GET FEATURED ON SAFE INVESTING SA

We would like to have you get featured on Safe investing SA.
Safe Investing SA has, since 2011 been inspiring readers to do better, live better, attain financial freedom, spread their wings, get that extra income, diversify their portfolio, excel at their jobs, raise level-headed children and just be better citizens. For eight years we have built a community of doers and influencers. Some of our readers are successful investors, entrepreneurs and have built various streams of income.

In the aim to continue promoting a debt-free lifestyle, financial freedom, and a great lifestyle community we would love to publish your story. Have you changed careers, started from the bottom up, started a business, paid up debt, saved and invested for retirement or any cause at all? Please share your story and inspire our financial freedom community.

Calling all:

• Entrepreneurs
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• Wealth builders
• Anyone with a story.

Let us learn from your journey in order to grow and be better. Let us also support your hustle. Get featured on Safe Investing SA today.

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BUYING PROPERTY FROM A SHERIFF'S AUCTION

The reader's email below is about buying property from a sheriff's auction to create wealth. All the best to you Mr S.

Student accommodation closet

Hi Mbini,

I'd like to start by thanking you for your informative blog. I have learnt so much from it.

The reason I am writing is that I would like to start investing in property and I'd appreciate getting your advice.

I have a house that I purchased 3 years ago and I am halfway through paying off the bond. I use this as my home and I would like to purchase a second house to rent out. What I would like to know is should I wait until I pay off my house (which can take up to 3 years from now) or should I borrow the money I have paid so far for my house and buy a very cheap property.

Because I don't have much money, I have been considering buying from the sheriff's auction but I have the following concerns:
1. Would I be likely to get a good property at a cheaper price
2. Do I need to purchase cash or will the sheriff's office wait for the bond approval to be processed by the bank
3. What would be the cons of buying from an auction?

Thank you for taking the time to even read this and please can I ask that you keep me anonymous should you put this on your blog.

Regards,
S

Thanks S for your email. Well done on planning to pay your homeloan so quick. I have responded to similar questions on raising funds for the investment property in my previous three posts. If you haven't already, do check those posts at:
Starting in property investing...
Paying cash for a house...
Raising capital for a property investment...
Early retirement and property investing...

If you still have specific questions on raising funds for your investment property, feel free to leave a comment below this post. Now on the sheriff's auction questions you asked:

1. Would I be likely to get a good property at a cheaper price?
Your first question is on whether you will be likely to get the good property at a cheaper price when buying property from a sheriff's auction. The short answer is that, you can get a good property at below market rate prices anywhere. Buying a bargain property is possible but because of where we are in the economic cycle, those deals are not easy to spot. Searching for bargains is not easy, especially at this time of the economic cycle. Recession is the time where opportunities to get bargains are unlimited. There is also existing players in the sheriff's auction property space. You have to go there and compete with guys who are experienced and even determined to intimidate and scare you off. Everything worth fighting for is usually a bit scary. In all, you may get the good property at a cheaper price in and outside the auction.

You will need a bit of preparation for the auction. Your local sheriff should be able to provide you with the list of what they have available. The trick with the auctions is to determine the amount of money you are willing to part with and not be easily swayed from your target. Critical decisions are not taken at the auction, but before it. You have to know how much returns on investment (ROI) you are willing to settle for. You then do the maths and know what you can offer to get those returns. Going to the auction is only to get your predetermined ROI. You may start by doing a trial exercise by going through the sheriff list, picking a property, doing the maths, attending the auction and asking the questions to have an understanding of the whole process.

A number of variables will determine your bottom line. The property you are eyeing may be having debt for water and electricity, rates and taxes, home owners association fees, and other fees you need to pay. The property may also be home to a tenant who refuses to vacate it. And getting rid of the tenant may be a costly legal battle. That is more reduction to your ROI. If the property is vacant, it may be in a bad shape or even vandalised and in need of costly repairs. Naturally, any distressed property is likely to need repairs, and that should be catered for. Renovations can be quite expensive.

2. Do I need to purchase cash or will the sheriff's office wait for the bond approval to be processed by the bank?
You need to have a deposit. But be sure you can get it back if you are unable to secure a homeloan. It is more difficult to secure a loan for a repossessed property than properties in the open market. If the property has been vacant, it is usually in a state of neglect. It may actually be in a similar state even when occupied. You stand better chances of getting the financing from the bank that repossessed that particular property if it is already in the hands of the bank. If you can, arrange for financing before hand.

3. What would be the cons of buying from an auction?
Please refer to number 1 above. Other disadvantages are related to how the property looks. You are buying it "voetstoots", meaning that you get it as is. Some of the problem areas are not easy to spot. You have no grounds to put a conditional offer. As mentioned above, you will have to pay for outstanding levies, rates and taxes and other related costs before your property is transferred to your name. I also secure the place by changing all locks before letting it to new tenants. So the security measures are not unique to distressed properties. However, it becomes even more important for properties that have been vacant for a while. Apart from those costs you have to also pay the auctioneer and sheriff's commission when buying property from a sheriff's auction. The Sheriff’s commission is about 6% on the first R30 000 of the proceeds of the sale, and 3.5% on the balance thereof. The maximum commission payable is R 10,777 plus VAT with the minimum being R542 plus VAT. The electrical compliance certificate may attract an extra cost especially if the wiring is faulty. The seller of my latest acquisition just parted with about R50,000 to fix the old wiring.

Buying property from a sheriff's auction is becoming a broad topic. I will have to follow it with a summarised version post of the sheriff's auction conditions. The bottom line is that, you may not be getting a bargain if you have not done a thorough job of investigations and calculations. The area where the property is located remains an important factor.

Note:
It is so important to never let your dream die. This evening I have been thinking about a number of doors that closed shut in my face "BANG!!!". Just as I thought, "if only I can get 1, 2, 3 opportunity, I'd be OK". Somethings blocks it. But each time I miss out on an opportunity, I somehow get amazing energy to create another one for myself. Even this blog is the direct result of writing opportunities I missed on. I always wanted to interview the South African middle class to stir a debate on how we can better our lives. I sent proposals to publications on this in vain. Until one day I decided, "Flip, I'll do it by myself". Then this blog was born. I love what I am doing here. Thanks for reading, sharing and continuing to send me emails. There are plans to grow this platform to something really big. Keep watching the space. Thanks again for being part of my happy space.

Thanks for the amazing emails. I respond to each and every email I receive. I keep all emails anonymous when I  respond to them through this platform. Feel free to make a follow up question or comment using the "Contact Us" button above.

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PAYING CASH FOR A HOUSE

The reader's email below on getting a homeloan and paying it up quicker or paying cash for a house made me think a bit. All I can do is give the pros and cons of each option. I have done all three when I was trying to find my spot in the real estate space.

Kitchenette plan for the new student accommodation

Here goes our question:

Hey Mbini

Hope your are well.

I just wanted to get your take on ways in which one should pay for a house. Would you advise a new home buyer to get a home loan or pay the house cash if they have the money? And if one opts for a home loan would you advise they pay it off as quick as possible?

Thank you
I love your BLOG!!

Thanks for your question Miss P. This blog is keeping me sane on so many levels. I am currently busy with my biggest renovation so far and have limited time to write. All my free time is spent shopping for building material and drawing layman plans. I will share details of acquiring and adding value to this property hopefully soon. I find your questions much more interesting and thought provoking than my soapy mortgage and dust sniffing stories. With my current schedule I only find quiet time to write just before bed. I am very glad that more than a few people benefit from my writing. This blog is my happy space.
Back to the question at hand: Getting a mortgage and paying it up quicker versus paying cash for a house.

