BEFORE YOU QUIT YOUR JOB

With the sky rocketing unemployment rate figures you would think that everyone is holding tight to the jobs that they have. Surprise, Surprise! The reality is that, most of us hate our day jobs and/or work outside our passions such that quitting sounds like a dream. I found myself talking to a friend about important things to consider before one quits his or her day job this afternoon. Here goes:

Gautrain Rides - (Before you Quit your Job)

Before you quit your job to work for yourself consider doing the following:

Draw a Business Plan
Drawing a business plan should be for yourself to get a clear understanding of the industry you are about to join. And YES, quitting without a thorough research of the business you are going to own and run is a bad idea. A business plan is not drawn solely to access funding but to also scrutinize the business idea you have. Have a clear understanding of your service or product, look at the expected income and expenditure, ask questions from the right people in the industry, and, and... This gives you answers to all the question you should ask before you quit your job.

Start Part Time
If possible, test the waters and start your business part time. This is a very tough approach but it works in a lot of business models. If you will be selling stuff, writing or crafting, just start already and see how the market responds. Be careful not to steal time and resources from your employer. Create time outside your working hours to work on your dream. Its quite exhausting but rewarding.

Build a Safety Net
Remember that you may not be getting any profits from your business for the first year or so. Time to build on your savings is whilst you still have a day job. Most people save at least six months to a year’s worth of their expenses to keep them going whilst they are building on their dream. These are the expenses you have monthly and not necessarily your monthly income. Look at stuff like:

• Homeloan, rates, taxes, levies, insurance or rental costs
• Water and electricity costs
• Groceries
• School fees
• Consumer needs like clothing
• Transportation, fuel, insurance and car service and repairs if you own a car
• Medical expenses
• Other unplanned costs

This is bare minimum of what you need. Add a little to what you think covers your budget just in case. You have to be sure you can do without your salary for a year before you quit your job.

Don’t Touch your Pension Fund Planning a business around a pension fund is a bad idea. Your pensions are meant to take care of you at retirement and not a day before that. Your business should have a start-up capital that is saved elsewhere. Invest as much of your pensions as you can in a tax free retirement tool if you have to take them from your employer. This is where most people miss it. Your business should grow to enable you to add into your retirement funds and not withdraw from them.

Reduce your Monthly Budget
A lot of money is wasted on unnecessary luxuries. Cut on all unnecessary expenses before you quit your job. I can immediately think of pay TV (DSTV), take away lunches, take away coffee, and any other unnecessary expenditure. You probably need to start washing your own car and fixing your own lunch.

Get a Mentor
If possible, get a mentor who is experienced in the business of your choice. Getting a free mentor is ideal. A lot of people are willing to share their knowledge and experience. You may even start subcontracting with experienced firms and individuals as you start your business. This is also a perfect way to learn until you have an understanding of how your business works and how you can go about securing your own contracts.

Business versus Personal Income
You may have started on your business already. If so, separate your personal income from the business income. Your business income is for your business needs. It is not to escalate your lifestyle. Your business should be saving for its times of need. A lot of small business owners are quick to withdraw from the business funds before their businesses develop some wings.

Starting and running own business is definitely tougher than being employed. It may look like a bed of roses. It is definitely not. As you start, you work twice as hard as you worked at your day job only to make a fraction of what you earned. Whilst the outcome is rewarding, make sure that the journey is as enjoyable. You cannot cut corners. Make sure you are mentally and financially prepared.

All the best with your plans,
SISA

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BUILDING WEALTH FROM YOUR FIRST JOB

This piece of advice on building wealth from your first job is a letter to my youngest sister who just got her first job as an intern. I am the proudest big sister right now. What makes me even more proud is that she asked for some financial guidance as she starts her career path. It feels good to give needed advice because you are almost certain it will be used. And that I can always follow up later.

SIDE-NOTE:
All of this is what I wish someone told me when I was a twenty something year old starting out in the salary world.
Heck! I wish I got this when I was running a small business as a university student making a modest but sufficient living.
Forget that, I wish I was given some wisdom when I was a school child selling sweets to other learners.

Anyway, let’s get back to building wealth from your first job. Here are a few pointers for you gorgeous sister and any other interested person:

1. Stay out of debt. ALL debt is BAD. I know you will probably need some debt but it is never a good thing to owe anyone. This should be your principle! Credit cards and retail cards are the most toxic of debts. AVOID them at all cost.

2. Bad company corrupts good character. This piece of scripture will keep you in the straight and narrow. Friends who are flashy and materialistic usually think less. Surround yourself with people as smart as and even smarter than yourself.    

3. SAVE, SAVE, SAVE! If possible, save more than 30% of your income every month. 50% would be great. I’m sure you have no intention of working for a boss for the rest of your life. OK, I hope so. Watch your clothing budget!

4. FIRST things FIRST. The first thing you do when you get your salary (besides Spiritual commitments) is to transfer the portion you are saving to your savings account, preferably a Money Market account. This way you start building your Emergency Fund.

