My road to 500k - TFSA

 

Basic Financial Plan

Tomorrow is 2024, its also a Monday…so why not start tomorrow!!

So here’s your guide to basic personal finance management in 2024!

1.     Draw up a monthly budget

We all hate this step, but it is necessary – you can just do it once off to make sure your fixed monthly expenses are less than what you earn. You can always update it when your personal situation changes, e.g., starting a new job with a different salary or having a new expense like a new baby, new car etc. There are so many free budgeting apps available. My personal favourite is 22seven.

 

2.     Have a debt repayment plan:

It’s not necessary to pay off all your debt before you start saving or investing, especially if you can comfortably keep up with your monthly re-payments without getting into more debt. Try and get rid of as much of unsecured debt as possible (credit cards, store accounts, personal loans etc.). The DEBT SNOWBALL strategy (made popular by Dave Ramsey) is a great way to approach your debt.

 

3.     Be adequately insured:

Medical Aid / Car / Household / Life / Death / Disability / Income Protection etc. Insurance can be quite costly but being without it is dangerous and can set you back years financially if for example you have to continue paying for a car that was written off in an accident or replace a burst geyser together the resultant water damage to your house. And we’ve all heard of people who get sick a few months after cancelling medical aid or have a car accident the month their insurance premium doesn’t go off. Just don’t risk it.

 

4.     Have an emergency fund:

Most finance gurus recommend 3-6 months’ worth of living expenses for an emergency fund. Choose whatever figure suits you and your lifestyle and keep it in a simple savings account with your bank or an access bond if you have one. What’s important is that the money is available immediately when you need it. Have a debit order going into this account if you don’t have all the money upfront. I sleep better at night if my emergency fund is at R100 000. Don’t forget to factor in your spouse’s financial emergency needs as well (yes, it will be your burden if he doesn’t have an emergency fund). If you have extended family members that you are supporting financially, you might want to factor them in as well, but please remember to create boundaries as to whom you assist in a financially emergency.

 

 

5.     Have money in a savings account:

Saving for an expensive ticket item like deposit for a 2^nd property or a car. Also, for the nice things in life – travel, kid’s birthday parties, le Creuset pots, and that New Years Eve trip to Dubai. This money should also be in a simple savings account or something like a money market account which usually gives a slightly better interest rate. Again, you decide on the amount, but be careful to not let this amount get excessively large because you don’t want to be sitting with too much money in cash if you won’t need it in the next 2 – 3 years. If you don’t use up this money or it becomes excessively large, you can transfer it to one of your investment accounts.

 

6.     Have retirement funds:

Another topic which we all hate is retirement. Make sure you have an adequate amount going into your retirement funds monthly, whether through your employer’s provident/pension fund or an external Retirement Annuity (RA). Remember that retirement fund contributions are tax deductible so you will always get some of the money back when you do your tax returns. Please don’t ever cash out your retirement funds when changing jobs, the tax implication is just not worth it. I know you think you can make the money back, trust me you won’t.

 

7.     Have a TFSA (Tax Free Savings Account):

This is my favourite investment vehicle. Please see my previous blog post on this topic here. If the lifetime limit of contributions remains R500 000, it will take you about 13yrs to reach the maximum. Don’t touch this money, it will supplement your retirement, or your early retirement, or even varsity fees for the kids. The point is to just let it grow and enjoy tax free spending in the future.

 

8.     Have a Discretionary Investment portfolio:

Open a discretionary investment portfolio. Have a monthly debit order going into this account and buy Exchange Traded Funds (ETFs). There are many platforms available to you, I use Easy Equities and have also used ETFSA in the past. Both these platforms provide a lot of education for new investors. There are may other great platforms out there, please do your research. You can start buying individual shares when you have done some research about which companies you want to invest in. Start subscribing to finance blogs, attending webinars, YouTube, and listening to podcasts. Follow finance related pages on social media. The plan with invested money is to one day live off the dividends or growth in the share price, so you are not touching this money any time soon, especially not in the next 5yrs.

 

 

9.     Do a quarterly review of your finances:

This is to make sure that your assets/investments are growing, and your liabilities are decreasing. Once you have this flowing you can just do it twice a year. Budgeting apps like 22seven are great for this, you can also just use a simple excel spreadsheet like on the below photo.

 

 

10. Have a will:

This is not an easy one, but you don’t want all your hard-earned wealth landing in the wrong hands or dependants squandering it in a few months (this actually happens a lot). You also don’t want your minor kids’ inheritance being transferred to the Guardians Fund, aka the government. Remember that we are trying to build generational wealth.

 

11. Have a side hustle:

Eish…. I don’t have much to say here, LoL! An extra stream of income is ideal (even a necessity) in these hard times. Would love to hear your ideas in the comment section.

 

12. Open Investment accounts for the kids:

Once the side hustle money starts flowing in and you’ve mastered steps 1 to 11. Even if it’s a couple of hundreds every month as a start, it would be great to give the kids a head start in life. This money can help with university fees, deposit for a flat, or to buy a 2^nd hand car in varsity, or simply left to grow exponentially.

 

 

Cheers to 2024!  

 

#SheKreatesWealth

#RoadToFinancialFreedom