Option 1: Paying Cash for a House
Taking a simplistic view to this option can lead to a conclusion that it is the cheapest way as one saves on the interest that would be paid on the homeloan. The major benefit of this option could be more mental than financial. Knowing that one owns the property fully can afford them peace of mind. Peace of mind cannot be taken lightly. Let's face it, it is a nice feeling not having to pay for any monthly installment. I have enjoyed not having a homeloan each time I had none. I may never ever enjoy that ever again but it sure is a nice feeling.  I especially prefer not having a homeloan on my primary residence as its debt attracts no tax benefits.

The other advantage of paying cash is the bargaining power it affords one. It is a fact that all sellers would prefer to sell to the cash buyer. You can easily make a ridiculously low offer as a cash buyer and have it accepted. Its true that "cash is king".
Just the other week my agent got a bargain piece of development land at R1.2M asking price. Within a few days the seller got a cash offer to purchase for R800k. He immediately told my agent that he is not looking at any new offer that is not cash and will be selling to the R800k guy if he does not get a better cash offer. Sellers  don't want the stress of the buyer not being able or taking too long to secure a mortgage, changing their mind, etc. cash buyers often get better deals. These benefits make paying cash for a house seem to be the most attractive option.

Option 2: Getting a Home Loan and Paying it Faster
Option 1 does look great, however financial life is more complex than that. There is never a simple YES or NO solution  to any investment decision. There are a lot of factors involved when taking wealth building decisions. The most important of those factors being the opportunity cost. The dictionary definition of the opportunity cost is "the loss of other alternatives when one alternative is chosen". One has to consider a number of alternatives that would have been explored with that amount of cash if it were not tied to the home investment.

I will make an example of a R1M (R1,000,000) house paid for in cash. And just to be realistic for current South African interest rates, I will look at the 10% homeloan interest. If your home is paid for in cash, it is paid for and that is it. You save about another R1M in interest that you would have paid over the homeloan period of 20 years at 10% and gain some more in capital growth of your home. You also save a bit in interest if you get a mortgage and fast track its payment.

Lets now look at the case where the same R1,000,000 (R1M) would have been saved in a bank account (investment) or bond that earns 10% in interest. Remember that those are more secured, which makes our calculation a bit more realistic compared to using a higher risk and higher return investment. Over the 20 years period your R1M would turn to just above R7,328,000 (R7.3M). You and I know that you can do better if you use a stocks related investment vehicle. (I am not going to complicate this equation by factoring in the alternative shelter variable, sorry.)

The only difference here is that with your home paid for in cash, your money is tied into one illiquid asset. Whilst saving or investing your R1M in one or more other more liquid asset classes may offer more risk combating benefits.

Option 3: Deposit a Few Properties
Ok, I had to throw in this third option. It is the approach that I would personally take based on my own focus strategy. Paying cash for a house is something I have done a few times in my early days by the way. Whilst it gives this priceless feeling, not taking advantage of the power of leverage does not sit well with most property investors. I would take the R1,000,000 and get into serious real estate debt. It would probably be my 20% equity to acquire R5,000,000 worth of investment property. Using it as a 10% equity to a R10,000,000 (R10M) worth of investment property sounds even better. Oh well, that is just me. This approach carries tons of risks. But those risks are shared with the lending institution.

I will revisit blogging on building wealth through "the power of LEVERAGE". My latest acquisition with no deposit or down payment is a great example of this.

One needs to do a lot of research before investing their hard earned cash. If one has no clear focus strategy, they should invest in education, a mentor or a coach. In the previous post  on Building Wealth I was looking at a simple three phase approach on creating and growing wealth.

 Note:
Thanks for the amazing emails. I respond to each and every email I receive. I keep all emails anonymous when I  respond to them through this platform. Feel free to make a follow up question or comment using the "Contact Us" button above.

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BUILDING WEALTH

A steady and sustainable way of building wealth begins with a focus strategy. That’s the gist of the message that I have for the reader who sent me an email below recently. Thanks CV for your email.
Here we go:

Hi to the recipient of this email,

Your blog that I just read is very inspiring. Pardon my poor English firstly. I would like to tell you my story.

I am a varsity dropout and started working a year ago. I just turned 21 a month ago and I am earning steady income currently of R10 000. I am living with my parents and my current work circumstances is about to change as I am working in the engineering industry which I also started my studies in but
did not finish. My parents are on the verge of bankruptcy. I do not want to fall into the same "rat race" as described in "rich dad, poor dad".
I have built a reasonably good credit record so far. I haven't made any permanent debt except for a cellphone contract. I am an entrepreneur at heart and I am very interested in letting the little amount of money I have work for me. What would you recommend I do?

I feel exactly as described by your blog. I want to LIVE. I do not want to
work to live.

I hope to hear from you soon and to learn as much as possible.

Kind regards,
C V

As I already mentioned in my introduction above CV, building wealth starts by drawing a focus strategy. Most people fail to recognise the power of being intentional and deliberate in the way they lead their lives. Luck may cut it but taking conscious steps stands a better chance. You are obviously on the right track because you already know where you don’t want to be. And that is in the “rat race”. But do you know where you want to go? You mentioned entrepreneurship and having your money work for you. Those are both causes worth fighting for. For you to reach where you want to go you will need to take the three steps listed below:

Earn Enough
Building wealth starts with earning and earning enough. We all know that any amount saved is better than nothing saved at all. What beats saving any amount is saving more than just any amount. One can only save more when they earn more. And one can earn more when they empower themselves. If you love your current job, get yourself skilled in doing it better to attract better opportunities. One needs to be proactive to get themselves where they want to be.

If you think of a way to earn even more than your salary, explore those options. Side hustles are always a great way of fast tracking growing wealth. Explore your passions, talent and skills and try to monetise those. Opportunities do present themselves when we are busy working on bettering ourselves.

I will not waste your time explaining how you need to take charge of our expenses. You seem to be mastering that one already. Staying with your parents for as long as possible could be one way of cutting costs. It is only when we spend less than we earn that we stretch our rand.

Save More
After having earned enough for building wealth, save at an escalated rate. This is where most people miss it. They earn a high income and spend it all and then some. High income exposes one to higher credit, which can translate to higher debt. The fact that you qualify for higher credit to buy a bigger house, car or whatever luxury does not mean you should go out and buy those. Wise people live below their means.

I have written a few articles on paying yourself first. Draw a budget to determine how much you need for each month. What helps in drawing a more accurate budget is tracking your spending for a few months. In that few month keep the receipts for all your expenses and have them recorded in the spreadsheet. I actually swipe my card and do electronic transfers everywhere possible for my spending to ensure that I have everything on record. I cannot be trusted with keeping small pieces of paper.

Using the monthly records of how much you are spending, draw up a budget. In your budgeting start with shelter, transportation, food and all the basic needs (your must haves). Add a small amount of wants to your budget (your good to have). Cut out wants that are unnecessary like the gym membership and the pay TV. Those are always my favourite victims. Hopefully you can cover all what is in your brand new budget with 60% (R6000) of your income or less. That leaves you with 40% (R4000) or more of your income for saving and investing.

