions, so they know what you are trying to achieve. Going out and spending money is fun, but those extra savings can make a huge difference to your investments future value. Your friends and family should be supportive and may even follow in your footsteps. 

Keep an Eye on Your Progress

Keep an on your statements and check them to ensure that your investments are showing adequate comparative growth. Also, look at your investment costs because any saving in these can lead to a boost in your investment performance. If you experience any life changes or financial changes then contact your financial adviser to ensure that your investment strategy is still right for you. 

Louw says that if you can commit to embracing the guidelines above then you will give yourself a much better chance of achieving your goals. 

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Government Trying to Keep SAA in the Skies and are Looking for Funds and a Partner

The government is trying to keep SAA in the skies and even with its commitment to the SAA business rescue process, they have not yet been able to fund R2bn. The department of public enterprise is trying to raise funds and is working with the National Treasury.

On Sunday evening, a statement was issued by the department that reiterated its commitment to the business rescue process. This comes after reports last week where business rescue practitioners said the required R2bn has not yet been received whilst the airline is facing a cash crunch. 

In December last year, SAA was placed under business rescue. The process required a R4bn commitment as a post-commencement finance (PCF) by both the government and creditors. 

Siviwe Dongwana and Les Matuson, the business rescue practitioners met with creditors in late December and in the past week they have met with unions to receive their proposal’s on the business rescue plan, which will be finalised in February. 

Also, this past weekend, the Department of Public Enterprises met with practitioners as the airline is facing liquidity limitations. 

In line with the PCF, the Department of Public Enterprises is trying to raise funds and are working with the National Treasury. They went on to say that they are determined to contribute to the business rescue process so that they can reduce job loss and to see SAA become rejuvenated.

The department also said that they want to break the pattern of bailouts. The business rescue process is aimed at helping the government reposition state assets so that it does not continue to burden taxpayers and the fiscus.  

The objective through this exercise remains to create a competitive, sustainable and efficient airline with a strategic equity partner. They added that the government is still working with business rescue practitioners with the goal of being a modern and restructured airline that will bring in more tourists and for the airline to be that of efficiency and innovation. 

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Is There Finally a Credible Plan to Fix Eskom?

We have all been waiting for Eskom to have a plan and now a solution might be here to aid the old and unreliable coal power stations.

Jan Oberholzer, Eskom chief operating officer said in an interview with Engineering News last week that before the end of the month, the board would be considering a new approach in how to maintain the fleet of coal power stations. 

The thinking is that Eskom would remove a number of units for service for an extended period of time, so that it has the space to do proper maintenance. Oberholzer went on to say that he thinks that Eskom needs to be bold and tell the public that they have 25 000MW 24/7, 365 days a year and to take whatever buffer there is to maintain the units. He also said that units that need any maintenance should be taken off so that they can be maintained properly.

Koeberg is maintained rigorously and Oberholzer said that the same respect needs to be given to the coal units. 

At the moment maintenance of the coal fleet is continuously being deferred which results in poor performance and reliability of the plant. Maintenance is already shifted out as the utility faces extremely high levels of plant breakdowns, which comes less than a month after we reached stage 6

The problems that are currently being faced by Eskom have been years in the making. The scenario of committing to a guaranteed 25 000MW of supply will give the board a sliding scale of options to deliberate and Eskom will have the room to do maintenance on around 18 000MW of plant. The bulk of the 13 000MW to 14 000MW of plant that is experiencing breakdowns will then effectively shift into a planned maintenance mode. The backlog on maintenance is so large that this strategy would need to be followed for about two years. 

So what are the possible scenarios?

Committing to a reduced level of supply will leave the country with two options. 

The first of these options is that we enter a state of almost permanent load shedding where the shortfall is made of power rationing with the level determined by how much power Eskom has committed to supply. 

The second option is to bring a new emergency supply on stream as quickly as possible. The Department of Mineral Resources and Energy has started a process to find a way to look at sorting the short term supply gap by focusing on demand side management and new generation capacity. The request for information on the process to gain between 2 000MW and 3 000MW has been published with a deadline of January 31st. Further rounds of renewable energy procurement have stalled. 

If the maintenance strategy is pursued, then there will most likely be a combination of these. However, Eskom is known for unreliability and it is difficult to see that will be able to constantly supply 25 000MW with plants undergoing long term maintenance that can’t be called upon to plug the supply gap. 

