I don’t know about you, but I rarely leave the house these days. Like a hermit, I roll out of bed and plop myself onto my office chair, ready for a new work day. Now and again, I dodder about the house – usually towards the kettle for a cup of coffee or the fridge for sustenance.
Aside from that, I’m like a mouse in a shoebox. Pre-Covid, this wasn’t the case. I just adored being outdoors, soaking up the lovely Cape Town sunshine with friends. Going out for dinner at vibrant eateries or exploiting a gorgeous and twisty mountain pass.
To minimise the risk (and to put my own mind at ease) I avoid going out unless I absolutely have to. It’s frustrating – as I’m sure many will attest to – but it has given me time to think about what I want to do once this is all over.
Most of us dream of travelling. The desire to explore a different land, filled with rich and diverse customs and cultures is perhaps one of the most enriching experiences one can be part of. But my, is it expensive.
Realistically, we’re looking at another year or two of social distancing and isolating – maybe longer. Who knows?
Still, it gives plenty of time to save for that special trip or holiday you’ve always wanted to take but simply couldn’t. My dream is to visit Austria. Meandering down Kärntner Straße while sipping on a warm Einspänner, before falling over into the white flakes to make snow angels (like the overgrown child I am) has been a dream of mine for ages. However the cost of travelling to Austria is simply exorbitant, so I’ve filed it under the dream section in my brain and forgotten about it.
Now, though, the idea has crawled back in and won’t go away. It’s not like I can go now. But I can certainly start saving for it.
The most important starting point is a budget. Setting a budget will determine your trip – How long you’ll spend there, where you can stay, what you can do and so on. Unless you’re a millionaire, sacrifices will have to be made. As nice as staying in a five-star hotel is, it would be pretty pointless if you can’t afford to sightsee or explore.
Once you’ve determined a budget, it’s time to divvy up the potential expenses. Luxury accommodation is wonderful, but it isn’t really worth the expense if you’re going to be out and about all the time. Prioritising your wants and needs will see you planning that dream holiday sensibly.
Determining a budget is of no use of you don’t save anything. While the current economic landscape has made things tough for many South Africans, there are always one or two things we can cut out or save on. Without realising, we spent thousands every year on things like fast food, cigarettes and alcohol. Start a bit of financial snipping here and there, and you’ll be surprised at the savings that are to be had.
Saving is never easy. People often say ‘live beneath your means’ – but it’s easier said than done. Aside from the cost of living, there are unforeseen expenses and desires that are sometimes too difficult to refuse. Perhaps you have a pesky student loan you’re trying to pay off.
No matter, it may just take a bit longer for you to achieve your ideal travel savings goal. It’s not easy, but it will all be worth it after a year or two, when you’re entrenched within the wonders of another culture.
Last week, I asked you to send me your finance and investment queries. Here, Johan Steyn, CFA* of Stellenbosch University, and Stefan Janse van Vuuren* of Brenthurst Wealth Management, share their expert advice by providing answers to your questions.
Kelly asked,
Given the current state of our economy during a pandemic- do you think it would be wise to open new investments? If so, any suggestions of ones that you would recommend?
Johan answers,
This will depend on your personal circumstances and your reasons for saving and investing. Yes, the economy is going through a rough patch with the pandemic at the moment, but it is worth remembering that the market and the economy do not always walk in lock step. Also, historically it has been very lucrative to invest during a downturn, because then it is possible to buy assets at depressed prices. If you are investing for the long term, it is best to start as early as possible in order to get the maximum benefit from compounding returns over time. On a personal finance level, I would suggest checking whether you have the following in place first:
- An emergency fund equal to between 3-6 month salary for any unforeseen expenses.
- Pension contribution or retirement annuity for retirement savings, and to reduce your tax expense.
- Tax free savings account which allows you to save up to a maximum of R36 000 every tax year without tax implications (like paying 20% tax on dividends)
If you still have discretionary savings you want to invest, I would suggest looking at opening an account with a low-cost service provider, like EasyEquities, and investigating a few exchange-traded funds (ETFs). Especially the ones that will give you broad, globally diversified exposure. Good luck!
I would like to do a little investing in shares on a small scale (between R1000 – R5000). Would you be so kind as to point me in the right direction and also as to the advisability of such a venture.
Johan answers,
It is commendable that you want to start investing. When you only have a small amount to start investing with, it is important to contain costs as far as possible. Typical brokerage accounts charge around R150 minimum commission per trade. If you want to do a trade of R1000, it simply does not make sense to spend 15% on commissions and fees. Fortunately, there are low cost options, like EasyEquities, out there, where it is easy to open an account and trading costs and fees are very low. It is best to start off by looking at the exchange-traded funds available, where it is possible to get more diversified exposure without owning a multitude of single names. Obviously, if there is a particular company you like and want to invest in, you should do that, but best not allocate your entire portfolio to a single share. Good luck!
Myrtle asked,
About 4 years ago I had a retirement annuity maturing and I contacted an investment advisor – he worked for a firm called Excalibur. I liked the sound of Allan Grey and asked if he could place the maturing funds in one of their funds. This he duly did, placing it in their Balanced Fund of Funds. I have barely made any money in the last four years – plus I’m paying a fee to Excalibur and to Allan Gray. How could I transfer that money out into something more worthwhile and have you any suggestions? I do not need any of the money at the moment, or income from the funds.
I have recently started investing in EasyEquities and have had a lot of fun investing and seeing my monthly sums grow! Is there any way I could transfer it into something like that?
Stefan answers,
Excellent that you review your investments and want to make changes if returns are not what you are expecting. Many investors invest and then don’t review it on a regular basis as their circumstances change. Without more information about your goals with the investment, and details like your age or your risk profile it is difficult to recommend a new investment option. Consult with an accredited, experienced financial planner who will be able to review your overall financial situation and advise you about what would be best suited to your needs and where better returns can be achieved.
For the past five years investing offshore (away from the risks of the South African market and struggling local economy) has delivered the best results and I strongly encourage you to investigate the options available with the guidance of an advisor. Investing directly in equities through platforms like EasyEquities is very exciting, but do bear in mind that markets are affected by all manner of events as we have seen last year when the impact of the global pandemic made investors uncertain. Make sure that you understand the companies that you choose for a share portfolio and what the outlook is for the industry in which they operate.
*Johan Steyn, CFA is a lecturer in investment management, from the department of business management at Stellenbosch University. He holds a Masters in investment management and has a background in fund management. Stefan Janse van Vuuren is a financial advisor at Brenthurst Wealth Management.
Have a question about share investing? Write to me at [email protected].
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