The Fat Wallet Show with Kristia van Heerden

Podcast: How to prepare for a financial crisis

In Latest, The Fat Wallet by Kristia van Heerden

Clean swearing bleeped out show is below.


Look, if it’s the end of the world we’re all in for a bad time. Your only hope is to be at the site of the asteroid hit at the moment of impact. Be patient zero – dying will be more fun than trying to survive the apocalypse. A financial crisis is not the apocalypse. It happens in financial markets once a decade. It sucks, but you’re not watching your family getting melted by lava.

Two things have always been true of financial crises:

  1. We are dreadful at predicting them.
  2. We recover from them.

This week, both Flipi and Ross were worried about financial or political collapse. We talk about the things within our control when it comes to our investments and those that aren’t. As any World War II survivor can tell you, when things go dreadfully politically, your wealth isn’t worth much. That doesn’t mean you should live large and wait for the end.


Flipi is concerned about a global crisis. He lives in Japan, though.

Are you guys reading/hearing or similarly being exposed to more frequent comments about another crash, correction or ‘bad period’?

Would there be any preparations (perhaps even just emotionally) that people may make to ensure they don’t do stupid things during such times, and perhaps come out better for it (or not worse off than everyone else) post such periods?

Weirdly, Ross has a similar question.

I have an RA with 10x investments. What would happen to my retirement should South African experience an economic collapse similar to Zimbabwe? Is there any sort of protection against this? I realize it may be an extreme scenario, but I would be nice to know what would happen.


Win of the week: Mpho almost had me in tears. This is one of my favourite emails of all time.

I have had a listening marathon of your podcast from episode 1 until the recent 101 episode and decided to finally write to you as your podcast is one of the reasons we are on this path to financial independence. I’m 33 married with 2 kids and for so long being on autopilot mode when it came to making decisions – especially money-related.

I’ve been told do well in school so I can get a job and the get married and then have x number of kids, which I did without even thinking about it.

For some reason when I turned 33 I had a freak out moment and started taking a good look at our finances. Making a combined income of around 90 000 a month life didn’t feel any different for us compared to when we had a combined income of R18 000 10 years ago. We had 4 credit cards between us with personal loans, car loans and a bond – not forgetting a R50 000 loan from my sister. I forgot about the overdraft. All these decisions were made without even thinking about it. I don’t know how we got to this point.

I started listening to your podcast and reading up on personal finance. From last year May we have paid off all the credit card debt, one overdraft and we are also ensuring that we are building up our emergency fund. We are not investing yet as focus is on building up that fund so we don’t find ourselves back in debt. The plan is to pay off all the loans, one of the cars and my sister before the end of the year.

I’m sometimes filled with regret when thinking of all the stupid money decisions we have made and how we have allowed the lifestyle creep to creep up on us without even realizing it. We now analyze our spending and have really started communicating about money, which is something we didn’t do.

We’ve cut our expenses and continue to identify areas where there is potential to cut (DSTV premium had to go). It has become a challenge to find creative ways to have fun and create memories without expensive outings and this has actually made us reach out to families and friends and spending more time with them.

I look forward to when our debt will be completely paid off and we start investing. I’m also looking forward to spending my money on things that I value and not being on autopilot when it comes to my life. Thank you for the information that you are sharing out there and will e-mail after that last bill is paid.


Josh is looking at a buy-to-let investment club

A friend invited me to join him and 2 other friends in an investment club.

He wants to set up a company for this purpose.

They want to get into buying properties.

Each member will contribute an agreed-upon amount monthly, increasing annually.

I know pooling money is a way to increase purchasing power, in this case for properties, which will be rented out.

There would also be the need to take out a bond on the property in the name of the company so I have no idea how that would work

Does this sound like a stupid idea? I know you guys are not into the whole idea of buying property, but is doing it in a club/company a better way by virtue of pooling money?

I highly recommend you watch this: https://justonelap.com/listed-property-vs-buy-let/


Wim is looking to move his RA, but Sanlam is dangling a carrot.

I am paying 2.3% in fees.

I’ve seen only 6% growth over 10 years and inflation was slightly lower.

I have to move, because my money is not moving.

Here’s a tip when you’re looking at performance over a period – compare it to the performance of the Absa MAPPS growth ETF for the same period. The MAPPS ETF has

Cash (4.48%)

Equity (72.53%)

Inflation-Linked Government Bonds (10.61%)

Nominal Government Bonds (12.38%)

This doesn’t include the 30% foreign exposure allowance in a regulation 28-compliant fund, but it should give you a sense of what a combination of assets have done over a period.

They said there’s a echo bonus being paid out in new Sanlam product.

I requested a detailed growth and cash bonus for remaining 20 years if I stay invested. Am I still getting screwed?

