Thursday, 28 February 2019

Does Size Matter?

Big or small? That is the question. Let me explain...

Once upon a time in the land of financial blogging experts, Sir Henry Save-a-lot proclaimed that if we focus on not over spending on the big items (cars, houses etc) then we will be on the road to financial freedom. On the other hand, Sir Harold Save-some-more thinks if you forgo your daily coffee and get rid of the small unnecessary expenses then you will experience this magical thing called financial independence.

I read a few personal finance blogs and usually the blogger is in one of the camps above. I don't agree with either. For me it doesn't really matter. Quite simply, spend less than you earn. Sounds simple enough but very few of us do it. I try do it every month and it is very difficult. Lately, I haven't been very successful. It is the usual story. I am married with a kid with more kids to follow at some stage. It certainly makes it difficult but we all have challenges in life. We have to do better.

Here is my list of no-no's:

  • Buying a house you can't afford (big thing)
  • Buying a car you can't afford (big thing)
  • Sending your kid to a school you can't afford (big thing)
  • Eating only at fancy restaurants (small thing)
  • Using retail store credit unless absolutely essential. Do you really need those jeans? Or can they wait until next month (small thing)
  • Trying to keep up with the Joneses (big and small)
  • Buying any of or all of the above and then having nothing left for your savings

Monthly Income = Consumption + Savings 

So, spend less than earn. Repeat that every day. If you find it difficult, look where you are spend money now. Use an app like 22seven if you have to. We often have more wriggle room than we think. Necessities are far often only wants.

And let me be clear. You don't need to be a scrooge. Spend money! Go on holiday! Experience life! Just don't spend more than earn.

What do you think? Are you in the big or small camp or a bit of both?

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Tuesday, 19 February 2019

Run for Cover: My Budget Predictions

Our future hinges on tomorrow. The world will end if the Minister Mboweni's budget does not meet expectations of experts at Investec, Deutsche Bank, Goldman Sachs and [Insert big bank name here]. What will we do? Oh, how will we survive?

Got ya...  moving on. I can only write so much drivel.

While some may worry about how big the bailout is for SAA or how much funding Eskom needs, I prefer to focus on what I believe matters. Sure, Eskom imploding will be catastrophic but if your entire investment portfolio is destroyed because Eskom implodes, it is not Eskom that is the problem.

You see, we invest for multiple futures. We don't know which future will happen ahead of time. The trick is not to bet on any one future. Yes, you will look like a rock-star if you put everything you own into one possible future but you'll end up the street in all other futures. Personally, I'd like to put my odds in favour of avoiding the street.

So when the bad news comes tomorrow, sit back and repeat after me "Is my investment portfolio positioned correctly?". This means:

  • Exposure to majority real (or growth) assets (think shares, property)
  • A small cash buffer to get you through hard times
  • An appropriate exposure to offshore assets to protect yourself from all that state capture and land expropriation noise
Have a plan and then the noise remains just noise.

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Tuesday, 12 February 2019

Forget hashtags. Accept reality.

Loadshedding. A dreaded word for all of us. I have no opinion on what got us into this mess. As far as I am concerned, all politicians are crooked and centralised government is a pretty terrible idea. An even worse idea is the creation of State-owned entities. I am going to leave it there and change course.

We need to accept our reality. Things suck sometimes. Deal with it. There are many things that are a mess in South Africa. And it is driving people crazy. I get a bit of a kick from browsing social media. Hello, people... venting your anger with the hashtag #EskomLoadshedding is not magically going turn the lights on. Maybe I am bit twisted but your anger is a source of entertainment for me.

So what should you do? First, decide whether you want to be here. If you don't, make a plan to get out of here. Simple choice. Stay or leave. (and please don't say some people don't have a choice... there is always a choice!)

If you decide to stay then stop complaining. Don't be naive, though. Take active steps to protect yourself.

  • Invest your money in real assets (property, shares etc - if South Africa goes south, ZAR cash isn't going to worth very much. I feel real assets have a better chance of maintaining purchasing power.)
  • Build an offshore store of wealth or investment portfolio (heck, if you want to leave, it can be the start of you saving towards one of those Visa's you can buy in some European countries)
  • Have access to offshore cash in hard currency (USD, EUR or GBP). If you need to get on a plane then you have some rent and food money.
  • Start meditating (I am serious). Learn to deal with stress/anger that uncertainty in South Africa is causing you.
  • Lastly, on a sunny African day go for a walk on the promenade at your nearest beach and wonder is it all really that bad...

Saturday, 9 February 2019

Action over inaction

I read a lot. I know, I have told you that 15 effing times. Like a broken record. I read everything. Any genre (except horror because I get nightmares!).

Reading is great because it exposes you many new ideas. Autobiographies are especially great as they let you into the mind of an individual. I even read my fair share of self-help. Some constructive feedback to the authors I have had the pleasure of reading... I find most books tell us only about the romance. Like a relationship, there is more to every story than just the romantic part. After reading books, everything seems so easy. If I just do x, y will happen. Well, life ain't like that.

The best way to do anything is to actually do it. Want to be an entrepreneur? Start a business. Want to be a small business owner? Buy a small business. Want to be an investor? Start a portfolio.

We can always find excuses not to do any of the above. We wait for the stars to align and then we will get going. The problem is the stars never align perfectly. We also want to be taught.The best way to be taught, is to do.

So, instead of signing up to these annoying masterclasses that keep popping up on Facebook where you can learn how to run a business like Howard Schultz (Starbucks), save your money and put it into an investment portfolio.

I know a number of people who are in their mid-thirties and don't have an investment portfolio. Others only have one by default due to employment and they don't know much about it. Unfortunately, company pensions will probably not be enough to sustain you when you retire.

Don't make this mistake. Start small and build up your portfolio over time. Good luck!

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