#96: Your money or your life The Fat Wallet Show from Just One Lap

Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Sign up here to receive an email every time a new show goes live. This is another themed-by-serendipity episode. Last week Edwin mailed with a dilemma: how do you choose between being a good citizen or family member and having money? Whatever you spend on your family, kids or pets or donate to charity is money not going towards your savings goals. Does that mean you should forego those things altogether?
Money and morality are closely linked, but so is money and health, as Christoff pointed out. Having a lot of money but never having any fun is completely pointless. A lot of money at the expense of having children is not going to make you happy (if you want children). Sitting on a mountain of money and never helping anyone else is going to bankrupt you morally. Spending your life trying to get rich but neglecting your health is going to lead to sickness in retirement. What’s the point of that?
We discuss strategies to navigate these questions and completely fail to choose a winner for Sam Beckbessinger’s Manage Your Money Like a F*cking Grownup giveaway. Something to look forward to next week!
Win of the week: Jacques Kasselman. He found us by accident on iTunes and immediately panicked. After reading his mail I realised that he actually didn’t need to panic at all.
Where to start to get on track? I think the best thing would be to get rid of my debt of over R1500 a month, excluding interest on my vehicle loan.
I started paying off my debt by having a liberty investment I had for 6 years (R500/pm - 1.67% growth above what I put in) pay out and pay off my most expensive debt first. That's R700 that can go to the next card/account and then the next and so on.
Is this the right strategy or should I rather look for somewhere else to invest that money, eg. TFSA, ETF and slowly pay off the debt over time?
The way I understand from what I have learned from you guys so far is get rid of debt, then create an emergency fund while simultaneously slowly starting to save/invest and increasing the savings/investing part as the emergency fund gets closer to 3 months salary.
TFSAs
SARS gives us R23,800 tax free interest already. Is it still beneficial to contribute to an TFSA at possibly lower returns if we are still far from reaching that limit? Saving the R500,000 cap for when one day we pass the R23,000 limit? Reaching the R500,000 limit would take about 15 years if you contribute the max of R33,000. As I am 34, I still have 31 years left if I am unable to retire early.
PENSION
My employer requires 22.5% pension contribution monthly, deducted from my salary (me=7.5% company=15%). At the moment its split between Allan Gray and the company fund.
I plan on increasing the percentage towards retirement to max as soon as I can get the rest in order, or at least a little better.
Stefan responded to Frank, who wanted to know where to keep his Lazy system cash while he waited for entries.
I have four EasyEquities accounts and I get interest on all cash in my accounts. There’s a cash management fee, so it's not the best cash account, but it's not like I'm getting nothing.
Fred has an interesting question about TERs. He is invested in an Allan Gray Balanced Fund through a financial planner. The TER of the fund is 1.44%. In addition to that, he pays an admin fee of 0.40, an advisor fee of 0.50% and a management company fee of 0.79%. Just for the privilege of buying the fund he’s paying 1.69%.
I looked up the fund costs on the Allan Gray website, and I have some bad news. The TER is 1.45%, but excludes “other expenses” of 0.02%, VAT of 0.15%, and transaction costs of 0.07%.
3.38% total cost.
The problem is, you don’t see the TER. It costs you money, but you don’t see the money.
Pieter is putting his emergency fund to work. He banks with FNB, and he’s really made the most of that infrastructure.
I have a cheque account that my salary ge