EARN INTEREST ON A CREDIT CARD

During a debate on one of the Facebook forums, one of my friends mentioned how possible it is to earn interest on a credit card. It is after said debate that a reader asked me about it. I promised to do a blog post about it. Hence this blog post at an awkward time for most of us to be working. Before we get into the credit card interest issue, I have to inform you that this blog will get a face lift in a week or so. I am excited as I believe this new look and feel will enable better interaction.

We were still on the subject of using the credit card as a savings tool. Those who have been following this blog for a while know that I love writing about what I do. Whilst I do not personally have a credit card, the hubby does have one. We use it responsibly and never pay any interest on it.
Do you know that you have a 55 days interest free period on a credit card? That is almost two months of free debt. We have used that option every time we used his credit card. When we bought a PC for instance, we paid it in two installments within our 55 days. That meant that we saved the half of the price elsewhere to benefit from the savings account interest and paid it the following month within our 55 days window period.

Do you also know that there are free credit cards in terms of fees? YEP! The hubby's is 100% free. We don't pay any annual fees or any fees at all. We never pay any interest because we hardly ever use it. And when we do, we pay it in full within the 55 days. So the hubby is allowed to keep his card for those reasons. As for myself, I carry one of the consumer store cards. That is the only store card in my name. That one card has a 6 months interest free period when used. I sometimes never get to use it for a full year until the store sends me those vouchers to go spend on some stuff. Debt is one of the things that I absolutely dread. I am not likely to get benefits that require having debt.

Apart from the 55 days interest free period and other benefits, it is also true that one can earn interest on a credit card with a credit balance. I am told that this is not the case will all credit card types and/ or banks. I think it is the case with most South African credit cards though. When an account has a positive balance, one earns interest which is calculated from the day the money got into their credit card account. I have seen earnings of 2.5% per annum from two of our South African banks. I can assume that this is more or less the interest one can earn on their credit balance from banks that offer this benefit. Given this, we can safely draw a conclusion that a credit card can be an amazing personal finance tool. Benefits like that of an interest free 55 days, interest on credit balance and cost free transactions when making local payments qualify it to be an amazing tool. Another advantage is that of getting rewards like the cash back when using a card linked to some reward scheme.

Part of me is scared that this makes a credit card look more attractive than I wish it did. But I have to emphasise my preference for being debt free compared to having good debt. Consumers who cant resist shopping should just steer clear of any possibility of debt. I know people who easily get addicted to a "SALE" sign. You would think that they are getting the stuff they buy for free. Just stay away from the credit card or any store card if you are a shopaholic. The interest free period and even the interest you can earn is just not worth it if you cannot keep your distance from the store tills and card swiping machines.

The other reason this 2.5% is not worth it is that, your money market account will give you a much higher interest on a positive balance. Your money market account funds are also available instantly. You may also try and get one of those debit cards that earn interest on a positive balance to avoid getting into unnecessary debt.

What your bank is hoping to achieve with this benefit is that:

• You will get a credit card with the intention of using it wisely and benefiting from the interest on positive balance;
• You will then deposit your spending money into the credit card to earn the interest on the credit card in question;
• You will go ahead and buy stuff you don't need just because you have "provision" for it;
• Over time you will go beyond the positive balance because you can, and luckily for you there is still the 55 days interest free. You are safe from paying interest;
• It will finally go out of hand that you miss the payment until after the 55 days. Then they get to charge you gigantic interest. The interesting part is that, you pay them about 10 times what they pay if they owe you. They give you about 2.5% per annum when they keep your money, and you may even pay 25% for owing them.

Of course you will only get a credit card to use responsibly. That is why if in a slightest doubt, you will stick to your debit card. Because you are part of the community that reads this blog.

And now, because I like experimenting, I will arrange for my own copy of the hubby's credit card. I will then put my monthly grocery money into it every month of the experiment. We do our groceries weekly. This will mean that we will get to keep the three quarters of our food budget in the credit card for a week, two quarters for two weeks and the last quarter for a week earning a little interest. This experiment is definitely not likely to earn a significant amount of interest but is worth a try. I will then come back and report on how it went after a few months.

Are you planning to try and earn interest on a credit card too? Please share if you do.
Enjoy your holidays!

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BOND LADDER

If you haven't already read about the basics of savings bonds and how to invest in SA retail bonds, give them a go by clicking on those links and read them. As promised, today we will be looking at how one can ladder their savings bond investments.

