How inflation affects your buying power
Let’s assume you are currently 35 years old and want to retire in 20 years time at the age of 55. You believe that, based on your monthly budget, you could easily survive on R10 000 per month. However, we understand that you will not 'buy' the same value for your R10 000 when you do retire in 20 years time, at age 55. Let’s assume that we have an average inflation rate of 8% per annum over the next 30 years. The million dollar question you need to ask yourself is: How much income will you need to maintain a reasonable standard of living in retirement? YEAR AGE TODAY'S INCOME REQUIRED INCOME 20 55 R10 000/m R47 000/m 30 65 R10 000/m R100 000/m 40 75 R10 000/m R218 000/m 45 80 R10 000/m R506 000/m To put the above
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Ready to retire
My story starts at the end, rather than the beginning. Here I am, it's 2016 and I am finally heading towards 'retirement'. That means I can start to focus on everything I love the most: art, photography and travel. I initially set myself an objective to retire at the age of 55. However, at age 45 – 10 years before that determined date – it became obvious that it was not financially achievable. So I readjusted my retirement date and postponed my exit for age 60. From age 42, I became obsessed with saving and preparing for retirement. Every spare rand was invested and I did whatever I could to consolidate or downscale my life. To simplify it through a range of committed disciplines over the ensuing years. At around age 22, I met a senior and extremely successful businessman,
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Buying property as an investment
One of the questions I get asked on a daily basis is, whether property is a good investment or not. This answer has so many variables, it’s really something you would have to look at on a case for case basis, but let’s look at some guiding principles that can help you make the right choice. Let’s say you find a house at a MARKET VALUE of R1000 000 and you take out a 90% bond (with a 9% interest rate) on the house, as most banks are not giving a full 100% bond anymore over a period of let’s say 25 years. First off you are going to have the following costs: Transfer cost on R1000 000 will cost you about R33 000 Bond Registration cost of R900 000 will cost about R20 000 Let’s look at the future costs of the house: The R900 000 bond over 25 years at an interest rate of 9%
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Understanding Unit Trusts
Today we are going to discuss Unit Trusts and how Unit Trusts work. If you haven’t read my last 2 articles on Asset Classes and Asset Allocation, I recommend that you have a quick read through those first as they form the foundation for this post and for your best understanding of Unit Trusts. I assure you that understanding Asset Classes and Asset Allocation, will change investing for you forever. I am going to start at the very beginning and break down what Unit Trusts are. Unit trusts are when companies like Allan Gray (Asset Managers) buy Asset Classes on behalf of us in bulk and at a much lower price or a better interest rate on bonds etc. They then take the different Asset Classes and combine them into what we call Funds. For example all Asset Managers will have what we ca
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Become an Investment Specialist Today!
Yes you can become an investment specialist today! After going through Asset Classes last week, there is just one quick thing we need to look at before we move on to investing into Unit Trusts. I touched on Asset Allocation briefly in the last post, so in this post I will go through Asset Allocation in a little more detail so that you can build a better understanding and knowledge base. Asset Allocation: Asset Allocation is how you divide your investments between the Asset Classes. So it is deciding how much cash, bonds, property and equity you want in your investment. Asset Allocation is, in my opinion, one of the most important decisions you make when it comes to investing and achieving your investment goals. Before you go ahead and select which bonds, equity etc you want
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Investments 101: Stocks
Now that we have touched on the foundation of investments namely; COMPUND INTEREST, INFLATION and TIME, I hope that you have a better understanding of why it’s so important to start investing. Today we will have a brief look at some investment options and over the next few weeks I am going to tackle one investment vehicle / opportunity at a time. The reason for this is not to overwhelm you with too much information in one very long post that 99% of people will not ever bother to read (let’s be honest), but also to highlight each option on its own for what it is. I like to call this investments 101, so you can get a very broad overview of investing and hopefully start to understand how things work. Please keep in mind that the posts over the next few weeks are going to give you
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Making Time Work For You With Investments
Today I am going to give you some handy tips to help you think through investments and financial planning in a simple and basic way. Now that we have touched on Compound Interest and the EFFECTS of Inflation in the last two articles, we can move on to a practical example of how the two work hand in hand with each other and with spending time in the market and not trying to time the market. The example below illustrates not only the importance of compound interest and inflation, but also how to use TIME to your advantage when it comes to investing. I really wish that they taught this to us this in school… Let’s take a basic example and say we have John and Max. John and Max are wanting to invest some money into exactly the same investment that gives a return of 10% and also has
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Compound Interest
My first few blog posts will deal with the foundation of finance. Once you understand these foundations, it will make a huge change in your life and outlook on money. One of my favourite things in the world is called compound interest, yes I know I am a nerd, but it really gets my blood boiling, as it is a huge phenomenon. I think I am not the only one who shares this fascination on compound interest. Albert Einsten once said: Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. My goal in this article is to get us all very comfortable around compound interest and its capability of changing your life. I think the best way I can illustrate this without going into too much financial jargon is to create a picture
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