They promise 10% growth but have not been able to do that for 12 years. Is there a way to compare my investment in eg. sygnia RA (skeleton fund) over 20 years with this installment vs the Sanlam pie in the sky prediction?

John recently pointed out when some of these institutions promise a certain percentage growth, they mean for the period, not compounded.


Kelly is getting some first-hand experience in loss aversion.

I’m 28 with no kids, and pay R222.39 for a life policy with Discovery, valued at R751 236. I have been paying towards this for almost 3 years now. I’m not sure whether or not cancel this policy, only because that would mean losing the contributions already made. Should I continue or not?


Mike has a thought about tax on RAs.

One of the biggest issues presented with an RA is the massive tax bill due once you convert your nest egg into cash and an annuity.

If you want to access a third of your R10 million in cash, you’re going to pay a whopper of an amount in tax.

However, you don’t need to!

You can take the R500K in cash, tax free, and put the rest into an annuity –  it’s not compulsory to convert it into cash if you don’t need it.

This neatly sidesteps the tax hit and gives you significantly more money to work for you in your living annuity. You’ll pay tax on the income generated, but that seems fair, considering it’s been growing tax-free for decades. If you’ve got tons of debt that needs to be paid off, then yeah, getting the cash out might be your only option, but if you’ve been smart about your impending retirement, then that hopefully won’t be an issue.

Herman is in the process of developing a calculator that will help you once and for all find the tipping point. If he succeeds, he’ll be the Win of the Week for a whole month.


Linda is about to kick of their investment journey and wants to know which ETF we recommend. We talk about that here.


Adrian has a question about timing.

I have recently been fortunate enough to exit a business and have some cash to invest –

I haven’t invested as much as I should have over the years in traditional savings but always saw my business as an asset I have been investing in.

Having sold this asset I have cash to invest but am worried about the timing of putting this all into equity markets at one point in time (markets priced quite high after a good run).

In this scenario would you do so gradually? If so, what do you recommend doing with cash as you gradually enter markets?


Ross wants to know if he’s on the right track with his ETFs.

I have the FNB Tax Free Share account. I invest in two ETFs: ASHT40 & ASHMID. How does the Tax Free Shares account from FNB fair? Are the ASHT40 & ASHMID decent ETFs?


Nadia is not sure if she’s on the right track in her tax-free account.

I opened a TFSA with Easy Equities this year after doing some research and listening to your show. I’ve very new to the finance world so everything is a little overwhelming and confusing. I want to tell you what I am putting my money in with the TFSA and I would absolutely appreciate it so much if you could give me feedback on if you think i’m on the right track or not.

These are the “holdings” I’ve chosen for my TFSA:

CoreShares Top 40 Equally Weighted ETF

Satrix 40 ETF (STX40)

SYGNIA ITRIX MSCI WORLD

CoreShares PropTrax Ten ETF

CoreShares Global DivTrax

Like I mentioned, I am brand new to this game so please excuse me if I sound like a complete dumbass. (No such thing as a stupid question in this show!)

I try to keep track of what’s happening in the markets but it’s happening so fast, I struggle to keep up. If I had to continue my TFSA with the above mentioned, would you say I’m doing alright or do I need to refresh my choices?

Should I be splitting my TFSA money equally between the above mentioned holdings or should I be putting most of my money in the CSEW40?


Mandla has a warning about using your credit card account as a current account.

Be careful of the credit card interest free periods. A person from FNB told me that I should not be putting all my monthly debits on my credit card.

I was moving things like my monthly rent and subscriptions and recurring payments to my credit card so that I have one statement to look at each month. He says I shouldn’t do this because I will get charged interest. Basically, the following transactions still bear interest:

* Cash withdrawals

* Purchase of Foreign Currency

* EFTs out of credit card account

* All transactions linked to Petro Credit card

* All budget facility transactions

I am actually sitting down to look up the terms and conditions to confirm for myself, I thought I’d just share.

I’m looking into credit card accounts myself. While there are interest-free periods, you do pay transaction fees on almost everything. A lot of people are talking to me about the rewards they earn, but nobody is saying anything about fees.

Links:

Six questions to answer before buying an ETF: https://justonelap.com/etf-six-questions-to-answer-before-buying-an-etf/

Should I consolidate my ETF portfolio: https://justonelap.com/etf-should-i-consolidate-my-etf-portfolio/


The Fat Wallet Show with Kristia van HeerdenThe Fat Wallet Show is a no-nonsense personal finance and investment podcast hosted by Kristia van Heerden and Simon Brown. Every week we answer questions by a growing audience of finance enthusiasts. Submit your pressing money and investment questions to ask@justonelap.com.

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