OUR NET WORTH AND 2021 MONEY HIGHLIGHTS

 When Mr V (husband) and myself planned our lives together in our 20s we took a decision to focus more energies on our family and family businesses and less on top careers. We had decided on shorter career lives. This was before the ‘fire movement’ came to be. For those who do not know, ‘FIRE’ is an acronym for ‘Financial Independence Retire Early. We never imagined that this decision would be the one thing that gives us purpose and a strong joint passion. Financial independence and early retirement were the goal. I have been outside formal employment for almost 5 years now. I also took my semi-retirement break at 35.

The past few years were super challenging. We lost my mother in December 2020. The pain that I went and am still going through cannot be articulated. My mother was a close friend. The year 2020 was the most difficult year globally. I have not blogged in both 2020 and 2021. However, in 2021 I went back to tracking my finances. This was a needed distraction. 

Back in January 2020, our family’s financial plan was to double our net worth and income in two years without acquiring new physical assets. Then 2020 turned to be the weirdest period of our lives. I rested more that year. The plan to double our net worth was only implemented in mid-2021. My excel spreadsheets and graphs are beautiful to watch every quarter.

Whilst excel is great, I miss keeping myself accountable through blogging. I will use this platform to keep track of the progress in our ‘project July 2021- June 2023’. It will take a lot of doing to achieve this goal but it is doable. The detailed plan for 2022 will follow in the next blog post.

2021 Highlights:

1.Stocks. What we have done from July 2021 is increase our investments in stocks. We did get lucky with the SASOL dip and the great performance of the US dollar stocks in the past year. The year or semester rather, was great. We did not forget our tax free benefit accounts which are also in Exchange Traded Funds (ETFs).

2. Rental Income. We also had major renovation projects to increase the rental income. One renovation project was in our multifamily let. We renovated the biggest unit. This property has 6 lease contracts in it. We are finalising this remodel project soon. The renovation should increase the income of the unit by 60%. The plan was to further develop this property. The city’s 2018 Regional Spatial Development Framework (RSDF) removed the erf from the area that they earmarked for densification. So, we could not.

3.Retirement and savings. We also contribute to our retirement accounts monthly. We each have two accounts with one being a retirement annuity. The performance is not stunning, but they are a great addition. We also keep some small figure in savings to serve as an emergency fund. We no longer have a big sum in the emergency funds accounts. Interest rates are too low for that. My zero-fee credit card is my emergency account. I never pay interest on a credit card.

4. Gigs. I achieved more in 2021 than I did in the past few years. My freelance income has been channelled to fast-track Mr V’s retirement. This deserves a separate post.

5. Content creation. My content creation income was very small. Like I mentioned, I went AWOL. See next blog post for the plans for 2022 on this.

6. Speaking. I was a visiting lecturer and had a few speaking appearances last year. Noteworthy is my appearance as an expert at an ‘Africa Trade Conference 2021’ and the full week radio show talks.

7. Wealth transfer. The Geek (our son)  turned 18 in 2021 and started on the investment journey of his own. The boy has done very well and invests in the US stocks and ETFs exclusively. He has impressed us by his focus on managing his finances. We have discussed building a good credit rating record and getting his first credit card. We are also helping him max his tax-free savings account. 

8. Budgeting. I still work with a budget that is in my head. Budgeting never works for me. I make my targets, save, invest and then spend. Paying myself first helps with my impulsive habits. 

9. Debt. On debt, we still only have investment property debt. We also have reduced this remarkably in 2021. We are generally not bothered by rental property mortgages. Our priority is having no debt in our primary home and no debt anywhere else. This has always been the case.

10. Travel. I had plans to travel in 2021. Ireland and Egypt were on the list. Due to the pandemic I only managed to travel between Angola and South Africa. I am looking forward to open borders. The family’s feet itch.

11. Comfort. Our primary home was the most costly project for the year. We are a family that believes in comfortable living, and always prioritise comfort and healthy food. OH, we sure love our food. We did get approached by interested prospective corporate tenants to lease this property. I was welcoming the idea of great income, but Mr V and the Geek refused to let go.