Make a thorough research on interest earned by bank accounts like a money market accounts. Open the highest interest bearing transacting account of your choice at the bank. (Mine earns 5.6% and requires a minimum of R5000 to open and keep). This bank account will keep your short term savings. Some refer to this account as an emergency or contingency fund. Name it whatever you wish, just open and use it.

The purpose of this account is to handle emergencies. Some people prefer to keep 3, 6 or 12 months’ worth of monthly expenditure in their emergency accounts. If you go for 3 months, you will not need R10,000X3 (R30,000) but R6000X3 (R18,000) if we make assumptions based on our example on budgeting above. This has to do with what you need to go through the month and not what you earn. I take this to be the most crucial step at creating, preserving and building wealth. Even at these low interest rates, you are benefiting from the compound interest. See this article on the magic of compound interest.

Invest Even More
Still on building wealth and taking it a step further by investing. Think about LIVING well, attaining financial freedom when you can still enjoy your life and retiring when you want to. I would say that before you even start with different forms of investing, get yourself a good retirement annuity to take advantage of the tax benefits.

Read my recent articles on tax free savings here, here and here and see what vehicle you can use for your long term savings/ investments. I am a fan of exchange traded funds as a passive form of stock investing. You will need to do your own research to see what works for you. Keep empowering yourself on what is available on the market. At your age, you can build a lot of wealth from very little. You have 19 years to 40 and 14 years to 35, if you decide to retire then. Your investment decisions can be planned around the amount of time you have before your planned retirement.

Other asset classes that you may invest in include property, bonds, stocks, etc. Your investment asset has to earn you capital growth and create passive income for you over time. Re-balance your portfolio from time to time as you are continuously building your wealth. A diversified portfolio is generally lower risk.

In conclusion, my own formula with creating, growing and building wealth is in three small stages. Those are earning enough, saving more and investing even more. Thanks for your question again CV. Please read the article I wrote for my sister who was starting out in this link: Building Wealth from First Job.

Note:
Thanks for the amazing emails. I may take longer, but I respond to each and every email I receive. I keep all emails anonymous when I do respond to them through this platform. Feel free to make a follow up question or comment using the "Contact Us" button above.

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EARLY RETIREMENT AND PROPERTY INVESTING

The combination of early retirement and property investing is the reason this blog exists. I am a part time personal finance coach with passion for property investing. My plan has always been property investing for financial freedom and early retirement.  Any other investing that I do is meant to balance my portfolio out and manage the risk. This is why it thrilled me to receive the email from one reader below:

Hey Mbini
I just stumbled upon your blog while doing some research on emergency funds, and I must say I found a Gem. I am very interested in early retirement and property investing and this is the first South African blog I have found on both subjects, most blogs I follow are either from the USA or Europe and sometimes it’s difficult for me to follow some of their advice as it doesn’t pertain to South Africa. So thanks for the blog it will help immensely in my own early retirement and property investing journey.
Kind Regards

Early Retirement and Property Investing

Thanks reader for your email. Emails like this one are humbling. I have benefited from sharing what I know on wealth building here more than anyone can imagine. Having someone else gain value from the blog blesses me.

Like most, I am a product of a "go to school; get good grades; get a job; work hard; retire comfortably at 65" generation. In case you haven't noticed "Living" is not part of that equation. I did follow that common “wisdom” by going to school and getting good grades. I was quite a competitive learner. I was never fond of books but I had a way to make it. And so I found myself being a graduate and moving towards the next goal of getting a job so I can work hard and retire just before death.

This is where I had a problem. I needed life before retirement. I doubt if anyone wants to work hard just to retire and die. Yet, everyone seemed to expect a successful life to follow this "logical" sequence. I was desperate to add “live” before and after the job in my own life equation. I needed to live because having a business as a student meant less living. Working hard until retirement was never an option.  And so my own formula became:

[go to school; get good grades; live; get a job; live; retire; live]

50 percent of my life was to be more about living than anything else. Living requires some level of preparedness. It is about working towards doing what you want to do. Living is about searching for your passion and pursuing it wholeheartedly. Working until 65 sounded... very wrong to me. I am neither a careerist nor a specialist. Throughout my life I have invested in a lot of unrelated studies and businesses. I have to be constantly excited about something new.

And so in my 20s, just after investing in my first apartment, I stumbled upon a book “Rich Dad, Poor Dad”. And like the Buddhist Proverb states, “When the student is ready, the teacher will appear”; that was what I needed. At that point I had gone from selling candy in primary school to paying my way through university selling soft furnishings manufactured by myself and trying my luck at MLM after graduating to supplement my low income. I was more than determined to fit in the "live" variable in my life equation and do so in my own terms. That is how a property investor within me was born.

I immersed myself in investment related reading material until I understood the basics well enough to start implementing. After getting married to a like-minded guy, we joined forces to pursue the “early retirement and property investing” dream. This does not feel anything like work. I am enjoying every single minute of it, including sharing it here in this post right now. It has become part of me that I get irritable when I am not inhaling dust doing quality control in a construction site.

We initially bought tiny homes to let and slowly changed our investment strategy to bigger homes in high demand upmarket suburbs and are gradually getting into commercial property. Whats more exciting is that I get invites to talk to small groups of young professionals and couples on living debt free, savings, growing wealth, early retirement and property investing. And, yeah, I write here too. And guess what… I am living. This passion keeps me alive.

Just remember that this is a business. And like any other business one needs a proper strategy and a good plan to execute it. For a very long time I heavily relied on my property manager to keep everything together. Building systems helps any business to run itself. One will always need people who know and do just about anything that needs to be done. And that enables one to “live”.

I am glad that I chose to “live”.

Note:
Thanks for the amazing emails. I keep all emails anonymous when I do respond to them through this platform. Feel free to make a follow up question or comment using the "Contact Us" button above.

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BUYING A PROPERTY IN A TRUST OR INDIVIDUAL'S NAME

Today's email came at a time the Mr and myself were looking at our options regarding our small portfolio. We have been busy researching whether buying a property in a trust or individual's name or even a company would be more beneficial for us. At the end we were at the "it depends" position. There is never a one size fits all. My understanding is that, when we have a bigger development, we will definitely buy and sell the land/ properties using a company. But for now, our individual names and a trust will do. Our reader has interesting question in this regard:

Thank you so much for this blog. My passion has been restored. And after what I have gone through in my life, I now know what I will be working for. I am currently unemployed because I am using a spousal permit which does not allow me to work.
I have a few questions for you.
Are all the properties you have under your name or how do you do it?
Is there a limit as to the number of properties you can register in your name in South Africa?
Regards,
SG

Pleasure SG. I am glad that this little blog is helping people to dream and work on their passions. I have never heard of a limit in the number of properties one can buy in their own name in South Africa. I cannot imagine a reason why there would be such a restriction.

Buying a Property in a Company's Name
I actually do not know of any advantages in buying a property in a company's name when one is a long term investor or lives in that particular property. The company pays all the taxes and costs that an individual property owner is liable to pay. This is usually at different times but everyone does pay. In some instances, companies may pay more in capital gains taxes. Buying through one's company or trading trust would make perfect sense for property developers who sell large stocks at a time and property flippers who are constantly having properties on the market.

