Monthly Archives: June 2017

Do you want to buy your bank a car

Why would you want to buy your bank a car, that’s just stupid?

You right, it is stupid. Yet millions of South Africans do it! And in fact a lot of people will buy their banks 3 or even 4 cars over their lifetime.

It seems to indicate that despite all the moaning and groaning, South Africans actually love their banks. A lot!

While this may sound ridiculous,  you will soon realise that it is not so far fetched after all. Let’s consider a hypothetical South African. We will call him Peter.

Peter starts his working career at age 20, and soon realises he needs a car. Of course since Peter has only just started working, he has no savings to speak of, and so his only real choice is to finance his first car. This is how many people (myself included) start their financial journey, and unless you are fortunate enough to have been given a car by your generous parents, there isn’t really any other choice.

Being at the bottom of the career ladder, and the matching pay to go with it, Peter is somewhat conservative with his approach, and he decides to get a R100k car. Nothing fancy, but a decent second hand option. He takes out a loan for 100% of the purchase price, and manages to get finance over 60 months at an above prime rate of 12%.

I am sure you agree, that this is a pretty average purchase – a monthly instalment of R2 224 and some change seems like a reasonable ask.

Time moves on, and Peter diligently makes his monthly payments. After 5 years his car debt has been fully settled. At the end of the 60 months, Peter would have paid a total of R133 467. In other words Peter would have paid around a third of the R100k purchase price over to the bank in the form of interest. While this is of course not ideal, Peter didn’t really have a choice and so I think he can be forgiven. The real problem is what most people do after this point. So let’s continue.

After the 5 years, Peter has climbed a few rungs up the corporate ladder, and now earns a slightly better paycheck. And of course he now no longer has that pesky car payment to deal with. This is great! He tells himself that he works hard for his money, and he deserves to drive a better car. So he trades in his current car (not worth that much any more after the effects of depreciation) and uses that as a deposit. In a mad stroke of luck and coincidence, Peter finds another car which requires exactly another R100k finance deal over 5 years at 12%.

The finance deal runs it’s course, and again, after the 5 years are up, Peter has paid another 1/3 of a car over to his bank in the form of interest. In total, Peter has now bought his bank 2/3 of a car. At this point he has also progressed further up the corporate ladder, earns slightly more, and now of course “deserves” an even better car…

I think you can see the pattern here. After the third iteration of this pretty “normal” behaviour, Peter would have bought his bank a full car. Why thanks Peter, your bank loves you too!

Invest Now and Retire Early

I may earn commissions from the links mentioned in this post. Thank you.

I recently sent a letter (yes, a real letter) to my 20-year old nephew encouraging him to start saving for his retirement today. With time and compound interest on his side, his options are endless. In order for him to reach financial independence, he’ll need to invest and adopt some crucial money-smart habits early on in his life.

Cross your fingers for me that the message resonates with him!

You’re back for your junior year this fall. That’s such an exciting time for you. I absolutely loved my time at college. Enjoy every minute of it.

I know the last thing you’re thinking about right now is investing for retirement, but humor your Uncle and hear me out.

You’ve probably heard of the typical person retiring when they’re 60 or 70, right? Well, I want to share with you how you could retire at 40 years old.

Since you haven’t entered the full-time working world quite yet, the idea of early retirement might not sound appealing to you. If it doesn’t, you can put this letter away and maybe open it again if you have a rough year at work in the future.

If the idea of only working 20 years of your life instead of 40 sounds intriguing, read on.


Steps to Early Retirement for a 20-Year Old

The steps to early retirement are quite simple, but not everyone will do it. You know why? Because it takes patience and willpower. As you graduate and enter the work world, you may find that a lot of your colleagues lack these two traits. Hell, I lack these traits most days, but I’m at least aware that they’re crucial when you want to do something incredible in your life.

Whether it’s running a marathon, negotiating with your 3-year old to eat their breakfast or reaching financial independence … these major feats all take time and a whole lot of determination.

So at 20 years old, you have something that a lot of people don’t have:  TIME! Let’s take advantage of it and set yourself up for early retirement.



I put this first because I want to express the urgency of investing. If you have an earned income this year, you can take advantage of a Roth IRA. This type of investment vehicle currently allows you to contribute up to $5,500 per year. That may seem like a lot of money for you now, but you can steadily increase your contributions year-over-year until you’re able to completely max it out.