12. Finally, 2021 had its challenges. We had a few months of vacancies and unpaid rentals due to the pandemic. This is not common as we invest mainly in the heart of national government and diplomat presence. Our 2022 goals will highlight how this discomfort pushed us to grow. Our investment city is also growing and is now with a population of over 2.5 Million.

Thank you for visiting Safe Investing SA. For daily motivation like us on Facebook, Twitter and/ or Instagram.

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Author Mbini Kutta, a businesswoman, personal finance author and investor.

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TEACHING KIDS ABOUT MONEY

What an amazing facebook inbox I got from someone I never met. Teaching kids about money is never easy, I guess.
Except I started quite early that my son thought of it as a game. You get money, save some, use a little and be happy. When he turned 10 I taught him about the JSE and Satrix and he thought is a great idea to try that. But then, when he gets a R10 note he asks me to throw it in the stocks. He is yet to get a grasp of this. But I am very impressed with him. Naturally, I shared this story with women and mothers in one forum of people who don't want their kids to fall on the same financial disaster trap. One mother was kind enough to give me feedback as follows:

Hi SISA, I am so grateful for all your financial advise on teaching kids about money, its value and how to save it. I was owing my 14 year old son R200 for house chores and I decided to open an account for him at Nedbank. I put R100 into an investment account and another R100 into a savings account for him. I went ahead and told him that even R20 saved in his bank account will help towards his Varsity time savings and for buying stuff for himself later on. Thanks you very much for that wisdom.

 I love getting such feedback. When I started teaching my own child about personal finance I explained the value of compound interest. It changed how he looks at money forever. One mistake we make is underestimating the intelligence of a 4 year old. I also gave my son a reason to save. He was talking about owning a car at the time. I told him that he can save some of his money to buy his own car when he turns 18. That was a challenge and you don't dare a 4 year old boy.

His Satrix Indi has been doing extremely well. Its been a few months. I think three or slightly less. And my boy raked between 6 and 8% growth in this short space of time. Even when the JSE caught some flu, his index fund was just shaken a bit.

The best way to teach kids about money is leading by example. Be what you want to see in your kids. If you teach them that expensive and fashionable clothing makes a person, they will grow with that. If you, yourself throw money around and try to impress your peers, you are setting your son for a personal finance failure. Its never too late to start with children. They are like sponges and ready to absorb everything that comes their way. Keep the topic interesting and give rewards.

For every rand my boy saves he gets a rand from his mama. The more he saves the higher the match. He is quite lucky to get money gifts from family and our friends for his birthday. He saves most of it. It helps that he is such a cheap boy.

In your own house, are you teaching kids about money? What do you do to encourage your kids, grand-kids, nieces or nephews to save? 

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INVESTING EDUCATION FOR KIDS

INVESTING EDUCATION FOR KIDS

I hope the safe investing South Africa blog readers are better parents than most. From a very young age my parents told me to go to school so I can get a good job. My friends were told the same by their parents. It’s a standard rule and parental policy to tell kids to prepare for good paying jobs, I guess. Our parents never thought that jobs are going to be such a scarce commodity, that their kids will struggle on their own and go back to squat at home if they ever leave to start with. Previously unthought-of terminology like unemployed and unemployable graduates mushrooms from all corners of the globe. Makes one wonder if such an intelligent society should be continuing with this crazy idea of raising employees.

How about telling our kids a new relevant story? We are in what seems to be a never ending recession and job opportunities are moving further apart by the minute. The economist in me whispers “its just an economic trough, it’s going to get better” and a realist is shouting “take this more serious than you do”. I don’t want to think of the worst case scenario. Let’s just imagine things stay the way they are for the next 10 to 15 years. My kids will be starting to look for their jobs right at the end. Who will hire them if companies are going bankrupt and closing down at the rate they currently are?