Buying a Property in a Trust
When it comes to making a choice between buying a property in a trust or individual's name, most property investors choose to buy their investment properties through family trusts. There are a lot more  arguments for trusts compared to those against them. The biggest issue is it being less complex to deal with by beneficiaries in the case of the founder's death. That is unlike the case where one is dealing with an individual's estate which attracts extra costs like estate duties and other fees and taxes. Trusts, not being individuals and being independent of their founders are not liable for the estate duty taxes. The trust does seem to offer a smoother transition in cases of death. I have heard a lot of South Africans arguing about the trust protecting one's personal assets from creditors in the cases of the investments turning sour and therefore offering protection against insolvency.

Having said all that, one has to bear in mind that trusts generally pay high taxes. the last time I checked, income tax for trusts was at a rate of 40 percent. The organisation of the trust is another factor as the trust has to be in the administration of all trustees and not just an individual investor. When one registers a trust, they give control and decision making over to the trustees. A founder cannot just take investment decisions alone. Another factor would be that, a trust may in some instances pay more than what an individual is required to in capital gains tax.

My advise to anyone who does not know what option to go with is that... Do your homework. A trust that is not properly administered and run can lead to a disaster. One's beneficiary may end up losing at the end. If one chooses a trust, it has to be run as a trust and never a company. Trustees have to be properly involved in decision making. 

A trust with some cash should do better than the one that still needs to borrow from the mortgage lenders to acquire assets. Banks can be skeptical to lend to a trust or require a larger equity/ deposit compared to what they would require from the natural person. Legal and maybe financial advise could help. 

Note:
Feel free to leave a comment below to help the fellow investor out. And if you find this post helpful, be so kind to share it on your Facebook wall or other social networks using one of the buttons below.

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HAVING MONEY WORK FOR YOU

Today's reader email is from another youngster who is towards reaching financial independence really fast. If you are as wise as this young professional, you may soon be having money work for you.

Hi there

I have recently sold my car to replace it with something cheaper, I freed myself from debt (Retail accounts, and credit card) with R75,000 to spare.

Aged 26 I would like to invest this money in hopes to buy my first property at 30 with a massive lump sum.

I am thinking of putting it in some type of fund where I can add about R2,000 a month to it. I would like to have the money available to me within 3 to 4 years time, and often I come across 5 year type of funds only. What would you suggest if the best route to take with this?

K

Well done on choosing to live your life in your terms K. I wish more young people were half as wise. As this email is very similar to the one I published two posts ago, I will only point our reader to it at: Diversifying a Portfolio. I may also recommend: Building Wealth from your First Job. Now onto the interesting stuff that may also help this reader and others on having money work for them.

Having Money Work for you
My friend asked a question along the "money working hard for someone" lines today. As expected I was too excited to engage in the debate and because I am a bit of a nut case, I am still as excited to repeat myself here now. The fact is that, you will never be able to work harder than money is capable of. I learnt this awesome truth over the years. You are just one person with limitations. Your money on the other hand can multiply itself forever. So why do what your money can do for you? Look at the examples below.

Compound Interest
A simple example of a baker who bakes cookies to sell them to various office workers. As a baker, you are only capable of baking a finite number of cookies and make a finite amount of profit per day, because you only have 24 hours minus 8 sleeping hours, 1 bath hour, 1 stock buying hour, 1 social networking hour, 2 other chores hours, etc. Do you realise just how limited your time is? Anyway you do bake cookies and make your nice profit daily. From that profit you decide to put R2,000 aside every month in an interest bearing account like a bank money market account or savings bonds if it were possible. For the purpose of this example, lets put the interest rate at 8.5% per annum. You save this amount of money for 10 years.

Monthly savings - R2,000
Interest Rate - 8.5%
Term - 10 years
Total amount saved - R240,000
Interest earned - R138,942
Total - R378,942

As you were busy sleeping, buying stock, baking cookies, driving around to deliver and doing a lot of lousy stuff in between, the monthly R2,000 that you worked for was busy working hard for you. It made R138,942 in interest for you. That is just one way of having money work for you. 

Growth from High Performing Exchange Traded Funds (ETFs)
Another similar example is that of high performing ETFs. I will push it to the one that yields 25% per year. By the way that is not the best one can achieve with ETFs. My son is with the one that yields close to 40% every year since he started.

Monthly investment - R2,000
Interest Rate - 25%
Term - 10 years
Total amount invested - R240,000
Growth - R825,609
Total - R1,065,609

How is this for money working for someone? Your R2,000 per month could only be summed to R240,000 in 10 years. But because it was hard at work every second of the day, it single handedly produced an extra R825,609. That turned you into a Millionaire. Don't you just love how amazing this can turn out to be?

(Almost) Passive Income
Now we look at one having a lump sum to invest in stocks that bear high dividends. One can get thousands of rands in dividends monthly over a medium term period of investing. This is of course after one has selected good quality and high dividend stocks.

Another example is that of a rental property. I like it when an investor buys a bargain property in a high rental demand area and puts it on the market. If you bought right, price wise, you may be killing it in the net rental income. That is what I mean by having money work hard for you.

Not passive at all, is flipping a property. It is a lot of short term work. We actually bought a property in an active property market area 6 months ago. We did clean the property up for about 2 months part time. We are now getting interest from buyers at more than 50% in profit. If we were to push it a bit, even close to 100% in profits is possible. That is another way of making your money work for you. And if you used the homeloan to buy, you may even be making someone else's money work for you.

Reaching Financial Independence
Remember how you start your working life, working harder and harder for your money. You may, if you are fortunate, start investing your earnings early in your life. You may also start a side hustle just because you can. Your investments may be earning you some passive income like dividends. Your passive income may at some point catch up with your salary... it actually does at some point.

At that point you realise that you do not even need to be working for your money because your money is now working for you. That is a definition of financial independence or like some refer to it, financial freedom. It is a stage where you never need to work for money ever again in your life. You may still hold a job because you love to. But whether you do have a job or not, money pours into your account. You may take a year traveling the world or volunteering in the local orphanage, and your passive income will sustain you.

Everyone should be working towards reaching financial independence. Who wants to need to work forever?

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RAISING PROPERTY DEVELOPMENT FUNDS

Isn't land ownership absolutely amazing? Does it give meaning without finances needed for development? Our reader owns a plot of land and needs funds to develop it. Can we put our heads together to come up with non-traditional ways of raising property development funds in South Africa? We may just bring a solution to the email I received from the land owner below:

Raising Property Development Funds - Photo taken by me in Beacon bay, EL.

Hey Mbini
Thank you for creating this page for some of us to learn.

I bought a plot of land that I would like to develop. However, I would like to develop under my Pty (Ltd). Could you please advise on any developers that I could approach for funding.

Kind regards,

Well done on your acquisition sir. It is always complex giving an opinion on someone's situation, when you do not have a full picture of their personal and financial background. What I know is that raising property development funds is not easy for any new property investor. The requirements are getting steeper and steeper with time. Banks also charge exorbitant interest rates to new players in the real estate sector. Your idea of approaching accomplished developers makes a lot of sense. Since I don't know your location and developers in your area, I am not well positioned to give a meaningful opinion. From experience, I find smaller developers more approachable as they themselves are likely to be searching for partners. Bigger investors are mostly looking for and working on mega deals.

Traditional Banks and other Financial InstitutionsFor those who are also interested to get into obtaining funding for their own property development projects, work hard at making that dream happen. There is a traditional route of raising funds for a real estate development, which works better when you have your own equity or assets as collateral. Borrowing from the banks and other financial institutions would be great. Being able to secure the funds from these financial institutions is a sign that the project is economically viable.