You’re gonna run into a lot of temptation to take on debt in many forms and fashions over the next 20 years of your life. Do your best to steer clear of it. Live by the mantra of “If I don’t have the money, then I can’t buy it.”

Short-term loans, payday loans and credit cards can all be slippery slopes in college and in the years following. These are fast and easy ways to get cash, but they have crippling interest rates that will leave you paying on them for years. Don’t have the money? Don’t buy it. This goes for cars, clothes, boats, fancy dinners, vacations, etc.

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Congratulations, you’ve finally graduated from college! You’ve got the diploma to prove it—and the student loans.

Unfortunately, student loans can be pretty confusing. You know that you have a six month grace period where you don’t have to make any payments, but other than that, you don’t even know what you don’t know.

If you’re anything like me when I graduated, you’ve got a lot of questions when it comes to paying back your student loans. How can I manage my student loan debt? How can I make my student loans less confusing? How can I pay off my student loans as fast as possible? 

The answer to all of these questions, luckily, boils down to one simple piece of advice: If you want to be successful in paying off your student loans, you need to be organized. And to be organized, you need to keep track of your student loans.

By keeping track of your student loans, you’ll always be able to answer important questions like:

  • How many student loans do I have?
  • How much do I owe on my student loans in total?
  • Are my student loans federal, private, or a mix?
  • If they’re private student loans, is the interest rate variable or fixed?
  • If they’re federal student loans, are they subsidized or unsubsidized?

The answers to these questions will ultimately impact the strategies that you use to pay off your student loans, so it’s important for you to quickly and easily be able to access the information. For example, knowing whether your loans are federal or private might impact your decision to refinance; knowing if your federal loans are subsidized or unsubsidized may make you think  twice about entering deferment.

Beyond this, keeping track of your student loans will allow you to have a quick snapshot of your finances. Once you have all of your student loan information gathered together in one place, you’ll be able to quickly check in to see the progress you’ve made in paying down your debt.

Just like you should always know how much money is in your checking account, or how much you’ve got saved for emergencies, you should be able to answer these questions.

At this point, you’re probably feeling really overwhelmed. How do I track my student loans? Where can I find all of this student loan information?

It’s completely understandable that you’ll feel a little overwhelmed at first, but I’ve got some good news for you: It really isn’t as hard or as complicated as it seems. To make things easier, I’ve written the step-by-step guide below on how to keep track of your student loans. Just follow these steps and you’ll be one step closer to paying off your student loans.


A Note Before Beginning

The steps below assume that you have already graduated from college, but that doesn’t mean that you need to wait until you graduate to begin tracking your student loan information.

In fact, starting while you are still a student is  much better idea. By keeping track of your student loans as you take them out each semester, you won’t need to go hunting for the information after you graduate.

Plus, tracking your student loans while you are a student can help you shift your mindset about finances. Unless you have federal student loans that are subsidized by the federal government, your student loans are going to begin accruing interest from the day that you first take them out.

Help You Pay off Your Student Loans

If you’re dealing with student loans, it might be hard to even consider the idea of saving for retirement. When you’re paying hundreds, or even thousands, of dollars every month towards your debt, how can you possibly find extra room in your budget to invest?

It’s an understandable feeling, but there’s a hidden relationship between these two financial goals that can make it easier to accomplish both at the same time.

In fact, saving for retirement can actually reduce your student loan payments and help you pay them off even faster. Here’s how it works.


How Retirement Contributions Affect Student Loan Payments

If you’re enrolled in income-driven repayment, your monthly student loan payment depends on your income. The less you make, the less you have to pay.

The actual number used in the calculation is called your Adjusted Gross Income, or AGI. This number is calculated by adding up all the money you make during the year and subtracting out certain allowed deductions.

As it turns out, retirement contributions are among those allowed deductions. Every dollar you contribute to your 401(k) or Traditional IRA is subtracted from your gross income when calculating your AGI.

What that means is that by contributing to these retirement accounts, you reduce your income for the purposes of calculating your monthly student loan payment. And a lower income leads to a lower monthly payment.

A lower monthly payment isn’t always good. Paying less now often leads to paying more interest over time. But there are two big potential benefits:

  1. Increased flexibility. You can always choose to pay more each month, but smaller required payments give you more flexibility to adjust to whatever life throws your way.

