The Fat Wallet Show is a show about questions. It’s about admitting that we don’t know everything, but that we’re willing to learn. Most of all, it’s about understanding as much as we can to make us all better investors.
Phrases like, “I’m not sure” or, “Let me look that up and get back to you” or, “I don’t know” don’t exist in the financial services industry. If you ever had a financial question you were too embarrassed to ask, you know what we’re talking about. In this business, appearances matter, and nobody wants to seem like they don’t know how things work or what the outlook is for the buchu industry. It’s easy to excuse that little vanity, except that people in the investment industry are meant to service investors - people like you and me who need to figure out what to do with our money.
There’s no such thing as a stupid question in this show. If you have unanswered financial questions, this is your opportunity to have them answered in a way that even I can understand. Pop them to us at firstname.lastname@example.org.
What The Fat Wallet taught me (#245)
Like many of you, I have listened to every episode of The Fat Wallet Show. I’ve learned so much over the years, but I find it interesting that some lessons keep repeating. This week, Simon and I spend our last episode together reflecting on lessons we keep on learning. Think of this as the TL;DR version of 245 episodes of this incredible show.
Here’s what we know for sure:
Many people who listen to the show think their biggest financial decision is ahead of them when actually they’ve already made it: being an active participant in your own financial life is the best financial decision you’ve ever made. Emergency funds are more important than any other product we ever discuss, but you can’t tell because it’s boring. A bad plan is better than no plan. Time matters more than money. Lesegisha pointed this out using a kota as an example, so I also learned what a kota was. Fees matter at least as much as returns, if not more. Grant Locke explained why this is when OUTvest introduced its Onefee product. 100 years worth of market data support this. Because there are so many variables in the market, it’s worth being suspicious of people who sell certainty. Cash offers certainty. Fixed interest bonds offer certainty. Aside from that, forget it. “The best investment” doesn’t exist (but bad investments do). Taking positive action, keeping a close eye on things and learning as you go is the only way to do this. Start with what makes you comfortable and build from there. If that means a GIANT emergency fund and one fixed-interest bond in addition to your work RA, that’s as good a place to start as any. The habit of setting money aside matters more than where the money goes. There is no single right answer. In fact, there are as many ways to get to financial independence as there are people in the world. ETFs are the market. When ETFs try to beat the market, they are no longer the market. The harder they shout, the farther I run. Wealth building is either silent and slow, or extremely hard and slow. Just because someone says they’re doing something in the media doesn’t mean that’s what they’re doing. Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Tim
I feel like you are both good friends due to the millions of hours of the Fat Wallet Show I have listened to. I have been there from the beginning when I discovered your show in 2016 during the start of my financial obsession ( don't judge me for not writing, I'm an expert procrastinator).
Although living in Germany since 2018, I have been listening to your show religiously and a lot of what I have learnt is the bedrock of my financial strategies. In October last year, my world changed forever, when in the week of the birth of our first child, my partner and I both got Corona which was a complete nightmare. Now 5 months later, a healthy beautiful boy, 2-3 hours of sleep a night, I am emerging from the haze of these challenging last few months to get back to old habits. I turned on the Fat Wallet Show and was shocked and saddened to hear that you are leaving Kristia.
I just wanted to thank both of you for the amazing job you have done over the last 240 something episodes. You have taught me so much and done it in such a fun and enjoyable way. As a teacher myself, I hope that some of my students could have such an enjoyable learning experience as I have had with the two of you over the last few years.
It's worth looking into the bottom-of-the-range Discovery card.
The Gold credit card, on its own, is R60pm. If you want, you can add R15pm for Vitality Money. I would recommend adding the Vitality Money for the extra discounts and rewards it gives you. I'm attaching the Discovery brochure that explains the "dynamic discounts" (it's almost impossible to find this on their website, and almost impossible to understand the product without it, which is why I'm attaching it) as well as my spreadsheet showing h
Access bonds explained (#244)
If you’re new to this money business, access bonds will confuse you. Not only do we use the word “bond” to mean “lending money to the government” and “borrowing money from the bank to buy a house”. The access we’re talking about has changed over the years. As Simon Brown explains in this week’s episode, in the bad old days before the 2008 crash, banks used to give you a little additional spending money when you took out a home loan. Those days are long gone, but the idea prevails.
These days you can’t access the interest or principal repayments you’ve already made. You can only access additional repayments you’ve made to reduce your interest payments over time. For this reason, many people store their emergency fund in their access bond. It simultaneously reduces the interest you pay by reducing your principal amount outstanding and protects your cash from tax on interest.
In this episode we discuss the possibility of using your access bond to become your own credit provider.