Property Developers and Construction Companies
In this reader's case however, he/she wants to take a different route of partnering with the established developers. For an experienced developer to have an interest in one's project, it has to be a project that that particular developer cannot easily get. There are always developers that are also into partnerships because of their size or to share the risks. Those can be potential investors in one's first project. Looking at the construction companies for partnerships should never be ruled out. A lot of construction companies have resources but do not have land.

Private Investors
Another way of raising property development funds is through private investors. The concept of private lending and investors is unfortunately not a popularised one in South Africa. If a project promises high returns, investors that never even thought of on investing in property before may show interest. A land owner's homework includes working out the rate of returns before they approach prospective investors. The investors may partner on the project through profit sharing or grant a loan with an interest that is slightly higher than the traditional banks' interest rates.

In the case where one gives shares to the private investor, the land and work that has been done, has to be valued and contributed as the land owner's equity. The investor may then contribute the funds to develop the land. This is where it becomes tricky. Land owners usually expect to get a bigger share than land value. And in most cases, they expect their land to be worth more than it actually is. An entrepreneur has to work on looking at transactions objectively. Another tricky part of this approach is that, as a share investor, one has a responsibility to monitor the progress of the project. Unlike a private lender, a share investor will be an active part of the workings of the development to look after their investment.

These kinds of private investor partnerships have a potential to be complex, especially when roles are not clearly set. One needs to have well drawn legal contracts to protect themselves and their companies.  The same goes if the investor is a friend or a family member. A gentlemen's agreement will not cut is as it is legally non-binding.

Note:
 Feel free to leave a comment below to help the fellow investor out. And if you find this post helpful, be so kind to share it on your Facebook wall or other social networks using one of the buttons below.

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DIVERSIFYING A PORTFOLIO

Readers of this blog are amazing. I am so privileged to get to know and interact with such inspirational individuals. Below is an email I received last week from a great young professional who is fast approaching his financial independence/ FREEDOM. I do not really have much to say to this reader other than to emphasise the importance of diversifying a portfolio. Learning to do this and occasionally re-balancing your portfolio could be the two activities that yield the highest returns in your efforts to build your wealth. I cannot think of any other point to raise, as this young man/ lady is intelligent enough to do their own research themselves.

Good morning

Thank you for having such an amazing blog. I really love it!

I am a 25 year old and started my first permanent job in October 2014. I can afford to save R5000 of my salary each month. However I am saving R3500 towards a car deposit and would like to invest the balance of R1500 each month. In addition I have a lump sum of R15 000 which I can add to my investment.

I have read your article about "investing in your 20's" and "ETFs". The ETFs got me interested.

Could you please advise on the following:
- Should I invest the lump sum and the monthly savings in ETFs or
- Should I invest the monthly savings in some other investment fund
- Also what ETFs should I choose or how do I go about choosing an ETF and which investment companies would you recommend.

Looking forward to your response.

Kind regards

Firstly, I have to salute and thank you for your email sir/madam. Keep moving. The sacrifices you are making will bear fruits later in your life. Equip yourself with knowledge that will enable you to take well informed decisions. I know the temptation to put all your money in an investment that is promising the highest returns ever. We all want maximum returns on our investments but using the highest growth as an only investment picking strategy can be detrimental to our wealth; in the event of an economic disaster. Diversification acts as a preventative measure for such dreadful events. Having all eggs in one basket could mean getting the highest returns possible or losing everything.

Diversification of asset classes like stocks, bonds, currencies, etc and diversification within each asset class like individual stocks or ETFs in various sectors (financials, resources, telecommunications, property, etc) are equally important. To clarify this point; buying into Nedbank, FNB, Capital Bank, Standard Bank and ABSA or MTN and Vodacom is not good enough as it is investing within the same industry. You cannot be invested in a single industry and consider yourself well diversified. Some economic tragedies sweep across the whole industry, like the most countries' financial sector in the recession of 2008. No one industry is immune to economic disasters. This is what makes diversifying a portfolio one of the most important steps in reducing the risk your wealth is exposed to.

Let us use the most popular sector classification system by the global industry classification standard (GICS) just to shed some light on how one can diversify their portfolio within sectors and industries. They grouped industries (sub-sectors) into 10 sectors.

Sectors and Industries
1. Energy
2. Materials   
3. Industrials 

• Capital Goods
• Commercial & Professional Services
• Transportation

4. Consumer Discretionary 

• Automobiles and Components
• Consumer Durables & Apparel
• Consumer Services
• Media
• Retailing

5. Consumer Staples 

• Food and Staples Retailing
• Food, Beverage and Tobacco
• Household & Personal Products

6. Health Care 

• Health Care Equipment and Services
• Pharmaceuticals, Biotechnology & Life Sciences

7. Financials 

• Banks
• Diversified Financials
• Insurance
• Real Estate

8. Information Technology 

• Software and Services
• Technology Hardware and Equipment
• Semiconductors and Semiconductor Equipment

9. Telecommunication Services 
10. Utilities

Not to confuse myself and the rest of us, the point that should be driven home is that one needs to have a clear plan of action that is informed by a deeper understanding of how the sectors of the economy work.  Knowing your sector groupings and their historic performance can help you take an informed decision when investing, especially in Exchange Traded Funds (ETFs) and individual stocks. You may now go into each available ETF sector like Financials and compare their 3, 5 and 10 year performance to get the understanding of how they grow. Don't leave out the other groupings of companies that are not sector specific like high dividend stocks.

Whilst conducting research, we often discover a sector which outperforms the rest and we are tempted to blindly put our lump sum in that one sector. Worse actually, we find one company doing extremely well and we put all our wealth in it. ETFs on the other hand are generally diversified per sector, performance (Top40s) or dividend payout. Whilst throwing money at them with no care is not advisable, they have a reduced amount of risk because they each are a basket of industries or companies. One can choose Industrials ETfs (with transportation, autos, etc) or financials ETFs (with banks, insurance companies, etc) for instance. Diversifying across all sectors could mean choosing your top performers, high dividend paying, international stocks per country, international stocks per continent, etc. Build a diversified portfolio, not necessarily including all sectors. You need to keep it low cost too. We will briefly touch on the dangers of being over diversified later in this post.

The young investor here is young enough to stomach quite a bit of risk compared to some of us...WINK. I would think dividing the R1500 into two or three ETFs may work. Just do your research and take a well informed decision. A response to any email here is never suitable for all of us. One's age can be a determining factor. If our investor was older I would also highlight investing in the bonds. That laddered approach is great for any kind of periodical investing. Staying informed on financial and economic news is mandatory. No investment is completely passive.

Dangers of Being Over-diversified
It is possible to be more diversified than it is financially healthy. Remember that each of your trading has some fees and some even commissions. An over-diversified portfolio can be costly. It also reduces the potential returns because you may end with too many under-performing stocks and assets too. One does not need stocks in all sectors and industries nor all types of ETFs. You may need to prioritise a few sectors according to your research.

Note:
I have been away for a long weekend and swamped with work on my return. I try to have a post most weekdays. When you do not see me, know that I am dealing with matters beyond my control.
Feel free to leave a comment below to help the fellow investor out. And if you find this post helpful, be so kind to share it on your Facebook wall or other social networks using one of the buttons below.