From where I’m standing, we need to grow new entrepreneurs and employers. Times are quite tough. Parents should be singing a new “business development” tune to their children. The coming generation should bring solutions to their challenges. If you are one of those “go to school, get a good job” parents, STOP, seriously STOP it. Nothing wrong with the “go to school” part though. Entrepreneurs need education. Research shows that educated entrepreneurs are more likely to make it compared to their uneducated counterparts.

Besides, our kids are looking at things way different to how we did in our time. Oh my God, did I just say “in my time”? I feel ancient already. My point stands though. We should start talking business with our children from an early age. We should be researching resources on investing for kids, we should engage kids in money related decisions, we should be honest with them about our poor financial state, we should teach them to save from an early age, and they should set personal finance goals. A simple piggy bank will go a long way to teach a child financial responsibility. However, a bank savings account reviewed often is even better. Love them enough to prepare them for the harsh realities of our times.
If you have more than one child, it might be of help encouraging harmony whilst you are still there. Money and family relationships do get tricky.

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Banking on Mom and Dad

Yep, young professionals are having it tougher financially and are daily banking on mom and dad, or even on grandparents for survival. We are raising a back home generation. You may be remembering my post about my "about to be vacant" duplex. I am back to preparing it for rental and marketing it again, after just one year of doing so. My tenant's (soon to be ex) story goes...

By the way, she was the best tenant ever. I had a few maintenance complaints but nothing out of the ordinary. Money was in my account on time every time. One of those tenants you want to hold on to for a very long time. Unfortunately, after a year of a contract and a few months, she had a change of plan. I can imagine her sitting down with her balance sheet, as she should, and seeing the highest expense being rent. She emailed me, "I do not want to do this but the matter is off my control now because of the reasons stated on the letter." And yes, the letter attached was the one serving as notice to vacate the property. Yeah right, she gave me reasons too...."I have some financial problems and will therefore be moving back home".

Its sad that I am losing the best tenant, but I must say, Good for Her. If she still has a bedroom at home, and can stand the nagging that comes with a package, why not. She decided to forget the reasons she left home to start with, and objectively decided on banking with mom and dad again.

Forget the back home revolution, some of us are downgrading. Living in small spaces is more fashionable than a yellow dress. I must say, its quite sexy. Even I love small and intimate spaces, but with two kids, I just cant.

Beginning of 2010, my then young family tenants requested to be released from the contract before the end of the term. They were moving to a smaller and cheaper home due to changes in their finances and budget. I was impressed by that move, but still sad to be going back to searching for the tenant. Recession can teach a person a thing or two about themselves. Downgrading from a spacious family home to a tiny apartment has to demonstrate some strength in one's character.

The trend with investing in real estate follows the same trend. The first time buyers often rely on their parents and even grandparents to help them with achieving their dream of owning their first home. I found out from one of the National Association of Realtors publications that 24% of first time buyers in 2004 received gifts for a down payment from friends or relatives compared to 18% in 1991. Other financial help options include having adult children stay at the parents’ homes for longer than they would choose to, whilst they raise the down payment for their first homes. Some parents buy their adult children their first properties or cosign to secure them good mortgages. 

As I am traveling at the moment, my tenant agreed to show the place to prospective tenants at a fee we agreed on. Its good to build great landlord - tenant relationships. Here's to hoping I get an even better tenant.

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Investing Inheritance and Gifts

I do a lot of blog hopping, especially in circles that deal with personal finance. I have seen different backgrounds of bloggers. Those from a "tough start" background and those with a little or a lot of help from their parents. I must say I am happy for those who are taking "difficult" decisions on investing inheritance and gifts from their parents, grandparents, aunts, uncles, god parents, etc. Some of us on the other hand had to start from a negative slate. Student loans, start up everything, and the quest to succeed. If you inherited a small fortune, you don't need to feel guilty or offended, just be grateful to your parents or grandparents for depriving themselves and working hard for you to receive a token of their love.