A bond ladder is simply used to take advantage of the high interest rate periods and reduce the impact of the low interest rate periods for a fixed rate bond investor. An amount of money that should be invested is divided into smaller lump-sum pieces that mature at different times. If for instance one has R300,000 to invest, they may divide it into three pieces that mature in 2, 3 and 5 years.

Remember that your bond ties the interest rates to the value they were at the time of registration. If the interest rates are 7% for 5 years savings bonds and one invests R300,000; 7% is what they get regardless of the change in the interest rates during the investment period. To try and combat this, an investor staggers that same R300,000 into three R100,000 pieces like this:

Year 2014 December
R100,000 for 2 Year Fixed Rate bond at 7.25% maturing in 2016 December
R100,000 for 3 Year Fixed Rate bond at 7.25% maturing in 2017 December
R100,000 for 5 Year Fixed Rate bond at 8.25% maturing in 2019 December
     
What the laddering does is to release the first R100,000 in 2016 in order for one to reinvest it at higher interest rates if the interest rates have gone up between the investment time and maturity of that bond. If the interest rates go up sometime in 2015 and/or 2016, one will have an opportunity to reinvest their R100,000 (plus interest) after maturity at that higher interest rate. The same happens in 2017 with the second bond and in 2019. You now have three different bonds which diversifies your risk over a period of five years or longer.

The other attractive way to do this is investing the R300,000 at various times. This is what appeals more to me. Lets try an example:

With our R300,000 broken into into 3 pieces invested at different years from 2014.
R100,000 for a 2 Year Fixed Rate bond at 7.25% invested in 2014 and maturing in 2016 December
R100,000 for a 2 Year Fixed Rate bond at 7.25% invested in 2015 and maturing in 2017 December
R100,000 for a 2 Year Fixed Rate bond at 7.25% invested in 2016 and maturing in 2018 December

I will not do the three years fixed rate bond as I find it pointless since both the 2  and  3 years fixed rate bonds earns the same rate. The shorter the period the better in that case.

OR
R100,000 for a 5 Year Fixed Rate bond at 8.25% invested in 2014 and maturing in 2019 December
R100,000 for a 5 Year Fixed Rate bond at 8.25% invested in 2015 and maturing in 2020 December
R100,000 for a 5 Year Fixed Rate bond at 8.25% invested in 2016 and maturing in 2021 December
etc.
With this process you get to have the bonds maturing every year after the initial five years of investment. This does not have to be done annually. It may be every 6 months or any other number of months for that matter. To complicate it a bit one can take bonds that mature at various periods at different years. I know it can spin one's head thinking about this but the point is that one should be collecting interest every year. 

I personally want to invest a set amount every year. For practicality's sake, I will make an example of R100,000 per year over 5 years with all the interest reinvested. This makes my capital R500,000.
R100,000 for a 5 Year Fixed Rate bond at 8.25% invested in 2014 and maturing in 2019 December with R150,845.88
R100,000 for a 5 Year Fixed Rate bond at 8.75% invested in 2015 and maturing in 2020 December with R154,637.37
R100,000 for a 5 Year Fixed Rate bond at 9.25% invested in 2016 and maturing in 2021 December with R160,500.95
R100,000 for a 5 Year Fixed Rate bond at 9% invested in 2017 and maturing in 2022 December with R156,568.10
R100,000 for a 5 Year Fixed Rate bond at 8.25% invested in 2018 and maturing in 2023 December with R150,845.88

I tried to change the interest rates throughout the initial 5 years of investing. You see how one ends up having their bonds mature every single year. I hope it clarifies the point of laddering your investments instead of investing your R500,000 at once. Investing the smaller amounts gives you some power and control as the interest rates change. You also get to have your income every year. Remember that the R100,000 could be R1M for some people. After a five year period that would give you about R500,000 or more in interest annually. The pensioners can opt to get their interest monthly, which makes for a nice monthly passive income.

Something we should all remember is that savings bonds are not high return investments. They are less risky compared to other investments.  If you are thinking of balancing your portfolio, consider building up your own bond ladder. This is very important as one gets older. A secure savings account with a government guarantee is not too shaby. 

Finally, it's a holiday week. I will write another article or two this week because I promised a reader one on earning interest on a credit card.

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INVESTING IN SA SAVINGS BONDS

Yesterday we tried to explain what savings bonds are. With my imbalanced portfolio, I find investing in SA savings bonds quite appealing. And though I hate to admit it, I am fast approaching the "cautious investor" age group. Risk aversion will soon be the name of the game. We need to start shifting some funds to the bonds in a laddered investment fashion. Bond laddering is actually my next post, I have not forgotten. It could be the last post in this series, at least for now.

