SETTING A CAR FUND

Back in July I mentioned my plan to set a car fund here. I was to choose between that and buying a car through the traditional high interest car loan. The thought has never left my head since. The most tricky part was on the choice of saving/ investment tool. It was either the money market, similar to the Just Invest account that I use for the emergency fund, or stocks through an index fund.

I then went ahead to compare the Mr's index funds using the spreadsheet (I love excel). Remember how I go on and on about the Dividends as a great form of passive income. So Satrix DIVI was an obvious winner. It has done well in the past year. Its done well both on capital growth and dividend pay out compared to Satrix 40. That's all I compared.

Setting a car fund using Satrix DIVI

See the comparison above. Its not as dramatic in a 3 year graph. But, like I mentioned, the high dividend payout is my main motivation. I will stick with the DIVI for the car fund. Its the R5000 per month until I cant take the car shopping abstinence anymore. I hope I can hold on for 5 years. If I don't, its no big deal, I guess. Just saying.

Lets now take a closer look at the share basket in this index fund:
Financials 38.7%
Industrials 18.27%
Telecoms 12.67%
Materials 9.67%
Consumer Services 15.67%
And Others

Whats not to like. I went ahead to check the individual shares in those categories. I liked them. And the 20% growth for the past year also helps. I will report on this monthly as well. Hope its a fun and profitable 5 year ride. Browse the individual shares in the basket below.

Share Basket Constituents for Satrix DIVI - October 2012

Share Name	Industry	Weight
ABSA Group Ltd	Financials	3.67%
African Bank Inv Ltd	Financials	3.52%
Allied Elec Corp Pref	Industrials	3.38%
Allied Technologies Ltd	Telecommunications	4.95%
AVI Ltd	Consumer goods	2.36%
Coronation Fund Mngrs Ld	Financials	4.47%
Exxaro Resources Ltd	Basic Materials	2.61%
Firstrand Ltd	Financials	2.57%
Investec Ltd	Financials	3.16%
Investec plc	Financials	2.96%
JD Group Ltd	Consumer services	3.61%
JSE Ltd	Financials	2.51%
Kumba Iron Ore Ltd	Basic Materials	4.71%
Lewis Group Ltd	Consumer services	4.46%
Liberty Holdings Ltd	Financials	3.58%
MMI Holdings Limited	Financials	3.67%
Mondi Ltd	Basic Materials	2.33%
MTN Group Ltd	Telecommunications	3.48%
Nampak Ltd	Industrials	3.44%
Nedbank Group Ltd	Financials	2.88%
PPC Limited	Industrials	3.24%
Remgro Ltd	Industrials	4.54%
Reunert Ltd	Industrials	3.64%
Sanlam Limited	Financials	2.70%
Sasol Limited	Oil and Gas	2.81%
Standard Bank Group Ltd	Financials	3.02%
The Foschini Group Limit	Consumer services	2.85%
The Spar Group Ltd	Consumer services	2.19%
Vodacom Group Ltd	Telecommunications	4.16%
Woolworths Holdings Ltd	Consumer services	2.52%

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Rising Petrol Prices

Do we fully understand what the rising petrol prices mean? It means we are doomed!!! Most of us forget that prices of everything are directly affected by the rise in fuel prices. Lets forget about luxuries and think basics...FOOD. For experimentation purposes, if you go grocery shopping today, keep your till slip to compare to your grocery shopping in a week or two. The same food basket will cost you more because it was supposedly transported by the 8.4% higher priced petrol.

Coping with Rising Petrol Prices in South Africa

Yes, the petrol price rises by a whooping 8.4% today. Apart from other reasons like rising oil prices and the weaker rand, the wage increases for pump attendants at filling stations seem to be one cause. An additional 8.4% translates to R11.97 a litre of petrol inland whilst the diesel price's 6.7% rise means R10.95 for a litre.

Is anyone as angry as I am that the public transportation in South Africa is in the state it is in. Car ownership has become one of the basic needs for South Africans. We often interpret that statement as "a luxury car is a basic need". In case you are wondering, we still have a lot we can do to save ourselves from the high cost of living.