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I am in the process of searching for a house and I often hear people saying that they use an "access bond" as an emergency fund. A friend of mine once told me in the past that I should never take up an access Bond because you never finish paying it.
Listening to a lot of podcasts I often hear people saying they use it to put their emergency fund and then they get the benefits to reduce interest. Am finding it difficult to understand how this works, can you kindly explain this to me and how it works practically.
I need to understand how I put money in the access facility, do I deposit it and will the interest reduce automatically?
Win of the week: Katrien
Just a short note to say thank you for the work you’ve done at Just One Lap. I’m one of the many thousands of people who drive to work on a Monday morning with a big smile to start our week. In addition to learning about personal finances, you guys lift our spirits and give us hope.
Moving towards pulling the trigger on the investment side so getting there...
TFSA for kids... (trustworthiness aside)
If I want to play catch up with their contributions (or mine) as we are all starting late (12 & 14 for them and 49 for me) I am aware of the 40% tax on over contributions, but surely in the long term their returns will work this off and they will be ahead of the slower sticking to the limit curve?
No.. I have not tried to spreadsheet this yet... My assumption is that the tax is on the input only?
The cost of moving retirement products (#243)
It has always been the philosophy of this show that a good question is more valuable than a good answer. It’s incredible what you can learn from a really good question, both about the topic and about the person asking the question.
This week, Frank had an excellent question about moving retirement funds. This question reveals, first and foremost, just how much Frank already knows about the market. It also reveals a thoughtful person who has found a balance between taking calculated risks and doing whatever he can to protect his assets.
In this episode, we address issues around the ethics of retirement product providers, loss aversion and rand cost averaging. All of that, from a single question!
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Frank
I have been contemplating transferring my retirement funds to OUTvest. I have some money with Allan Gray, some with Sygnia and most recently with EasyEquities. Combining all with Outvest will qualify me for the R4,500 fixed fee.
My concern is switching providers too frequently and whether the risk associated with the potential savings is too high. The time out of the market between the exit and the re-entry may result in losses. Is it worth considering? What happens if someone cheaper comes along next year and I'm tempted to switch again? My other concern is the potential manipulation by the provider that I'm transferring away from, the amount that went to Allan Gray from Old Mutual was significantly lower than the balance showing on the investment platform around the time of the transfer.
I had no control over what day the selling of the units happened and had no way of verifying whether the sale actually happened on the day they said. A number of weeks pass from the day you notify a provider of your intention to move away to when the move actually happens.
What prevents them from selling on day two after I notify them, but selecting the lowest unit price in the following days and reporting that to me as the day on which they sold my units? They could sell on 1st of the month for R50, but the transaction is only finalised at the end of the month (31st) - they could then see that the unit price on the 12th was R46 and report to me that my units were sold for R46 - giving them the profit (is this a kind of arbitrage?).
I'm conflicted about whether I should move to Outvest now and whether the benefit would be substantial or whether I should just leave the money where it is to grow and perhaps consider Outvest the next time I change jobs. With the bulk being in a Preservation Fund, what are the considerations I should take into account when combining it into my RA?
Sygnia had allowed me, at the time, to change the allocation of my provident fund to 75% SYGWD (MSCI World ETF) and 25% SYGP (Global Property ETF). My concern is that with the uncertainty around the changes, the online platform is now reporting that my investment is not reg 28 compliant. What are the risks? Whose responsibility is it to ensure that the provident fund is compliant (me or Sygnia). What happens in reg 28 compliant providence where there is "drift" in allocation (ie I may have had the correct percentage in equities during January, but price changes in asset classes may have resulted in "drift" where the asset value in that class is now outside the allowed percentage?)
In a previous episode Simon briefly mentioned that there may be scope to use available funds from a bond to invest in the market for returns that neat the interest. My current bond interest rate is 6.55% and I have a substantial amount available in the access bond portion. Could you discuss whether I should use those funds to buy ASHEQF? Am I correct in stating that 6.55% per annum is 0.55% per month? My logic says that as long as ASHEQF returns more than 6.55% per annum I should get out ahead. Thoughts?
Win of the week: Shumi
I am 33 years old, single, female with no dependents. I am not a cat, engineer or do
Passive income (242)
A conversation on our excellent community group had me wondering why we’ve never dedicated a whole Fat Wallet to finding passive income streams outside of investments. It took about ten minutes for the realisation to dawn on me: true passive income is a myth.
We often talk about side-hustles. “Hustle” is the operative word there, because we’re describing a second job. The appeal of working in your free time is the diversification of income streams and the potential to eventually earn your monthly income doing something you enjoy instead of your day job.
True passive income means you work at nothing but capital for the initial investment. It’s important to remember capital can be physical or it can refer to your time. We discuss the potential of online businesses and the enormous amount of time required to get any sort of momentum. We talk about rental income, having an Uber fleet and selling products online and in each case talk about the work required to truly make it work.