  2. Increased forgiveness. Less money paid towards your student loans could result in more of your loans being forgiven, especially if you qualify for Public Service Loan Forgiveness. Though it’s worth noting that some people have recently had serious challenges with this program.

Buy a Stock to Get the Dividend

Dividends are an important part of investing for long-term growth, but the mechanics of how they’re paid can be confusing for investors of any level. The one question I hear most often about dividend stocks is: When do I have to buy a stock in order to receive its dividend payout?

The answer is a bit complicated. This date is not included in the company’s announcement of a dividend, and it’s not published on the quote pages of TheStreetYahoo! Finance or even the expensive Bloomberg terminal on my desk.

Over a decade ago, I coined the term “must-own date.” Terms such as “record date” and “ex-date” are commonly thrown around in dividend parlance, but the must-own date provides the simple answer that most folks want: the date by which they need to buy a dividend stock.

Here’s how to determine the must-own date for any dividend so that you’ll never be confused by this important question again.

When most dividends are announced, the company generally says it is “payable to shareholders of record as of” a certain date. This is useful information, but investors often mistakenly assume that the record date is the date by which they need to purchase a stock in order to receive the dividend.

You see, stock trades actually settle three days after the fact, even if you’re a frequent trader who buys and sells the same stock several times a day. That means that you need to buy a stock three days before the record date in order to qualify for the dividend.

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Further complicating matters, the ex-date falls two trading days before the date by which you need to be a shareholder of record. We’ve established that the must-own date falls three days before the record date, so simple subtraction means that you must buy a stock one day before it goes ex-dividend.

Most individual investors stocks

It’s hard to check your email without hearing about the next “hot” penny stock that’s going to make you rich. But what are penny stocks, and can they really deliver on those promises? Here’s my 2 cents worth on penny stocks.

What Are Penny Stocks?

Low-priced, small-cap stocks are known as penny stocks. Contrary to their name, penny stocks rarely cost a penny. The SEC considers a penny stock to be pretty much anything under $5. And while there are sub $5 stocks trading on big exchanges like NYSE and NASDAQ, most investors don’t think of these when asked to describe a penny stock.

Most individual investors look at penny stocks like Wall Street’s Wild West, an untamed world of investing detached from all the glitz and media coverage that comes with stocks that are traded on major exchanges. While the gains and losses can be pretty impressive in the penny stock world, they’re not often heard about elsewhere.

Just because you don’t hear about penny stocks every day on CNBC doesn’t mean that penny stocks are without drama. Unfortunately, penny stocks have also garnered a reputation as a game filled with scams and corruption. Indeed, penny stocks could be your wildest ride yet as an investor.

So then, if penny stocks usually aren’t traded on normal exchanges, where can you buy them?

How to Buy Penny Stocks

Like any other stock you would buy, you can purchase shares of a penny stock through your normal stockbroker — regardless of whether or not it’s listed on a major exchange.

Secured Business Credit Card

For many businesses, credit cards are an essential part of your business activities. They can help you build your credit and obtain the assets you need to properly run your business. Unfortunately bad or non-existent credit may make it difficult to be approved for a credit card. For those denied approval for a credit card, if you are looking to establish or rebuild your credit, a secured credit card can represent a viable option.

So, what exactly is a secured business credit card? Quite simply, a secured credit card is one that requires a deposit or collateral up front. In most cases, this deposit must be made in cash, although there are some lenders that will accept collateral in the form of homes, cars, etc.

Though a deposit may not sound ideal, a secured business credit card or secured business credit card can be a valuable tool to build and repair your credit. The security deposit will ensure lenders that, despite your bad credit, you will be able to pay them back. Much like a regular credit card, you can use a secured credit card to make purchases or pay bills when cash is not an option. Your payment history will be reported to the major credit reporting agencies and an account that remains in good standing (no late payments) over a period of time can help you boost your credit score.


How Much Money Will I Need for a Security Deposit?

The security deposit required will vary from lender to lender, but all lenders will review your credit history, income or available capital, and perceived ability to pay on time. For those who have bad credit, that may sound scary, but keep in mind that this particular type of card is specifically for individuals or businesses with bad credit.

Typically, your credit limit will be equal to or a percent more than the required deposit; this means that the credit card company is lowering their overall risk by securing funds ahead of time. For example, if you’re approved for a $500 credit limit, you will be required to pay a security deposit of, or close to, that amount.