At the moment a process seems to be underway by the presidency to strengthen, replace and overhaul the Eskom board, which could mean that the maintenance strategy might not get discussed this month. 

Eskom is not able to commit to this strategy in isolation and it will require political will from the presidency, the minister accountable for Eskom and cabinet as well as the ruling party. It will also not be easy to sell this plan to South Africa, but the public is frustrated and accept that it’s not just working right now. 

The treasury will also have a say as they will need to sell the idea to the rating agencies and will probably have to provide further financial support to Eskom. Removing a substantial level of supply for a period for two years will have an impact on Eskom’s revenue and its income statement will weaken further. 

When it comes to Eskom there are no easy decisions, but the fact is, time is running out and something has to be done. 

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Cashing Out Your Retirement Savings…Watch Out for Hefty Tax Fees

If you are in the midst of moving company, then you need to be careful with what you have built up, which includes your retirement savings. It can be confusing to know what to do with retirement savings that you have accumulated through your employer when you are moving jobs. 

Some see this a chance to cash out a nice lump sum that they can give themselves as a bonus, that they can use for a holiday or even a down payment on a new car. However, this type of decision will probably be financially destructive in the long run. 

If you choose to cash your pension out when you change jobs, then you will lose your accumulated savings as well as any returns you would have gained on this during the rest of your working life. This shortfall will be extremely difficult to make up later in life and those years of savings will be gone. If you do find that you are in financial difficulty and you have no other choice apart from dipping into your retirement savings, then only cash out a small portion and leave the rest for the long term according to Chris Eddy from 10X Investments 

In South Africa, it is very popular for us to not persevere with 70% to 80% of fund members having cashed in on their savings when changing jobs. However, when you choose to cash your pension out then you may pay hefty tax fees. 

The tax free portion that you can withdraw before retirement date is R25 000 and anything more than this is taxed at 18% or more. Instead of withdrawing the lot rather transfer your accumulated savings into an alternative retirement savings fund like a preservation fund, so it has a chance to grow. You will then be able to benefit from compound interest, which is key. 

It might be tempting to cash out your savings especially as 2019 has been a challenging year and the cost of living is continuously on the rise, but resisting this urge will help to take your savings to the next level. 

When you see that your balance statement is in ten of thousands or even hundreds of thousands then it can be very tempting to take it out when you have bills to pay and debt to pay off, but you should be looking at your retirement savings as precious. It is after all your retirement savings that will help you to preserve your standard of living in retirement. 

Review Your Insurance Policies in the New Year

Review Your Insurance Policies in the New Year

The silly season is over and now we have Janu-worry in front of us. You may have overindulged and overspent over the holiday season, which makes the New Year the perfect time to look at your insurance cover. 

insurance quotes

If you want to start the New Year on a good financial standing then you will need to get your finances in order, which also means you need to ensure that you have the right insurance coverage.

This may sound like a pain, but reviewing your insurance policies or making sure you have the coverage you need doesn’t have to be a long and painful process. Doing this in the New Year could even lead to savings and makes sure you have the right coverage.

So, what should you be looking for when you review your insurance?

Having Enough Coverage

As we grow so do our needs and things may change in our life like a new baby, a new house, having more valuables and so on. These life changes can have an impact on your insurance needs. Having a baby or moving house could mean that you need more coverage, so you need to make sure that you are adequately covered. In terms of life insurance, you will need to make sure that you have enough coverage to cover your wishes if anything were to happen to you. 

Also, you may have purchased items throughout the year that add more value to your home, which means you need to ensure that your home contents insurance is enough to cover these items as well if anything were to happen. 

It is also a good idea to go through your policies and check what is and what isn’t covered, so you don’t find yourself in a situation where you can’t claim from your insurance and will need to pay out of pocket. 

Having Too Much Coverage

You may find that when you are going through your insurance policies that you are paying too much. 

You may have over-insured your home contents or your car insurance and figuring out what you really need can help you to save money on your premiums. 

compare insurance

Time to Compare

If you feel like you are paying too much for insurance, then now is a good time to compare insurance providers, the cover they offer and at what price. 

Comparing insurance premiums doesn’t have to be a headache, as you will find sites that will do the hard work for you. With these sites, you just need to enter your details and they will find you insurance quotes from reputable insurance companies that you can compare and choose from. This can help you save money and get the cover you need as well as making sure you are still getting the best deal possible.

