Podcast: Should I save or pay my debt?

Kristia van HeerdenLatest, The Fat Wallet

Clean swearing bleeped out show is below.

Interest is a strange thing, because you could at any point be earning it and paying it. In fact, if you have a credit card you could be earning and paying interest in the same bank account.

Tharina has taken steps to get her financial house in order, but she has a dilemma. She has a sum of money earning interest, and she owes a sum of money on which she is paying interest. Should she be using the one to pay off the other?

The answer can either be very easy, or very complicated. We discuss her options in this week’s episode.

Win of the week: Pieter, who has his estate planning situation on lockdown.

My wife is currently a stay at home mom. We have two kids and twins coming. There is a plan for her to go back to work at some point, but currently this is the configuration that works well for all of us.

I am contributing monthly building up a lekker EM fund. I am planning moving the entire thing into her name. I know you mentioned “What about divorce”, but honestly she is not earning currently and if something happens to me she needs to be able to hold down the fort.

So our plan is as follows:

Move EM fund to her name. Currently this is just a 30 day notice deposit at FNB.

This also means she does not have to liquidate some of her assets.

It does not have to be a year’s worth of EM fund, because I have proper life insurance.

They pay a R50,000 immediate benefit within 48 hours and the rest in about 2 weeks to a month.

He also has a death letter that explains everything.

P.S. Me and my kids do not mind the swearing. I’d rather they swear and know shit.

Tharina is pretty much on top of her finances except for a car loan.

I took out a car loan. Apart from my emergency savings, I have saved a decent amount to pay off my car. It is not the total amount due. The amount is being saved in a money market account.

Would it be better to pay off my car by putting the lump sum and extra each month into the Loan Account OR would it be better to save the total amount in my money market and then settle the car loan all at once?

Johannes just got a credit card. He’s very worried about it.

I am a 21-year old student and recently upgraded my FNB account to a Gold Account which includes a credit card.

My old FNB account was an Easy account which was R5.20 p/m, but I ended up paying anything between R100 – R210 p/m for additional “services”.

I decided to stop that shit and upgrade an other account which is the Gold one.

I decided to take a credit card eventually. What is the best way to use my credit card? I know a lot of people use their credit card for day to day living and pay it off at the end of the month.

I know very little about all the rules/fees that apply to a credit card. How do I use it to my benefit and hopefully save money rather than paying FNB interest each year? I hope to build a good credit score.

I know some people earn a shitload of ebucks that they use for flights etc. Please inform me best on this as well. Some people suggest to pay your salary each month into your credit card and use that…I am lost and don’t want to blacklisted.

Jane has something called a “last survivor” account. She wrote back after our death episode.

My husband and I have an offshore joint and last survivor banking account.  In the event of one of us dying the other one is the automatic owner of the banking account.  The bank just removes the deceased spouse from the account.

We have a HSBC account. Unfortunately my local manager was retrenched and now we only have one of the expat banking services.

Isaac is 22 and has his financial situation completely under control.

  • With regard to my TSFA, I have exclusively been buying property ETFs and own the Coronation property fund. Since REIT dividends do not qualify for the usual dividend exemption, the best utilisation of the tax saving would be for REIT dividends which are taxed at a person’s marginal rate from the first cent. This is opposed to regular dividends, CGT and interest (first R23800 tax free). What are your thoughts on this? Am I overthinking this?
  • If you sell and buy ETFs often in your TFSA, will SARS deem your intention to be revenue in nature only for ETF’s in said TFSA or for all TFSA’s in general? (thinking that this might be a sneaky way to day trade tax free. Not that I would day trade, but I like the thought) SARS doesn’t care what you do in your TFSA accounts. Since there’s no tax in those accounts it doesn’t matter if you trade for income or are a long-term investor.
  • I own a small amount in a huge number of ETFs. Is this problem? If it is a problem, should I rebalance and incur some CGT? Remember your CGT is tied to your marginal rate, so if you want to go this route, do it now before you start earning real money. Or just pump money into preferred ETFs and leave the rest as is? (I see an IPO and can’t help myself)
  • With regards to Simon’s comments on the three year rule and resetting base costs of investments (section 9C): The act provides this section to ensure that investors actually invest as opposed to speculate. Since it is explicit in the act, surely SARS won’t penalise the taxpayer for making use of it? Eventually they’ll catch on and put in an anti-avoidance provision?

Wim has two RAs and wonders if he should be moving one.

I have a Momentum RA from my employer, which is pretty much compulsory, but I have no issue with that because my employer matches my contributions.

Then I have a Sygnia RA in my personal capacity from before. Would it make more sense to move the Sygnia one to Momentum or not? Also, I feel like I am paying too much in fees. Which RA has the lowest fees? I obviously don’t want to withdraw the funds due to tax. Moving them from RA a to b is tax free.

Gerhard checked out Brightrock for life insurance and he’s very pleased.

A while back I asked about life insurance and you suggested I look at Brightrock.

I have and for a product that I am comfortable provides me roughly the same as I had before I am paying R1,200 where my liberty costs were 1,650 before.

This is a massive saving.

Jacques saw a life insurance ad that promises free money. It’s a life insurance product that invests either your entire premium (if you’re under 30) or a percentage of your premium in a money market index fund. (Think TRACI). After 60 premiums you get 10% cash back.

Check out the company here.

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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