Need Guidance with Finances Please

[lik]

Need guidance with my finances

Hello all, amazing community btw! I would like you to look at our current financial position and give advise where necessary.

Currently we are saving/spending as follows:
32 years old, me and my GF are not interested with having kids.
My TFSA is maxed out annualy with FNB TFSA savings (8% interest).
Thinking about it now, my GF has not touched her TFSA.
I am happy with the amount we are putting towards RA for retirement (R9k).

We have R10k per month disposable income per month which we would like to use for traveling from next year. Traveling is a major goal for us, one of the reasons we do not want kids. This amount includes SARS tax returns

Currently we have R168k in FNB 7 day deposit earning 8% interest.
I am planning on spending around R120k - R150k in traveling from next year when I have leave.
Only debt we have is R100k on Car Finance.
We are renting a 2 bedroom flat for R8k excl w&e in Roodepoort/Jhb.
Planning on getting married within the next 2-3 years.

Are we on the right track. Any advise/guidance that you can think of please, would be much appreciated

 

[gracer]

@lik FNB TFSA is a waste of your TFSA. You can earn 12% with global index funds as it hedges against the Rand.

RA try for 10-15% of your salary.

The R168k in FNB is fine for emergency fund.

Pay off the car before buying other investments.

I'm not going into individual ETFs and funds. That list has been repeated multiple times on the group, just have a scroll. What's your savings rate?

 

[lik]

@gracer Yeah thanks! I've noticed lurking on this sub that I am not utilizing my TFSA correctly. Thankfully I have only contributed 39k so far. Is there a way to transfer TFSA?

Current savings rate is 15% towards RA. The rest I just dump into TFSA first and whatever I have left into the 7day notice

 

[skylaradams]

@lik Yes you may transfer*TFSA funds

 

[hsrl]

@lik It’s pretty easy to transfer your TFSA. Whatever you do, just don’t withdraw it! Make sure you do a transfer. If you withdraw, and deposit wyou get penalised twice, you reduce your overall contribution limit AND you get taxed heavily for exceeding your annual contribution, so transfer is key.

Just open an new TFSA on another platform like Easy Equities or Signia Alchemy and then request and fill out the TSFA transfer request form. The rest happens in the background. Takes about a week.

 

[lik]

@hsrl Amazing thanks for this! Will defintely look into this

 

[alfiano]

@lik A few pointers:

1) TFSA is absolutely wasted with an interest bearing account, since it is effectively a retirement holding. You should plan to not withdraw from it for 30-40years.
Strongly encourage you to transfer (not withdraw!) the entire balance to EasyEquities (or Sygnia/Satrix) and invest in globally diversified equities.
The best all-round ETF for a beginner investor (imo) is Coreshares Total World Stock.

2) Not sure what you mean when you say your GF hasn’t touched it - if that means she isn’t maxing it out, I’d strongly recommend you do start doing that.

3) Do you need as much as R168k as an emergency fund/travel savings? If I were you, I’d chuck as much as you can into paying off your car debt. Obviously still keep an emergency fund.

4) RA - presumably R9k per month? Who is your RA invested with? I ask because some RA providers are ripoffs.
Assuming you have a zero balance today, R9k per month with 4.5% real returns in the RA results in R8m by the time you’re 65.
At a withdrawal rate of 3.5%, that gives you an income in retirement of 280k pa or R23kpm together. Obviously if your contributions increase in real terms over the years, that’ll give you a larger income.

5) You haven’t mentioned what your current net worth is / value of RA, whether you expect any significant increase in salary as you get older / increase in lifestyle & what age you want to retire. I can give you more of an assessment with this information.

6) You’re doing better than most, well done! I hope you enjoy your travels!

 

[lik]

@alfiano Thank you so much for this!

1. Yes I am defintely going to look into transferring my TFSA. This sub has been making me realise I am wasting it with FNB
2. Yes. She has not made any contributions towards her TFSA
3. The emergency fund is bigger than needed yes. The reason being is that I have a side hustle where I made 200k+ profit this year. Not including that in future cashflows as it could end at any minute. Been chucking it into the notice deposit untill I decide what to do with it, paying off the car is definitely on the cards as I like being debt free
4. Currently my only RA is with Fnb where I was planning on investing 2k per month. Balance is currenfly 9k. I want to open another RA with another provider for the remaining 7k per month I have aside for RAs. Contributions will increase year on year.
5. Net worth isn't much. I spent the last couple year paying off credit card debt (poor finance decisions when I was younger). So essentially I have a ford Figo paid off. And R420 000 in a mibco provident fund that I need to Tranfer into RAs this month

Salary is expected to increase to 100k per month within the next 5 years. Currently earning 60k per month. I need to finish studies. Probably going to work untill a normal retirement age, can't be sure though. Expected retirement earnings would be nice to have a minimum of R50k per month, I know I am behind here on contributions

I want to keep 200k RA and some products with FNB (not TFSA) as the ebucks rewards is significant

R6 per litre off fuel

15% off groceries and medicine

40% off flights and car hire

 

[alfiano]

@lik Okay great.

1) should be easy to do, don’t take no for an answer.

2) definitely worth getting on that if you can afford to

3) congrats! yeh, would highly recommend paying more of the car off.

4.1) I had a look at FNB RA offering and it seems okay. Could you please confirm are you invested in the FNB Core Balanced Fund? Or something else?

4.2) Your balance with FNB is R9k or is already above R200k? Re the ebucks situation, not sure if relevant but the R2k minimum is for ad-hoc investments, it’s R300 if you set up a debit order.

4.3) If you want to keep some TFSA with FNB, you could move the balance in your FNB TFSA to the FNB Global Equity fund. You can do the ebucks-value assessment, by my calculation it’ll cost you 0.6%pa in excess fees vs EasyEquities.

4.4) My go-to recommendation for an RA (and the RA to move your provident fund into) is Sygnia. As their reg28 funds only have about 30% offshore, I personally strongly recommend expanding that to 45%. This can be done in one of two ways:

• SygSkeleton70: 68%. Offshore ETF: 24.5%. SygniaAllBond: 7.5% where I really like the Coreshares Total World Stock for the offshore etf. OR
• CoresharesTWS:44.5%, SatrixCappedAllShare:33%, SygniaAllBond:22.5%.
• What this means is Sygnia might get in touch periodically (once per year at most) telling you you need to rebalance (very straightforward) or that they will do it on your behalf (I don’t know how they do it).

5.) You’re still doing better than most, well done for getting on a sound financial footing.

6.) Awesome re: salary increases! Obviously no point in saving money for when you’re dead, so I’m not going to tell you you shouldn’t travel or whatever. Life is for living! Just try and avoid too much unnecessary lifestyle creep when you salary goes up, keep that % going into your RA and you’ll be in a good place re: retirement savings soon.
Just to give you some further idea of where you are:
Using your R420k starting balance and assuming your contributions increase to R15kpm in five years time and stays there, your RA is expected to be worth R13.8m by age 65, which would yield a pre-tax income of R40kpm at a 3.5% withdrawal rate. Obviously you’d also have your TFSA which should be worth around R2.5m by age 65 and yield R7k per month. And your salary & RA contributions should keep increasing.

7.) Don’t forget you can also invest your after-tax income beyond the TFSA limits - where you have extra cash in future it’d be a good idea to invest more money in globally diversified equities through eg. EasyEquities USD (Vanguard Total World Stock is the equivalent of Codeshares TWS).

 

[lik]

@alfiano Marty thank you so much for all your effort writing this. I am going to go through all your points one by one

I clearly have some learning to do but this will defintely give me a basis on where to start researching