It’s easy to become complacent and just renew your policies year after year, but premiums go up every year, so you could be getting a better deal somewhere else. 

Update Your Information

Another reason that you should review your insurance policies is to make sure they contain all the most recent and accurate information. The year may have bought some changes with it like you bought a new car, made renovations to your home, had a baby and so on. Your policies will need to reflect this information, so make sure everything is up to date because if it isn’t then you could risk having a claim refused. So take the time to review and update your policies. 

The new year is a good time for you to check and review your policies, as well as making sure you are getting the best deal for your insurance premiums. Shopping around is a good idea and making use of an insurance comparison site can save you time and money. 

War Talk and the Rand

According to Bianca Botes, treasury partner at Peregrine Treasury Solutions, the first full trading week of the new year will likely be a bumpy one after the killing of a top Iranian general at the end of last week in a US airstrike.

The rand is expected to come under pressure and Brexit and the US-China trade war will continue to be major market influencers as we start 2020.

After the assassination of Soleimani, a powerful Iranian general, the US and Iran fallout escalated, which saw oil going above $70 a barrel according to a Bloomberg report. 

On Monday, following a warning by the US State Department of an increased risk of missile attacks near energy facilities and military bases in Saudi Arabia, Brent Futures jumped by another 3%.

Threats of retaliation were repeated by Donald Trump if Iran were to do anything. He also vowed to place heavy sanctions against Iraq if they forced American troops to leave OPEC’s second largest producer, which resulted in a further price boost. 

Furthermore, Trump said that if Tehran reacts due to Soleimani’s killing then he is prepared to attack more than 50 sites and strike disproportionately. The Middle East nation has a score to settle with the US and would no longer adhere to limits on its enrichment of uranium. According to Bloomberg, the fallout has further deepened as Iraq’s parliament took a vote to expel US troops. 

The Iranian leadership has indicated that they will be mobilising its militia network across the region and they will most likely target US military installations and bases in the Middle East and Trump will be sending more troops to the Middle East. 

On top of these tensions that are affecting the rand, Eskom is still constrained, which led them to conducting power cuts over the weekend. 

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It’s a New Year, so it’s Time to Get Your Money relationship in Order

When it comes to your personal finances, the most powerful tool you have is the budget, which is also one of the least attractive for many people. This is often because find that budgets are demanding and restrictive. So, even though budgets are useful, they don’t always work.

Some people do not like the idea of having to track every transaction and being limited to what they can and cannot buy. These restraints are too much for some and they throw away their budget altogether and go back to their old spending habits. 

On the other hand, some people find themselves so determined to stick to their budget that they deny themselves any pleasure they could get from their money. They are obsessed about being responsible, which results in them not spending money on anything that isn’t practical or necessary. However, if you have worked hard to get your money then you do have the right to get some joy from it. 

So, how do you find a balance with your budget?

Balance Your Budget

Instead of having a strict budget, you need to create one that allows you more freedom but also helps you to regulate your spending. 

The main benefit of a budget is that you are forced into thinking where your money is going. Monitoring your transactions will show you your spending habits. You can also compare your spending to your income and determine if it makes sense to allocate the money you earn in the way you do. 

With a budget, you can make sense of your money and see where you are overspending and you will become more conscious about the way you spend. 

Be Mindful of Spending

Before you buy anything, you should take a moment and consider if it is something that you really need and if it is going to add value to your life. This can help you to avoid overspending and buying things that you don’t really need. 

Whenever you make a purchase, make sure you get your receipt and note down why you made the purchase. It only has to be a few words that state what it is for and how you felt when you spent the money. Review your slips after a couple of months, look at what you bought and consider if you still feel the same way about how you spent the money. This can help you to avoid bad purchases in the future. 

If you are hit with buyer’s remorse soon after the purchases, then remember that you can take the purchase back and get your money back. 

Going over your slips can help you to appreciate purchases that did enhance your life or please you and help you to avoid any purchases that were a mistake in the future. 

When it comes to having a good relationship with your money, you will need a budget, but it is also about recognising where you are spending money, what we are spending money on and if these purchases are worth it. This will help to guide you away from spending money on the things you don’t really need or want and rather spending on the things you do need.