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STARTING IN PROPERTY INVESTING

A question related to starting in property investing is probably the most common type of question that gets mailed to me here at Safe Investing South Africa. A lot of aspiring investors are fascinated by real estate. Which does not come as a surprise to me. What drew me to this type of investment is the power of leverage. I find that to be quite enabling for investors with jobs and stable sources of income. Today we look at a property investing reader's question:

"Property Investment
I would like to enter the property investment market. I only have R70,000 which I would like to use as start up capital. I am not sure how flipping for profit works but would like to learn. Secondly I am interested in blogging and not sure how to start. Your assistance will be highly appreciated."

Photos of New Developments that I take: Starting in Property Investing

 Let us start by unpacking "Leverage" or "Gearing":
This simply refers to the ratio of one's debt to their equity.  One invests their own equity (say R70,000 in our case) to borrows some more cash (debt) with the hope of making profits that are higher than the price of that debt (interest). To simplify it further with an optimistic property flipping example:

• You get an all inclusive homeloan of R450,000 (debt) and invest R50,000 as the deposit (equity),
• You use the R20,000 to renovate the place in a short space of time,
•  You then put the property back on the market at R700,000 (I said optimistic OK),

What happened here is that you invested R50,000 to make R200,000 (total profit). This is 300% profit on your investment. R200,000 is a profit from what you spent, not from the cost of the project. You may now pay back the R450,000 holemoan and go for a bigger project or multiple projects. This is how investors use lenders' money to make money for themselves. If you maintain a good credit record, you stand chances of getting very cheap debt (low interest rates).

Important to Remember:

1. One needs to be having income or financial support because a property can take a little while to sell;
2. The right time to make returns is when one buys. Buying a property which is undervalued due to non-structural challenges like broken tiles and cracked plaster or chipped paint is always wise;
3. Nothing beats the location of the property. It has to be in an active market.

Let us now be more realistic as we look at your R70,000. This is how I would approach it:
1. I would start in a Low Cost Area
It is tempting to want to look at the Metropolitan cities but the small towns and townships are offering huge opportunities at the moment. One should always look at the fast growing areas for opportunities. Not to forget to look at the rental demand before one even starts. One mistake we usually make is to look at the rental prices in one area and compare them with rental prices at a different area and draw uninformed conclusions. We should be basing our real estate investment decision on rental yields or returns.

In Gauteng suburbs for instance you will likely invest R500,000 or more to collect R5,000 gross monthly rental and a negative net income. In a tiny town similar to where I will be developing a few flats, you buy a smaller house within a larger erf (land), re-develop the land and get a few tenants. You are most likely to collect way more net income for a similar amount invested.

Low cost areas are definitely not for flipping because of the low property prices. They are for rental income sort of investors. Also important to note is that one develops at a slower pace in smaller South African towns. It is a painfully slow process to get things done. You will need to exercise your patience especially when the municipality is involved. Getting plans for existing structures, and information on restrictions and servitudes on the land is my biggest challenge. When you have gone past those humps, these kinds of investments seem lucrative and cost-effective.

2. Leverage
One could also use the R70,000 as a deposit in a high growth and high rental demand area. You would be better off with a property way below R600,000 as they are exempted from transfer duties.  This option requires one to have monthly income to repay the loan. If you have bought right, you would be in the position to get a positive cashflow when you rent the property out. Or to resell the property at a profit if you are flipping (see the Leverage/ Gearing passage above).
Flipping with a mortgage and on a tight budget is not easy.

3. Form Partnerships
 I would try and get a partner to boost my capital as I am starting in property investing. Choosing this option means that partners should set clear roles and responsibilities.

4. Real Estate Investment Trusts (REITs)

"A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands." Investopedia

One can invest in property through buying REIT shares in the open market. These may also be in the form of real estate Exchange Traded Funds (ETFs). This way you are investing in huge commercial property without the hard work.

When it comes to blogging, it is not as difficult as people think. Most people use wordpress and some, like myself use blogger. Both are free blogging platforms. I will have to do a separate blog post on this one.

Welcome to new readers. I started this journey alone and am encouraged to see interaction through emails that you guys send through the contact me form.

If this you find this article helpful, please share it on your social network of choice by clicking on a button below.

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INVESTING R100 OR R200

I get emails everyday but I find it particularly impressive when students and new entrants in the job market think of saving or investing. The amount of money invested is not as important as the early start and consistency thereof. Today we have a new graduate who gets an allowance from his/ her parents or guardian. The young investors are so close to my heart because they are the ones who have the best shot at shortening the journey to wealth. Our graduate here wants to invest R100 or R200 every month. Here goes:

Hi there,
I am in my 20s. I just completed my university degree. I do not have a job yet but I have about R100 to R200 allowance that I would like to invest. My question is where you would suggest that I invest? Would it be in a unit trust or ETF?
Thank you.

I am so happy that you are thinking of starting to invest at your age and current financial status. That is quite commendable. There are limited options for investing R100 or R200 per month. This is due to the costs of investing in general. If I were in your position I would be creative to do either unit trust or exchange traded funds in this manner:

Unit Trusts
I would get information on the cheap/ cost effective unit trusts that exist on the market and put the R150 or so in there monthly. The best way to do research about the fund is to look at its historical performance. Check how the fund has performed in the past 10, 5 and 3 years. That's a good indication of how it will perform going forward. I would definitely keep it going and track its progress to see how it is doing.

Exchange Traded Funds (ETFs)
If you follow this blog, you will know that I am quite fond of this investing vehicle, especially for new investors and those who do not invest much time in reading financial and company news. The ETFs that I know of start at the minimum of R300 per month. However, the lump-sum investment usually starts at R1000. You may be able to save R100 to R200 in one of the banks' interest bearing accounts that allow a small amount to open. You may save your R100 to R200 in that account until it reaches at least R1000. You then invest the R1000 or more you have saved in the Exchange Traded Fund of your choice. Remember to do the research I mentioned in the paragraph above.

Savings Bonds
The bonus idea I have is putting the money in the savings account like you do with the ETFs in the paragraph above. When it reaches R1000 or more, invest it in the savings bonds. If you do not have a good understanding of how savings bonds work, go check these links... What are savings bonds and How to invest in savings bonds.

I wish you the best in your investment choice. Please do come back with the testimony to encourage another young person.

NOTE:
My mailbox is filled to the brim. I have read all the emails you sent but I can only respond to one question at a time. If you emailed me through the contact me form, be rest assured your response is on its way. I love hearing from you by the way. Thanks for your emails.
You may also share this post by clicking on the Facebook or any network below.
You will not be able to see the share buttons if you are reading from your email.

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BUILDING WEALTH

I actually enjoy responding to emails and comments. It feels like I am having a two way conversation. Anonymous just posted a follow up comment on dealing with debt, buying a home and investing in property. Here goes:

I think that (making solid relationships) is a skill that has stood you in good stead.

Ok, so I'm a 29 year old married man with 2 kids and a little knowledge on personal finance. I feel like I'm too far in debt that even buying home for my family is but a dream. Any advice as to how I can go about making this a reality as my wife earns R13000 and I earn on commission which is normally between R17000 and R25000. I am very curious about the property industry and would one day like to look at buying, fixing and selling. Would you say that I would need to first pay off my bond before treading into that sphere of property investment and so forth?

I'm sorry, I know I'm asking so many questions now, but all this is coming to mind. Could you perhaps suggest any books or material that I could use to expand my knowledge on?