5. INVEST! Within your first months of being employed put a portion of the money you are saving in Exchange Traded Funds (ETFs) like satrix. This has to be a bigger portion of your savings. You will see it rise and fall but steadily building up. (I cannot emphasize on this point enough as part of building wealth from your first job). Later on in your life you will have this fund cover all your lifestyle needs in dividends.

When you get braver, you may start investing in stocks. It’s not as scary as it looks. Just don’t buy the products and software that they sell to teach you how to invest. If you prefer, go for property investing like I do. Buy property at below market rate and resell or rent out to tenants. It’s important to remember that NO investment is passive. You work your butt off building wealth with or without investment managers.

6. GROW with your career. You will ultimately get a raise in your job or get a higher paying job elsewhere. Raise your savings and investments with your increase in income. Stick to your percentage of savings and investments.

7. PROPERTY AND DEBT. In South Africa it is better to own your home. You never need to invest in your own home but it has worked out better for me and people I know. This is the only debt that is justifiable to have. When you do buy a house of your own, get a townhouse in a high rental demand, convenient and upmarket area. You may rent this out someday.

8. WARNING: Almost everyone around you will be carrying bucket loads of debt. Most will argue that you cannot live without debt. That’s a lie. A very few people will be debt free and labelled ridiculous names. Choose to be your own person and stay away from the crowds when it comes to your personal finance. You are guaranteed to lose friends over this. Press on; they are not worth it anyway.

There are a number of other ways you can fast track your progress when building wealth from your first job like earning extra from side hustles. For any specific how-to information, click on the active links within this post.

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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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SIDE HUSTLES

I just asked a group of women on facebook about their side hustles. I was so inspired by all these hard working women. Some are in direct marketing building their sales businesses, some are rocking a second job/ future business, one is selling chicken and eggs and one is completing her self catering apartment/ studio. This all inspired the rest of us. Everyone is awakening to the reality that no job is secure, and that diversification of income is necessary.

Side hustles and Outsourcing

My own side hustles story goes:
For more than 4 years I lived in a foreign country, set to build on my side income to be my main income. I had no salary and my goal was to grow my side income to reach the last salary I received from my job. This would enable me to choose whether to go back to work or continue doing what I love doing. The plan was to have a location independent kind of work like freelance writing. For one year I buried myself in writing from morning to morning. I slept for 5 hours max. I got burned out and worried that I wont enjoy the new country I was in if I carried on with the hard work and no leisure. I decided to outsource some of my work (I am a lazy person in general). A company in another country started writing for me together with SA journalism students and a freelance editor worked on the imperfections. I pretty much freed most of my time to do missionary and charity work and talks in conferences, and coffee dates and church activities, and social networking, and leisurely writing only on what I like.

My main side income when I had a job was in real estates, followed by my writing. With me that far I had to hire a property manager to take care of the real estate part of my busy life. I now had outsourced almost all my life. I didn’t even take my son to school, because I felt I needed time to think about ways to grow my side income. Everyday I woke up to think, think and think some more... My thoughts got clearer and clearer every single day. I decided to go back to school for 2 years, which I did on block weeks to do Masters in Real Estate. Though unnecessary but also tying in with the goal of growing my side income.

I renovated my rental properties to increase the rental income...it worked. My writing side hustles started working for me and I re-invested the income where it can work and earn me monthly income... it worked. Four years went by and my extra income reached my final take home salary of 4 years prior. I had to choose whether I go back to the workplace or I continue chilling with my daughter at home. My friends were scared for me, my family was scared for me, I was scared for myself, my husband was a very proud man and pretty much told me to “do whatever you want to do”. I went back to work just to see how I feel about it. I was now more confident to shove in my terms into my new job like reducing the travel. And I realised that I still like the kind of work that I have been doing in the past, quite a bit. I will be honest, the main reason I went back to work is to grow my side income further through investments in order to reach double my current salary. I thought and still think I won't last very long at work but I decided to at least try it. If I enjoy it, I will stick around for another two years.

This is no magic, anyone can do what I am doing. I am humbled by the love and support and the inspiring women who are working hard all around me. I am writing this to inspire the women who are starting on their side hustles to keep on working hard. It's one of the few ways to fast track one's financial independence. All my side income is re-invested to build more income. Most importantly, when I invest money, I never feel deprived of anything because God has already provided me with everything I need. The rest is just unnecessary frills that are great to have. And my lifestyle has enabled me to give to the less fortunate more each year. I am really grateful. I may not be rich but I am very content.

How about you my friend? What side hustles are you busy with?

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DECEASED ESTATE TRANSACTION UPDATE

A few weeks ago I wrote an update on my deceased estate transaction. I had basically thrown a towel as this transaction is approaching a full year in existence. I actually sent a "thanks but no thanks" type of email to the lawyers when they sent me this:

Dear Mrs... Thank you for your email of the 20th of July. You are quite correct to say that this has been a tough transaction but we have reached the stage where the transfer documents have now been forwarded to Cape Town for registration in the Deeds Office. We anticipate registration to occur towards the end of August. 
Yours faithfully

Ok, it seems that we are finally putting this matter to rest. We are to pay the remainder of the money beginning of September. What I found interesting though is the email from the lawyer that reads:

Dear Mrs...