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Win of the week: Kay
I stumbled across your podcast Sep 2019, via Sam Beckbessinger's book. I binged listened to all the episodes in a rather short space of time.
I got a much clearer understanding of TFSA, and opened one immediately. My fear of stocks (which was more a lack of understanding) disappeared.
Took my ostrich head out of the ground, and looked at my liberty RA. Ouch. That got shifted out, can't say immediately, but Liberty did eventually let me go.
I started pumping money into an emergency fund. Life had taken an interesting turn in early 2019, and my income was more than halved. Come 2020 I had an emergency fund, which has saved my ass (or more like my animal’s asses....pet insurance is definitely a future consideration with younger animals ) more times than I thought I could possibly ever need to use an emergency fund.
If I had not discovered your podcast before 2020, I shudder to think what may have been in 2020.
Once again, thank you for all that the two of you have done. It really has been life changing.
I have a feeling once I finally retire, and I am able to still drink a fairly decent whiskey, I will think back to the early days of The Fat Wallet Show, and think thank goodness I discovered the podcast.
On a side note, does Simon get to keep all the future donations that will be sent once we all have it made?
I currently hold Ashburton 1200 and Satrix top 40. Now, with SATRIX I am guessing I am not taxed on dividends as these are SA stocks and fall under SARS, so they can't shaft me here.
But do I pay tax on dividends and gains in the Ashburton 1200? Is there any benefit to holding it in my TFSA or should it just be a discretionary investment?
Should do a 50% , 50% split between these two? OR because I have a local RA, do I max my offshore in the TFSA and do a 70 ash / 30 satrix split?
I am torn between putting extra into my bond to reduce the term (and amount of compound interest paid) vs putting money into my RA/TFSA for the future. Currently my bond is also my emergency and travel savings fund.
My current strategy is-
RA: maintain and only do standard annual increase.
Bond: pay in an extra 50%,
I take about the same amount I put into my bond and put 2/3 into a TFSA and 1/3 into an FNB share account.
Do I pump up that bond and get it done, or maintain the current strategy?
Do you have any suggestions of what calculator to use to show someone the value of time in the market?
I began a new job in early December and had my daughter in early February. While I understand the value of getting medical when you have a child, I signed up for health insurance instead of medical aid because I was in a hurry. I'm not sure if I should cancel and get medical aid; could you please advise which of the two choices is the best?
She owns her home and should downsize. She likes having 2.5 vacant bedrooms for my
Should I stay or should I go? (#241)
Many people take their first wobbly steps into the financial world because they understand money is meant to do something. What exactly that “something” is, is often left to someone else to figure out. However, once they start learning about the financial environment for themselves they realise there might be products better suited to their needs.
Moving a lump sum away from a provider you’ve trusted for a few years is a daunting process. Even if your reasons are sound, it’s not an easy decision to make.
In honour of the brand new tax year, we spend this week’s episode helping Carmen decide what she should do with her existing high-cost retirement product. We hope the discussion will help you decide what to do with an investment product that no longer suits you.
We apologise for the ear worm.
This week’s show is also the last of our shows sponsored by OUTvest. We are deeply grateful to them for their support.
Also remember tomorrow at 11:00, Bobby from AJM Tax will talk about how the tax changes announced last week will affect your pocket. Join the Facebook community group to watch it live and ask your questions.
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Carmen
Do I keep pumping money into my high cost actively managed RA at Old Mutual (I like the idea of money going somewhere that I do not think about)?
Do I transfer the current balance to my low cost EE and let it sit there and grow (along with the increased monthly premium plan)...but then continue the R3500 contribution to OM (which will likely have even higher fees because now my base amount is R0).
Do I reduce my RA contribution to Old Mutual to the minimum R500 per month (so that I don’t incur an “admin fee”) and increase the RA amount to my EE RA immediately by R3000 per month?
Do I get outta dodge re: Old Mutual RA and move alles completely?
Ancillary reasons for sticking with an actively managed fund at a big investment house are: not to have all my eggs in the EasyEquities basket; my personal risk insurance side is sitting with Old Mutual (disability, illness etc) and my OM is invested in other items than my EE portfolio (bit of diversification); keep contributing to one RA up to age 60 and only pull from it from 65...and other RA only pull from later.
Win of the week: Nalisa
I started this email about four months ago, and listening to this week's podcast made me decide to get it done. Especially when pet expenses came up!
To clarify, I'm a vet and best you believe my creatures are on insurance! Yes, I'm a vet and proper medical care is still expensive for me! Akina, my eldest, decided to go ahead and twist her spleen (after hours, fucking typical) and the resulting bill came to about R20 000, and the medical aid paid me back in under a week.