The one advantage of savings bonds is that of securing your capital. They provide a safer haven for investors who need to preserve their capital, as opposed to the risk they would be exposed to in the stock market. I also have to mention that exposure to risk is not always bad. Especially when you are young enough to recover funds lost in case of a mishap. You can do with a lot of stock trading in your 20s and 30s. As you go towards your 40s, a balanced portfolio starts becoming essential. You will always do well with stocks but of a lower percentage to the total portfolio as you grow older. Forget about how passionate you are about a certain form of investment and look at your portfolio from the outside. Thats rich coming from me, I know. (We are at the portfolio balancing stage people, please don't judge). No one type of investment is good enough to be a portfolio on its own.

I will eventually get to the how part of investing in SA savings bonds, I promise. Let me give a few facts and opinions on the subject first. Savings bonds are one of a few investment options that offer totally passive income. Even though they earn smaller returns than most investment vehicles, they are very unlikely to renege on their promise. If you collect your interest on a certain date, it is coming. Other forms of investment earnings are not as certain. Dividend declarations depend on the performance of a particular company and property rentals depend on the willingness of the tenants to pay. Savings bonds are also made attractive by the fact that they have no fees. Please refer to the previous post for basics on South African savings bonds.

Please keep in mind that we are only looking at SA government savings bonds and not covering the ones that are issued by corporates. 

Investing in SA Savings Bonds. How to:
All South African post offices have information and brochures about SA retail savings bonds. Grab a pamphlet with all necessary information and application forms from there. You may also visit their website at www.rsaretailbonds.gov.za or visit the National Treasury offices near you. You may also call them at 012 315 5888. I also read from their website that one can apply from any branch of Pick 'n Pay.

After applying for the bond and getting registered (issued with some investor number) you can also make the payment in the places mentioned above. Please remember to state your investor reference number correctly. It is too easy to make errors when filling forms and sometimes costly to rectify them. The minimum investment is currently at R1000 and the maximum at R5 Million.
   
Investing in SA Savings Bonds Indirectly
One can also invest in savings bonds exchange traded funds (ETFs). The bond ETFs invest in different government bonds on your behalf for a set period. I am not so keen on bond ETFs because I find the process of investing directly in the SA Retail Savings Bonds simple enough. If you are like me, you have probably invested in the ETFs in various sectors already. I also have a suspicion that an ETF will earn less than the direct bond investment, because of the middle man factor.

Please give your views and experiences on governments savings bonds if you do have some. I love hearing from you. Next week is the long awaited bond laddering post. Have a lovely weekend.

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SAVINGS BONDS SOUTH AFRICA

Savings Bonds act as money you lend to the government or any other institution that needs to raise funds to fund its debt or finance a specific project. When you are buying bonds like South African retail bonds, you are offering a loan to the South African government. Your capital is secured and should earn you interest. This money is used by the borrowing institution like the government, the city or any other organisation to reduce its own debt or grow that particular organisation.

Risk
Bonds are viewed as a safe option for investors as the amount of money that is invested is not exposed to the amount of risk that stocks are exposed to. Even investors with stocks and other forms of investments use the savings bonds to balance their portfolios. The older one gets, the lower their exposure to risk should be and thus the higher the bond portion of their portfolio. There is an argument that the savings bonds do carry some risk. I guess because they are attached to some organisation, they are bound to carry part of the risk the bond issuer carries. I would put more trust in the SA government bonds administered by National Treasury. I will do a post on buying them for a few who are not aware.

Returns
The longer the term of the savings bond, the higher the interest it earns. It is now December 2014 and these are the rates for RSA retail Bonds:

Fixed Rate bonds
2 Year Fixed Rate    7.25%
3 Year Fixed Rate    7.75%
5 Year Fixed Rate    8.25%
          
Inflation Linked Rate bonds
3 Year Inflation    1.25%
5 Year Inflation    1.75%
10 Year Inflation    2.00%

The fixed rate will change with the change in interest rates only for the new investment. If you bought at 8%, its fixed until maturity. But if you ladder your investment, you get to buy at different rates for various pieces of your investments. The rates can go much higher. In July and August of 2008 for instance, the investors bought at 10.5% per annum for 2 and 3 year fixed rate and 11.25% for a 5 year term. The challenge is that, you tie your investment to the rate at which you bought when you are on fixed rates. This is where bond laddering becomes important. if you never heard of that concept, do not despair. I will explain it next week.