How I Cope with the Rising Petrol Prices

Off course I hardly ever drive. Its not an advise for everyone though. I am blessed to be working from home and online, maybe for now. My car battery dies all the time unless the hubby drives it around a few minutes per week. I walk to go do my small grocery shopping.

I am not buying a new car any time soon, make that in a few years. That means that I don't have any car installments to pay in the few years. I am keeping my fingers crossed that I don't snap and go buy the car of my dreams within that period. I am so enjoying not worrying about the car installment. It must be the most painful thing to worry about, when one has a lot of other financial commitments to take care of. Especially if those commitments are DEBTS.

If hubby buys a new car, because buying his French car was one of our worst mistake, we will go for something modest and do so for cash. That means we have to have a car fund going, and sadly we don't. We will open a second emergency fund (Money Market account) set up in hubby's name for that purpose. We obviously cant use my existing money market to avoid taxation on interest. Remember that the exempt portion of interest earned is now R22 800 a year. I feel we are being discouraged from saving.

I don't have any credit card and I never had a petrol card. I know about the benefits, the reward programs, the convenience, blah-blah-blah. I don't have time nor energy to look at all that. I will have to look at that in future. To see if the annual fees are low enough for me to overlook.

We are sadly not buying a new house either. This has nothing to do with rising petrol prices however. We just decided to take advantage of the opportunity that presented itself. I am investing in another rental property in a small town. I know I have all the rental property that I planned to have, but I couldn't resist the temptation. I am all so excited about it but will give details later.

My monthly budget is still a work in progress. There are luxuries that I cant let go of yet. I work very hard and some luxuries make this journey to be worth every sacrifice.
What are you doing to cope with the rising petrol prices?

image via

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A Car is Not an Investment

A Car is Not an Investment

We all know that a car is NOT an investment right! But why do we continue to treat it like one? I am learning to unlearn all I learnt about car ownership in the past. We were a one car family for a very long time. And most of my friends were bugging me about not owning my own wheels. Being in South Africa where everyone owns or at least wishes to own a car, and all. I wonder why friends never ask if I'm investing for retirement for a change. That would be a better concern.

Oh well, I managed to buy myself a car 5 years ago. I did so much research. I knew that I don't want a new car, I don't want a car that has covered a lot of mileage, I don't want a very old car. Most importantly, I didn't want a car INSTALLMENT. And all my wishes came true. There I was at the dealership of choice, picking and choosing. I ended up with a 1.8 litre car, 5000km mileage, same year model, and parted with R170,000. And I negotiated it down from R175,000. It gives me goosebumps just thinking about it. I was very proud of myself. Sacrifice does pay off.

Lets look at the figures. Based on the high interest rates at the time I would have paid just below R5000 per month over 5 years and just above R255,000 total payment over 5 years. Typing it alone sends chills down my spine. And indeed after 5 years I had an itch to buy another car. There's a whisper in my ear that says, "your car will start giving you problems". There was that whisper until I read an article about the guy who drove his car for 16 years. His car was bought used. I brushed the edge to splash on another car immediately. I guess I can keep pushing for another 5 years. This guy understood that a car is NOT an investment and focused on things that matter. In year 13, his car started giving problems. He fixed it for R7000 or so and continues with the ride. I know you think its too much, but he rightly justifies the cost by his lack of an installment. He just put aside R7000 per year for similar repairs going forward, saving the equivalent of the installment for another car. The most that he paid in repairs in the last 3 years of his car's life was R2800 per year. By the year 16 he bought himself another car, CASH, using the car fund that he opened for such.

Now back to me. This is my 5 years of driving my car, and my first year doing so without the warranty. That used to scare me. What is stopping me from starting a car fund, saving the R5000 - R7000 that I would pay for a car installment in that fund. I refuse to spend more than that on a car installment by the way. I can even invest that car fund whilst learning online investing. And since its a longer term project, I would reinvest all my dividends and do what is termed drip investing. It would be interesting to watch the money piling. YES, I am that positive. And I suspect that with a mileage of just above 100000km, I will have a great 5 years and another 100000km. Paying for service will be a pain, but a better pain compared to a car installment. I think.

How do you finance your cars? Do you save for a high deposit to reduce the monthly installment? Do you buy an older car for cash? Do you just do without a car, PERIOD?

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