Thanks for your email Anon. let me briefly unpack your data:
Age 29; Married; 2 kids; renting (assumption); lots of debt; Income is R30,000-R38000 per month
Assuming that your wife is the same age as yourself, you are very young. All you need is to start where you are and start building up. You have to take tough decisions to build your wealth and the legacy to leave for your children. Where it starts is dealing with your debt. It doesnt matter how big it is, you can do it. You will need to be on the same page as your wife to fight this together. I will suggest a few posts for you to look at.

1. Starting Out
This post might discourage you a bit because it states what I think you should have done to start with. If you havent read it already, do so. Knowing what you missed helps make you more cautious as you move forward. The post is a letter I recently wrote to my sister who is starting out.
Building Wealth- the beginning...

2. Getting Out of Debt
Most people think this is too difficult. It is not as difficult as most imagine it to be. Read this and create your own strategy on how you will kill your own debt. R30,000 in income is not small money. It can go very far. Whatever strategy you use, stick to it. A number of people who dont get to the top give up too early. Consistency is what matters.
Dealing with Debt...

3. Building your Savings
You will always have to start with paying yourself. You are more important than any of the retailers you are enriching when you buy stuff. Your debt has to take priority. Paying your debt is paying yourself because that is buying your freedom. Refuse to be a slave to those you owe. Paying debt is the first step in building wealth.
Buying your Freedom...

4. If you buy a House
Buying a house is not necessary, but when you do, fight to pay it up so that you own 100 percent of your home. Rather buy a smaller house in a nice area with good schools. If you have a car, work on paying it up too. Not even a bank deserves to be owed by you. This will take years to finalise but you have the time. Remember to keep saving a little whilst you are paying off your assets.
Paying your Home Quicker...

5. Investing in Property
Be ready and prepared when you start investing in property or any other investment vehicle. I would remove small debt like personal loans, credit card debt and store account debt before I embark on investing. Savings in the money market account and probably an ETF may suffice until you are debt free. The debt you can live with is a homeloan. Nothing else is worth owing on. Keep your car as long as you can.
Property Investment...

6. Mistakes to Avoid
It would be wise to avoid some of the mistakes that others make when investing in property.
Common Mistakes by Property Investors...

7. Books I have Read
I have read a lot of books on investing and building wealth. I will make a list of all the books that pointed me to the right direction and make a seperate post. This post is already too long. I will take them out in my study and make notes on each of them. That may require a bit of time.

I enjoyed giving my two cents piece of layman advice. All the best going forward.
SISA

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EXCHANGE TRADED FUND

I have been getting a lot of emails about the exchange traded fund (ETF) lately. I'll try and unpack it a bit here. I am a fan of ETFs, please pardon my positive look at them. But Really they are just the best money growing tool for new investors. Being low capital intensive and so on and so on... Lets look at our latest email below:

"You really inspired me, I would like to know more about Exchange Traded Fund”
Patricia

An ETF can be your foot in the door of the JSE or any stock exchange. One fund typically combines or has a collective of  stocks, commodities, currencies and/or bonds, which offers the needed asset diversification for an investor. Two people in my family invest in the ETFs because of their passive nature, low costs, tax efficiency, and liquidity. This is my experience on the subject from the two family members (hubby and son):

Low Cost
I once compared the ETFs to Unit Trusts. ETFs are very cheap because they are mostly commission-free. In their statements I see an admin fee. It’s negligible too. They are generally tax efficient too. That’s a really big plus. Always bear in mind that whatever cents you are saving in trading translates to more in your portfolio. It may be a few rands which add up to hundreds of rands in the long run.

Liquidity
Most investors want to know that they can get their money whenever they need it by selling their assets. In that case, an Exchange Traded Fund could be one of your options. You may actively trade your units using any of the available platforms, if you are the hands on type of a person. This means that you may buy and sell your units as you please.

Diversified Portfolio
All of us personal finance divas love a diversified portfolio. I hope we do. Exchange Traded Funds can be a good way to diversify one’s portfolio. Each ETF is typically a good basket of stocks, currencies, bonds or commodities. These may be from the same sector or various industries like finance, minerals, technology, top performing stocks, etc. Some are from same country and some international. Some are a group of high dividend stocks which are great for dividend investors. Now that we are on this topic, I have to write about my experience on international ETFs soon. 

Compounding
With my 11 year old son’s ETF, we both agreed to automate the re-investing of dividends. That small income buys more units of the fund and so the ball rolls. Apart from the capital growth he earns, he also gets his dividends automatically invested. That's the power of compounding. Some people may choose to take out their dividends out. I wouldn’t, unless I would invest them elsewhere.

Risk
Like any other investment, there are risks associated with trading. From the periodic trends, exchange traded funds generally look very good. Remember to do your research to identify your industry of choice and ETF type.

I did write about the Exchange Traded Fund before. Click on that link to open it.
Let me also commit to trying to get an expert to write a more comprehensive article on this subject. I'll beg them to go easy on the technical language.


You too may ask me a question by clicking on this link. You may also leave a comment below. And off course tell us about your own experiences or guest post here. We welcome any views. We also love other people's financial freedom journeys. Whether you just started paying your debt up, acquiring assets or taking your well deserved early retirement.

All the best in your investment choices,
SISA

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PAYING THE HOMELOAN FASTER

Latest reader's comment is on paying the homeloan faster.

I am so inspired by your blog. I have just bought a small house and from
reading your blog I now see that me and the bank can bond for a lot less
years if I take control of my finances. I need advice though, but I will save
that for another day. Thank you for putting all this out there."
Ncumisa, South Africa.

 Thank you and pleasure Ncumisa. I share this because I love it. I love it when people get out of debt and start building wealth.

And yes, you may pay up your bond faster. I received a call yesterday from someone who wants to pay up her home in just 5 years. From the calculation we realised that it can take her just below R17,000 to pay up her R800,000 home in 5 years. Well that depends on the interest rates that an individual is charged by their bank.

What people fail to realise is that, even R500 extra on their homeloan payments eats on the capital amount and makes a huge difference.

My advise to you would be

• Start small with what you have;
• Start now not next year;
• Stay consistent... every month, every year, every quarter... just keep moving;
• Plan an escalation. It may be 10% increase on your extra payments.

You may also do a lump sum payment from your annual bonus if you are lucky enough to have one of those. Every little bit helps in paying the homeloan faster.

Thanks again for your comment.
All the best in your financial freedom path.

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INVESTING IN YOUR 20S

Investing in your 20s and paying up debts by an actor:

Hey there!
I'm a 22 year old, South African actress. No wheels, still living with the parents. And I can't afford my acting lifestyle i.e going to auditions, and living off one freelance job to the next. So I took the broad leap of faith and got myself a "proper" job, well in this case its just a well paying job. I've always been a planner. So I've set a goal so that I can save up enough for wheels. But I'm afraid that my growing living costs are going to come and bite me in the behind when all this is done. My question is:
Where can I invest so that I can attain my goal to buy my vehicle cash and not live on nothing once my steady jobs sees its end? 
Also when is a right time/age to start investing in property, as I see your blogs favouring the returns of such an asset.
Like I know I didn't choose the worlds best career but I want to be able to enjoy my acting without dying of starvation, and don't want to spend my life sponging off of my parent's.
Regards
-Concerned 20 year old actress.