You will get a higher return in other investment vehicles but they may not be as low risk. That is the reason this kind of investment is recommended as one gets older. One will always need this kind of an investment to balance their portfolio and to reduce the overall risk levels of their wealth. I know that you noticed that the inflation linked rates are much lower. This type of rates is meant to protect you against inflation. They tend to yield much lower returns.

Interest Payment
In the case of the RSA fixed rate retail savings bonds one is paid on set payment dates until the end of the bond term. Investors who don't need passive income immediately choose to reinvest their interest instead of getting it periodically. 60 year olds or older investors can choose to receive their interest payments on a monthly basis. They usually live on their interest anyway. For RSA inflation linked retail savings bonds, interest is payable every 6 months on set payment dates until the end of the bond term.

I am not going to go into the corporate bonds that are issued by companies like banks, sorry.

Next on this "Savings Bonds South Africa" series will be how to invest in bonds in South Africa. I will remember to also do a post on building a bond ladder with examples.

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TO BUY OR BUILD A HOME

We drove back home from East London on Sunday. Whilst there, one of my new friends insisted on me driving around Gonubie Beach to see where she lives. I saw East London in a new light. It is such a beautiful town. I am now back home to give my two cents worth on why I would choose to buy or build a home of my own.

Gonubie, East London, South Africa

Most readers of this blog lead or strive to lead debt free lives. It makes me smile just thinking about it. As we all know, a home is the biggest debt for most of us. Most readers believe in building their own homes without borrowing from the bank. That is the reason I love associating myself with you guys. I know this to be a fact because of the debate we had with a number of people who read this blog. (PS. if you are from outside SA, it is a norm to build one's customised home with a mortgage here in SA).

Summarised, this is what transpired from the debate:

• Even those of us who have never built their homes before seem to plan to do so in future without taking on any debt;
• Those who have built their homes with little or no debt before would take the same route again;
• Most were fond of the fact that building one's own home enables one to get a more custom structure;
• Everyone who has built their home stated that they saved a lot of money doing so compared to buying an existing home using a homeloan;
• We all aknowledged the higher stress levels that come with building compared to buying an existing home;
• Most agreed that the building project requires intense management as most builders prove to be unreliable. A lot of facts accompanied this notion. Sticking to payment interval agreements by the home owner and the builder was the major problematic area in the building project;
• This was followed by the time lags from paying for building material and it being delivered at the building site;
• One person raised the building quality concern emanating from the fact that the bank is not involved to ensure good workmanship and high standards of material used;
• Even though those who built before did not fully enjoy the process, they found the end product to be fulfilling;
• The obvious one was that, moving into a fully paid house means that you owe no one for it. It is very rare to have a house you are not paying for.

I am undoubtedly inspired by hard work and focus on being debt free by these amazing friends. I know this debate will go on forever. In the meantime, let me give my personal preference on whether to buy or build a home.

I will most likely have a commercial property development project in 2016. However, I don't anticipate ever having a construction project for my own home. I have to state though that I don't feel as strong about this as I did before this eye opening debate. My reasons for being pro-buying vary from those of psychological to those of financial nature.

Design and Architecture
As a "designer", I find my design preferences change by the hour. Even if I were to design my dream home, I would most likely wish to change it before it is even ready for occupation. Some people take two years to complete their home building projects. By that time I would have changed my mind about the plan already. That does not make it easier to buy an existing house but it cancels the "custom house" argument for me. I also think I put more thought in other aspects of the home like location and prepare my mind to adjust to whatever I get. Which some would view as more stressful than building.

In reality, though very similar to each other,  most modern homes do look nice. Going completely different is costly in financially, on time, design fees, etc. A lot of people I know choose existing house plans from their architects and developers which, once more, discounts the uniqueness and custom part of the structure. It is important to mention that the features of newer homes are much nicer and pleasant to the eye.

Cost
I used to dispute the fact that building a new property can cost significantly lower than buying an existing one. Research states otherwise. However, most people who build without the bank assistance seem to manage to keep the costs very low. The challenge would be omission of other costs that we usually leave out when quantifying the details of the project. Some of those are the cost of alternative accommodation, daily travel to and from the site, the stress, the family conflicts that are a direct or indirect result of the project, getting something different to what you have imagined, underestimating the project duration and costs, the value of one's time, etc. Even with these factored, I am now convinced that it does cost less for most people to build in this way than to buy homes.