Even if it wasn't for that incident the peace of mind we get from it is worth every cent. But do your research and (I can't stress this enough) read the fine print! Know what they cover and what they exclude, and especially look at their limits (per claim and annual limits). They're still insurers, they're still trying to screw you.
My fiancé and I were discussing how one could become completely self insured.
We only insure our cars, our home and our pets. We both have life insurance ( to cover the bond), medical aid and I have income protection.
We've always agreed that our home contents (aside from his laptop) are considered self-insured because our quote for insurance was exorbitant.
In an ideal scenario, we'd need to have enough saved to be able to replace everything with cash, and have about R50k for the animals. The figure gets big really quickly.
The main concern would be that you'd have such a huge pile that needs to be fairly liquid and would earn very little (but still more than handing it over to someone else every month). Are there any strategies for self insurance? Or is it actually a silly goal and we should resign ourselves to gam
Farewell Fatties! (#240)
After five rewarding years as host of The Fat Wallet Show, my time with the show is coming to an end. This episode is a short retrospective of our time together, followed, as usual, by your questions.
On 30 May 2016 we published the first episode of The Fat Wallet Show. We knew from our personal experience and from our work at Just One Lap that money was such an emotional topic. All so-called financial education came with an assumption that you would already know the jargon and have some basic understanding of how the system worked. Based on the questions we got at Just One Lap, we knew that wasn’t true.
I had started at Just One Lap a year before that and I was like a toddler, asking a hundred questions a day. These questions weren’t orderly. I’d latch on to one topic, ask every question I could think of, mull it over and come back a few days or weeks later with either the same questions or more questions. I was learning a lot, but I wasn’t learning it all in a straight line, because learning isn’t linear.
Luckily for me I had a mentor with superhuman patience, who would keep explaining it to me until I got it. I figured if this is how I’m learning about money, this could probably help other people learn too.
The Fat Wallet Show was an experiment. It was just going to be questions and answers. It was always just going to be two people on the show. We decided to swear in the show, because we swear when we talk to each other normally. We didn’t want any barriers to making the show sound just like our ordinary conversations. We didn’t want experts, we didn’t want to interview CEOs. We just wanted to get together once a week and talk about money.
Since our first episode, the show has been downloaded 717,000 times. We’ve received 2,600 emails. Our Facebook community is 9,000 members strong. We’ve been supported by companies we truly believe in, companies where we have our own money. OUTvest especially has been a true friend to this show. We’ve made friends that I hope we’ll have for life. I’ve been so inspired by the members of this community.
Subscribe to our RSS feed here. Subscribe or rate us in iTunes. Ernst, in response to Louise’s question:
Louise is referring to her provisional tax estimates. So there is a timing difference as she will only get her certificate around June but she needs to estimate it now. She needs to run her own calculation and try to get as close as possible taking into account rate adjustments etc. Again tax works on accrual or paid, whichever comes first.
It would seem that she has a considerable amount of interest as she probably uses up her annual exclusion amount. So if she ‘underestimates’ her taxable income she may be liable for penalties if it's too far off.
She needs to do an excel calc to try calculate her interest so she can estimate accurately before 28 Feb 2021. She cannot wait until she gets paid or gets the certificate.
I did a little happy dance this week, on reviewing my OUTVEST RA statement. My transferred RA landed @ OUTVEST in May 2020 and the growth YTD has been SUPER! My set R4 500 fee, which is about 0,75% of my investment, has really made a huge difference. I will be saving my butt off over the next 10 years, to reach that minimum 0,2% fee balance.
This led me down an investment spiral, and after listening to episode 183 again I ended up asking the following question….where are the OUTVEST fixed fee living annuity products?…….
If I am happy with the asset class breakdown, would there be any reason not to be able to continue with my pre-retirement investment strategy, after my retirement date, at the same 0,2% fee?
I have no idea what the general going EAC is for a living annuity, apart from what I have seen on my Dad’s statement – which stated a 1,5% fee.
I listened to your Money and Travel episode. Simon mentioned that the SYG4IR is bespoke and doesn’t have a US equivalent - that is
Nice could be nice
Hosts are funny. I think I repeated the “Nice could be nice” segment of the 100 year investment episode about 10 times. 😂
Thanks for the great show guys!
Love these two! Informative and funny. Great teachers. Thank you 👏🏾👏🏾
Kristia and Simon manage to break down financial jargon meant to confuse you (when all it is, truly, is a scam, in too many cases! a scam to rid you of all your hard earned money!)
Still not quite comfortable with all the finance terms etc. and applying all the lessons is so much easier said than done. But, some action is better than inertia. Thank you both!