Hi B
Its good that you have supportive parents at the time of need. I also like that you don't want to take advantage of their kindness. Regarding your questions:
1. I would advise my 22 year old self to look into the ETFs. Its such a nice high return type of investment and a foot in the JSE door. It works very well for my son. Please refer to the article on the Exchange Traded Funds.
2. The time and age is always right to start investing in any sector. What can stop you is not qualifying for a homeloan/ bond because of the strict National Credit Act law. If you do qualify for a loan I think you can start immediately. Just buy in a good area with good jobs. You need paying tenants.

All the best with your investment endeavours.

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SIDE INCOME

Side income from writing:

Under a heading "Side Income I have a small income from my online writings." How do you get income from writing? I love writing and every penny will help.

 There are a lot of ways that one can make extra income. I wont dwell on them because your question is on writing income. What you are reading right now is my blog and one of the ways I publish my work. This blog doesn't make much for me in terms of income. I do however write on other topics and monetise my work and get some income from it.

All my work is published and sold online. If I had time, I would probably freelance too. I would write for online and offline media like magazines. I don't have the time. Maybe a few articles a month at the most would do.

I must add that my writing side income has gone down since I came back to work. I used to write an article or two most days when I worked from home. I enjoyed it. Writing relaxes me. Strange but very true. Hope you use your own skill and hobby to make money and build your wealth.

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DIVIDEND INVESTING IN SOUTH AFRICA

Question on Dividend Investing in South Africa.
I will soon give an update on what is happening in my life after being a housewife slash full time everything else but office work. I will be answering all outstanding questions tomorrow. Hope that will be possible as I will not be working. I am nicely well adjusted now too and I feel tired of having a job again. I will try not to be scarce anymore.

Reader's mail:

I read your article on this dividend investing. I have been looking at this also for a long time, also as a passive income option, but have not started for the following reason.
To make this worth your while, you really have to buy a large amount of dividend shares. What does your investigations tell you?

 Thanks for your question F. Indeed, one needs tons of high dividend shares to make a sizeable dividend income in South Africa. We just don't have high enough dividends. But what makes the whole idea difficult to work is the fact that, most high dividend stocks/ shares are low growth. The most I have done on dividends is R15,000 per year. And that was when I kept the focus on it. But my shares were limited in general.

We also have high dividend exchange traded funds (SatrixDivi), which is out performed on growth by other ETF sectors like Satrix40 over a period of 5 years.

You may see how modest the growth of the dividend investment compared to the top 40 stocks in satrix in the graph below.

I will look into practical calculations of when Dividend Investing in South Africa is worth it. It will obviously depend on the amount of money that one has in stocks.

Thanks again for your visit. For any questions, feel free to click on the contact us or Ask Us button above.

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UNIT TRUSTS VS EXCHANGE TRADED FUNDS

Apologies for being in hiding for so long. I have a number of emails I received whilst I tried to get used to my new work life. I took what feels like a lifetime to adjust. But I must say, I am enjoying the workplace for now. First reader's mail:

Hi I am 34 and recently developed an interest in personal finance. Up till now
I have been living like everyone else with debt, etc. I have started my debt
payoff plan, and is it currently progressing quite nicely. However I have
money my Mom invested for me in Absa Unit trust while I was still at
varsity, about R4 000.00, it has not grown much and I think the Absa fund is
not a very good one. My question to you is should I use the money in the
unit trust to make a huge payment towards credit cart debt, or should I take
that money and invest as a lump sum in Satrix fund. Any advice would be
appreciated. I have been reading a lot of overseas blogs and was pleasantly
  surprised to finally, find a personal finance blog by a South African for
South Africans, keep up the good work:)
Thank you

 Pleasure Anonymous. Congratulations on finally getting your act together. Unit Trusts are usually very expensive, hence your money not growing much. If I were to choose between unit trusts, other bank savings and exchange traded funds (ETF) like SATRIX, I would definitely choose an ETF. If you want to keep your mom's dream of having the R4000 growing you may consider Satrix.

However, a credit card debt is usually very expensive, with even above 20% in interest. Paying your debt makes more sense to me. Its a quicker way to start on a clean slate. I would definitely pay it into my credit card debt. What it means though, is that you wont swipe that credit card at all, until its paid off.

Keep moving. You are definitely on the right track.

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WHERE TO SAVE MONEY

A reader asked me:

"Do you have any advice on where to save money and get good interest?"

It depends on how much money we are talking about and what the money is for. There are a number of facilities and tools in South Africa that help one earn high interest.

1. I would put a small amount that I might need for an emergency in a Money Market account. I wrote about the money market accounts here... Money market accounts are relatively low interest but it is risk free, you can't lose any of your money. All banks have a money market account about 4-5% interest at the current low interest rates. I promise you, you will struggle to get that in the developed countries.
2. I would put money I don’t necessarily need for the medium to long term in the Index Fund like satrix. See my demonstration on satrix here... There is some risk as the money is in the stock exchange. So you may lose your money. Its unlikely and has never happened in the medium term. Your money is available when you need it. It depends on the fund you choose but a fund like SatrixIndi has managed more than 30% per year in the past few years and about 40% in growth in some of the years. That is a lot of growth.
3. I would go riskier and buy into individual companies in the stock exchange if I have a sizeable amount. Remember you can lose the money in the stock exchange. You also need to know what you are doing to invest by yourself. It is possible but takes time and education (reading and listening). So if you are not clued up, get experts or even better stick to an index fund.
4. If you have a huge sum of money and you are like in your 40s-50s, think about bonds. Interest is not bad but your money is locked for a specific number of years like 3 or 5 years. Why did I mention the age? The bonds are completely safe. I think when you are younger, you can afford a little risk in your life because you have time to recover what you lost. 

 For a balanced portfolio you need a bit of each of the tools listed above, plus other assets like Gold, property, etc. I just cannot give advise on where to save money without knowing your specific situation. Especially not knowing what the money is for. Feel free to ask more questions using the comment form below.

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DECEASED ESTATE TRANSACTION

Back in October 2012 I wrote about my deceased estate transaction. Only yesterday, I emailed the lawyers that I have lost interest in the deal. Who can blame me. I started this investment process in September 2012 and its now almost August 2013. The lawyers mentioned the challenge they have with the wrong municipal bill amounts and their difficulties rectifying them.

my deceased estate transaction

Anyway, I just got an email from a reader by the name of Jason.

"do you have a continuation on your story? email it to me."

I will email Jason. In any case, this is the story:
Lawyers did their long tango dance. Like I mentioned in my initial post, I was not going to be bothered by how long this transaction takes. The problem I have now is the fact that this project is still outstanding. Something about an incomplete project drains the energy out of me. I feel so drained each time I think of it. Can I be blamed? Its almost a year, anyone would be bound to crack, right?

This is my second try at the deceased estate transaction, and the experience is similar to the first one. I don't know if I will try my hands in the third one. Never say never though. I will wait to hear from the lawyers tomorrow. I feel relieved already. The seller (daughter of the deceased) is the one who kept me hoping. We finally got introduced, talked on whatsapp and facebook. And then I got my emotions entangled because I was all of a sudden dealing with someone I thought I knew. So I hung in there. I don't know if holding on to this deal was a great thing. If I cut my losses earlier, I would have moved on to another deal, I suspect. That may have ended up being a good or bad thing, depending on the deal I go to. Now that I couldn't go to another deal, I managed to focus more on the stocks. I feel its been a great move.

There it is folks. My deceased estate transaction seems to have fallen through again. Thanks for asking Jason.
If you also have a question/ request for me, feel free to leave me a note by filling the form at the Contact Page. No one will see your details. I love responding to emails.

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