If I were to choose a single factor that makes it difficult for me to choose building, it would be the time cost. I am too impatient to wait for a year or two for the home project. When one builds cash, they most likely run out of cash at some point during the project life cycle and add to the waiting time. This can result in months or even years of delay in the project. One may have achieved some growth in the value of the existing home in those months or years if they bought an existing house. Two years of inflation plus a splash of paint can yield amazing grown in the property value. If you bought right, you would be in a position to sell it at a good profit. Existing homes can offer huge discounts when one is patient enough to search for the right property with a right price tag.

Quality
Very low construction costs usually result in inferior workmanship. Most often than not we get what we paid for. Less experienced builders tend to charge lower fees than the highly recommended ones. Whatever you estimate to be your costs, allow some fifteen or higher percentage for contingencies.

Other Benefits
Buying is definitely less stressful. Chances of getting a deviation from what you ordered are very slim. Most older homes are closer to established communities with benefits like great schools and other amenities. One can easily predict or research the challenges that older communities present. Building in well established communities would be very expensive because of the higher land cost.

Finally, if I were to build, I would probably use a homeloan. I would want to be cushioned by the bank rules to be able to manage the project effectively. I would also prefer to carry whatever risk that comes with the project with the financial service provider. The bank has an agreement with the constructor and owns the project. And YES, I am also a believer in the power of leverage. But I also prefer to have my primary residence to be a fully paid property.

Having stated my preference though, the debate did change my thinking around the "to buy or to build a home" debate. I can now consider the cash building idea. What are your views on this?

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QUARTER 1 2015 GOALS

I am posting this passing through Kroonstad, Free State. My cousin and his fiancé are throwing a Thursday to Saturday wedding marathon in the Eastern Cape. It is a long drive. To readers from outside SA, our country is absolutely gorgeous!!!

Let me start with the review of my November 2014 goals. I actually followed through with a lot of what I planned.

On personal finance:
Net worth update and report - DONE.
Emergency Fund more than doubled in November - DONE.
We didn't reach the 10% of giving because we received money we did not expect. NOT DONE
In real estate we were to enforce security in our home. NOT DONE
Interest was minimal and dividends were low. DONE
Online income grew by 7% and not the 25% planned. NOT DONE
Enrolling for a short course. NOT DONE

Not impressive performance. I'm glad I tried.

QUARTER 1 2015 GOALS
NET WORTH: The overall plan is definitely to grow the net worth. The target is growing it by 2.5%
EMERGENCY FUND: I won't focus on this at all. I will set no targets. I will transfer money if I so wish. We have enough funds for emergencies. I can't live with myself having too much cash earning 5.25%.
STOCKS: We plan to up this by 25% by March 2015.
GIVING: We will maintain giving of more than 10% of income.
REAL ESTATE: Sell one unit as part of fundraising for the fast approaching commercial property development.
EXTRA INCOME: Working on taking my online income up by at least 55% by the end March 2015.

What are your personal finance plans for 2015?

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STOKVELS AND MONEY CLUBS

Ever since the formal financial institutions realised the power of stokvels and money clubs in South Africa, they have been doing all they can to tap into this market. Apparently these clubs are worth over R20 billion. We can be sure of one thing, whatever the banking sector is doing to get their hands in the stokvel industry will benefit the banks more than the stokvel membership. No surprise there. Financial institutions are permanent winners. A topic for another day.

Like many people her age, my mother is a member of a stokvel. Hers is the one where each member gives a set amount of money to one of them, rotating monthly. They are six members which results in them getting their turn twice in a year. Lets now say my mom gets her turns in June and December and each of the members contributes R1000. Members 1 to 5 get their R6000 each (including their own contributions) in January to May, then my mom gets hers in June and the circle starts again with member 1. Looking at this in simple terms, the whole stokvel collected R72,000 (R1000 X 12 months X 6 members). Each member contributed R12000 and got exactly the same. 

Money Market Scenario
Let us assume that my mom and club members threw this money in the Money Market account. I will make an example with the account I use from one of the banks with the current interest rate of 5.25%.

Month	Deposits	Monthly Interest	Balance
January	R6,000	26.25	R6,026.25
February	R12,000	78.86	R12,078.86
March	R18,000	157.96	R18,157.96
April	R24,000	263.65	R24,263.65
May	R30,000	396.05	R30,396.05
June	R36,000	555.29	R36,555.29
July	R42,000	741.47	R42,741.47
August	R48,000	954.71	R48,954.71
September	R54,000	1195.14	R55,195.14
October	R60,000	1462.87	R61,462.87
November	R66,000	1758.02	R67,758.02
December	R72,000	2080.71	R74,080.71

My mom's stokvel would have collected R4,080 or R680 for each member in interest in that one year. My adopted motto is that... every little bit adds up. It sure does. 