If I were to inherit some money from my parents, I think I would be very scared to lose it. I would probably feel I owe it to the giver to not lose it. I know I am making too much of this because I have no clue how it feels to have your portfolio pumped with a few hundreds or millions of dollars in a second. Its a blessing and an enviable one in that. I work hard to make sure my kids do get something when I get "matured". Another reason my son knows more about money than an average eight year old, poor boy.

I think parents should not only leave their children with huge amounts of money, but equip them with tools to make that money work for them too. Its very sad when one gets to inherit a fortune, only to lose it all in a few years from too much extravagance. My take is that, if you cant take care of your $80,000 annual salary, you wont be able to take care of your $800,000 inheritance. Easy as that. Your state of finances has very little to do with the amount of money you make every month, but your attitude towards money.

Spending money is the easy part, for most of us. Trust me, I know. Despite my being responsible and always trying to get better at managing my portfolio and making a little more money, I tend to spend more of it than I should. I was traveling last week with my family on a one week holiday. I spotted opportunities to spend everywhere, from bookstores, chain stores, kids' clothes, home supplies, my own clothes, etc. When I got back, I finally pulled me together to check my bank statement and... I don't want to talk about it just yet.

What to do when you mess up like that... work harder. That's what I do. I have no inheritance to fall back on remember. If I did have some, I would have been very grateful though. An extra burden of investing inheritance and gifts from loved ones is SO SO SO welcome. I hope my aunts and uncles are listening.

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Family Relations and Money

Trying to keep great management of family relations and money matters in harmony is no easy juggle. Especially when the family doesn't speak in the same financial and investment language.

Charity begins at Home:
I have gone past my mid thirties, and I am yet to hear my dad giving me a financial advice. Any kind of financial advice. Even a really bad advice. Nah, it will never happen. My parents did the best in preaching the "go to school, do well, get a job, live well" gospel. As to the "how to" of the live well part,... that was left out. But I still have to give it to them for ensuring the former three parts. We all had to go to school and do well.
I do wish my parents did have financial conversations with us though. Better yet, I wish they themselves knew better about financial management.

This gave me an interest in teaching my son  about money matters and the value of money. That has helped me escape those nasty screams in the store isles about what toy I should buy. At a tender age of eight, he can give better financial advice than most adults. Very embarrassing to state that, but it is a fact. Its never too late to talk to your kids about money. Like with all aspects of life, the sooner you start your money talk, the better. Its easier to get them a piggy bank, which me and my son passionately refer to as "Cashy". He keeps all of my son's savings until his tummy is too heavy to carry on.

Sibling Rivalry Around Money:
I am so fortunate that I never had quarrels over money with my siblings. Its really not because of our good manners, but the fact that we never see ourselves as trading partners. Whenever a niece, nephew or sibling in both families is in need, we rather opt to give, rather than lend. It happens often, but hey, giving is the whole idea of making money to start with. My idea by the way.
A classic case is when my sister and her new husband were renting my garden cottage, straight from honeymoon. The thought of renting the cottage out had never crossed my mind before they approached me. I never kept any records of their payments, and they did come late, etc. I really didnt mind at all. When they bought their own house and left the cottage, my sister explained how they will pay the debt. I was like "No, you actually don't owe anything". She insisted, until I couldn't say no anymore. Touching gratitude on her part I must say. I'm not sure if the money was ultimately paid or not, which shown my loose approach when it comes to siblings and money. I am happy with it.

Extended Family Relations and Money:
Money does exchange hands in our extended family. But we really give and never have loans with each other. That's my experience at least. I will buy what my cousins sell for instance, even when I have no use for it. It feels great supporting their businesses like that. I end up with a lot of stuff, which feeds my hoarding habit. I probably should stop.
Supporting a family member with a business is just one of the things I feel obliged to do. I do it with love.

I know families that have broken relationships over money. Its a shame when people use others for the love of money and materialism. I take care of my finances but I love my family more. I will not hesitate to give for a good cause. Be it family, charity or church. Ultimately, the whole idea of making more, is to give more.

"And to whomsoever much is given, of him shall much be required..." 

Luke 12:48(ASV)

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