As we are expecting registration early September 2013 please let us have the purchase price iro the above-mentioned transaction.

Please note that there has been a delay caused by FNB losing the original Title Deed and Bond which has to be simultaneously cancelled with registration of transfer.

Awaiting to hearing from you shortly.

Then the bank delays this process further. But really, it doesn't matter much. I still think the transaction was worth the wait. I managed to lock the price for the whole year. I only paid the lawyers fees in the year and kept my money in the money market account for the year.

What is exciting me the most is the fact that I will do a small development in this property. I may add a few two bedroom units in the land. Lets hope the municipality wont give me problems. if they do, I may have to re-sell the property. It would hurt to do that because even my parents went to see it. They really loved it.

Well, that's my deceased estate transaction update. Will I ever buy from a deceased estate again? I don't know. I actually doubt it. Would you consider buying from a deceased estate?

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REACHING FINANCIAL INDEPENDENCE

The right way to go about reaching financial independence for me was only through understanding my “WHY”. For me, it is to be able to take control of my life. I don’t want to stay in the job that I don’t want because I have to. That's why we chose to owe no one anything but love, and it works wonders for us. We worked hard and sacrificed fancy material stuff earlier on to leave an inheritance for our children and started building our own tools to give to the poor. I have a small scholarship to give other people's kids a solid high quality education. This is all based on the wisdom found in the Proverbs.

Reaching Financial Independence - image

Establish your own WHY and shape your life to respond to it.

What is Financial Independence?
“Financial independence is a term generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.” Wikipaedia

A high salary doesn't count, unless it is used to acquire assets that make more money. It is all about asset ownership. Assets are what enable us to create jobs, reach out to the poor, and have control over our time. A job is not a permanent solution to one's financial woes. You may lose your job in an instant. It is much wiser to get R500,000 per year from an asset than R1Million from a job because your asset is likely to be with you and your children and if well taken care of, with your children's grandchildren.

Measuring your Way to Reaching Financial Independence
Financial independence is about the ability to live comfortably without needing a job. To measure your wealth, think about the number of years you can manage without your next salary. If you are able to cover all your expenses without a monthly salary, congratulations, you have arrived. There are two ways of doing this

You either boost your income or lower your monthly expenses. The easiest is lowering expenses. This is not easy, but it is very possible. In just over 10 years of us working towards this with only our salaries, we reached the point where we can do without our jobs in an unfortunate event of us losing them. We managed to collect assets that earn us a stable income that covers more than just our basic expenses. This is how we did that:

Real Estate
Most of our monthly income is from our rental properties. These alone can cover our current basic needs. It is definitely not easy collecting assets like property in South Africa. Don't be intimidated, however. Push harder, save like crazy, and start your own wealth building journey. We also paid up all our properties by investing the rental income back into the mortgages/ homeloans. It was worth it. Without a homeloan currently, that means lower monthly expenses.

Living Below your Means
It's a no brainer, earning R20,000 and having your living expenses at R20,000 is doing your retirement plan disservice. Most of us spend more than we earn. In some instances, a beggar in the street with R500 net worth is doing far better. Living on 50% of your income is a general rule of thumb. I know couples that live on one salary. Earlier on, we invested about half of our income in real estate and lived on the other 50%. That was not very easy but with time it was automatic. Even the 50% was a lot. I suspect that we will do even better than this. I think living on 40% in our current financial state is attainable.

Paying yourself First
It has been mentioned over and over again but the concept of paying yourself first will never get out of fashion. I am guilty of loving nice clothes, shoes and bags. Most people don't know how badly I love nice stuff including nice cars. I go to an extent of reading car magazines. I love cars. But I obviously can't own everything I love now, can I? The fact that I know I can afford them and will eventually own the one I really love is enough to keep me going. I just think a car installment would pain me at the moment. I doubt if I will ever be OK with it. So I try to hold my horses and keep pushing my old car. In the meantime, I'll keep investing in my car fund until its overgrown.

I've been trying to quicken our way to reaching financial independence through this method for a while now. What works for me is transferring the money immediately it reaches my account into my investment accounts. Part goes to stocks, part to property when I have a mortgage, part to my money market account, etc. Its only after this that I start spending the remainder. After spending on all the basics, I make it a point I get my monthly facial and massage. Even with spending 50% and below, I manage to sneak in my beauty spa visit. It is very important for my sanity.

Interest, Stocks and Dividends
Our emergency fund obviously gets some interest of just below 5% in the current low interest rates. The stocks we have earn us some growth and dividends. These are very small amounts but every little bit counts. I must add that with diversifying in mind, all our rental income goes to stocks now.

Side Income
I have a small income from my online writings. This alone can pay for my son's school. I am grateful for this very small amount of money. Especially because I love writing and I only do it about once a week currently. I am too busy with a lot of stuff in my life at the moment. I would prefer more writing.

I also want to sell stuff online at a comfortable pace. I will stock things I love to collect and re-sell them. That includes antiques and art.

How about you? Is there any thing you are currently doing to fast track reaching financial independence?

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