A few weeks back Simon challenged us to reflect on our big spends. He asked: “Do you spend more on your car than your kids’ education? See the problem?” It was a question that really spoke to me – and made me think about what my big spends are. Do I have the right priorities, do I get the financial balancing act right, does my spending align to my values, will I ever retire comfortably? It spoke to many of the questions I’ve raised previously in this column.
So I looked at my big spends. In terms of the stereotype of a flashy car and huge debt, I can relax – I drive a small car and its paid off. But I then explored my other expenses and went back to my budget (see January blog post), and although my kids go to public schools and their school fees are not high, I spend a lot on a part-time au pair, a “nanny” and extra murals. Add that to school fees and it’s a big chunk – nearly 20% of my monthly expenses. But our house is the really big spend, at 38% of monthly expenses. My It helps to think of bonds as an IOU from the government. When you buy a fixed interest rate bond or bond ETF, you are lending money to the government in return for a fixed interest rate (also called a coupon) over time. You can invest in local and foreign government bonds. This post covers the subject in more detail: ETF: is not astronomical, but the maintenance and security adds up. Is this the right priority for my money, does it align with my values – my kids and our home? Yes, I think that feels good, I like those priorities – my big spends feel appropriate.
Just as I was feeling smugly proud of myself I looked at another important factor for me – how much am I saving for my retirement. Oh dear, I realised I spend a really small percentage on that.
So although my two big spends feel right, my retirement is not getting enough in this balancing act – I really need to explore whether I can shift that a bit, a little more is needed for retirement. Where will I find that.
In my next column I will discuss the tax free savings account (Tax Free Savings Account. A fully tax-free investment account is limited (as at 2021) to R36,000 a year and R500,000 lifetime limit. Only certain ETFs are eligible for this product. These posts are a good place to start: Video: Everything ETFs and tax-free OUTstanding money: Saving tax free Wealthy Maths: The impact of tax-free investing Podcast: Your first tax-free investment More), we can all save R30,000 a year tax free, how can I seize that opportunity?