It’s important to note that this is not a prepaid credit card in which your deposit will be used against the balance you accrue. Instead, your deposit will be held separately, and you will be required to pay your bill in full without relying on the money you paid up front.


What Happens to My Deposit?

As mentioned above, your deposit is held separately, and much like a deposit for say, rental equipment, you will get it back as long as you live up to your end of the bargain. In this case, it’s making regular payments on your account and eventually reaching a zero balance.

When exactly you get your deposit back can also vary from lender to lender, but in all circumstances, your account will need to be in good standing. With that in mind, these are the most common scenarios in which a secured credit card lender will return your deposit.

In one scenario, the deposit can be returned to the cardholder upon their decision to close the account. Of course, it’s not as simple as just saying “I’m done, let’s close this down.” Your account must be in good standing and carry a zero balance at the time of closing.

The other, perhaps most desired, scenario is one in which the account holder has successfully reduced their perceived risk by maintaining a history of on time payments and manageable balances. In this case, the lender may determine to convert your account from a secured credit card account to an unsecured one and to return your deposit without requiring you to close the account.

The different loan programs that are exclusively available to small businesses

When it comes to loans, small business owners have a lot of options to consider. From selecting a lender to determining the type of loan you need, the path to financing can be a confusing one. Of the many places you may look, the Unite States Small Business Administration (SBA) could be a great resource for information on loans, and specifically, different loan programs that are exclusively available to small businesses.

Of those SBA loan programs, the SBA 504 and the SBA 7(a) programs represent options that, depending on your needs and intended outcome, can present many advantages to you as a borrower. It should be noted that SBA typically does not offer direct loans. Instead, these are guaranteed by the SBA and fulfilled through banks or Certified Development Companies (CDC’s).

SBA 7(a) and SBA 504 Loans

While both of these SBA loan types can help small business owners to grow or maintain their business, each differs in the purposes for which it can be used.

To start, let’s look at the SBA 7(a) loan. The SBA 7(a) loan is the SBA’s most popular loan program. If you want to take out a loan so that you can have access to working capital, purchase furniture and fixtures, make leasehold improvements, or acquire an existing business, you should consider applying for a SBA 7(a) loan.

On the other hand, if you need to finance the purchase of land or existing buildings or improvement to lands or existing buildings, purchase ground-up construction commercial real estate, or purchase heavy equipment or machinery to operate your business, you should consider the SBA 504 loan.

Under the umbrella of the 7(a) loan program is the SBAExpress loan. The advantage of the Express loan is turnaround time — completed applications will receive a response within 36 hours, a process which usually takes about one month. Express loans generally follow the same standards and uses as the 7(a) loan program.

These are general outlines of each of the SBA loan types. If you are seriously considering pursuing the SBA 504 or SBA 7(a) loan, there are plenty of other differences and caveats associated with each. Be sure to do your homework before you move forward.

Organizational printable designed to help you manage your personal finances

Call me old fashion but I have found that I stick to a budget so much better if I write things down. After a few months of using some plain notebook paper, I got fed up and decided there had to be a less ugly, more organized way to track my budget.

I searched Pinterest for a while and found a few good budget binders out there, but non of them had all the pages I was looking for. It was time to put my creativity to the test and make a budget binder of my own.

After some trial and error I had the first draft of my sheets. I have been using the budget binder for months now and had to make a few changes to sheets to get it to the point where I want to share it with my lovely readers.

Below, I walk through each page and how to use it.

In order to get a pdf of my complete budget binder, simply sign up below and it will be delivered right to your inbox!


Print a Complete Year Binder

To build an annual binder you will need to print the following number of each page:

  • 1-2 Goals Sheets
  • 1 Reoccurring Payments Sheet
  • 12 Month at a Glance Sheets
  • 12 Monthly Debt Tracker Sheets
  • 24+ Expense Reporting Sheets

Any good financial plan should include a set of goals. Whether they are goals for the next 6 months or 6 years, it is always good to write them down so you can revisit and work towards them.

Each goal should have a few action steps to break it down into easier to achieve steps. For example if your goal is to save $5000 over the next three years for a down payment, an action step might be to start brown bagging your lunch and put the extra money in a savings account.

You should fill out this sheet when you first start your budget binder but revisit it often to see how you are progressing on your goals. You can make notes of your progress on the back or on your monthly summary pages.