ETF (Exchange Traded Fund) Scenario
Lets take it a step further and assume this particular money club was investing this same amount (R6,000 per month) in an ETF as a collective. Lets assume that the stokvel invested the money monthly in Satrix Indi which earned 37% growth this year. 6000 would be invested every month and after the last month the club would collect R85,556.43. This gives the club R13,556 which translates to R2,259 for each member in interest. That's a decent amount given the total investment of R12,000 per member over that one year. This is the reason I don't fully understand the logic of putting R1000 per month aside for a year only to get an exact R12000. 

Who Benefits from a Stokvel
The traditional money club benefits only the first few recipients. Lets say member One was the January and July beneficiary and my mom the June and December beneficiary.

Member One:

• gets R6000 in January;
• invests it for 6 months in the same ETF;
• gets about R7,199 after six months; assuming an evenly spread 37% interest annually;
• adds her second R6,000 to that total;
• In December she gets R15,837.15 which is a whooping R3,837 in interest on the money that is not hers.

If they were 12 members, this January member would make  R5,276 in interest over 12 months.

• Mommy dearest on the other hand, gets her turn in June
• invests it for 6 months to get R7199
• adds it to the December earnings to make a total of R13,199
• In December she would have gotten a mere R1,199.

Back to our banking fraternity. When all banks market their new amazing stokvel products, its never about the club membership. Banks don't spend money for nothing. Especially not South African banks. But we have to admit it, it helps combat some amount of risk for stokvels and money clubs.

Risk has to be the biggest issue I have with informal stokvels and money clubs. I don't see any part of this arrangement that is not risky. You have to have amazing faith levels in human kind to invest in such an informal arrangement. Number one a.k.a January member may take all the contributions and flee without ever contributing to the rest of the members. I doubt it if it happens often. Secondly, people lose jobs, die, get disasters, etc. When that happens, what does one do?

The smarter way is to have your own stokvel and automate it by having a debit order arrangement to transfer money from your account to your savings or investment account. You need to find support within you. You are not going to make it without discipline. Wise up and let your money work for you.

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CALCULATE YOUR NETWORTH

Going back to work has not been kind on my monthly personal finance responsibilities. I have not looked at the details of my net worth since exactly 11 months ago. It will never happen ever again unless this net worth is too huge to be calculated by myself. That is actually not a bad thought. We have since done a lot of manipulation in our portfolio. We sold a huge percentage of our stocks to invest in a new property, we got into new mortgage debt three times, we gave away an old car and replaced it with another one, we had a new property vacant for months whilst rezoning it to be a commercial property, and the list goes on. In all that craziness, we managed to grow our net worth by 57%. I am also in a bit of a shock. It feels like I slept and woke up in another world.

A few readers of this blog ask how I calculate my net worth all the time. I thought of dedicating today's blog post to that. A good start would be to define it: Net worth (also referred to as wealth) is an individual's total assets minus total liabilities. After taking out what you owe from all you own you are left with your wealth value. Lets look at how I calculate our wealth:

NET WORTH           
           
1. Assets           
1.1 Cash
    check and/or savings accounts
    + money market or similar accounts
    + any other cash

1.2 Investments           
    stocks, bonds, exchange traded funds
    + current values of unit trusts
    + other investments like endowments
       
1.3 Movable and Immovable Property           
    market value of your real estate property
    + current value of your cars
    + value of gold, silver, coins, etc       
    + value of collectibles (I never add this)       
    + Other        
       
1.4 Retirement           
    retirements accounts and annuities
    + employer pensions current value
    + other retirement investment       
               
Total Assets = XXXX           
           
2. Liabilities           
    accounts outstanding amounts       
    + car loans       
    + credit card outstanding debt       
    + personal loans        
    + home-loans
    + student loans       
    + other liabilities       
Total Liabilities = XXXX           
           
Total Assets - Total Liabilities = Net Worth

That is how you calculate your net worth or at least how I do ours. Do not stress yourself if it gives a negative figure. What should be of concern is the direction it takes from there. It should be going up steadily as you pay up your debt, start saving or up your investments. If you are still not clear, feel free to ask me any question.

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MONTHLY SPENDING AND BUDGET REPORT-NOVEMBER 2014

To those new in this blog, This is my personal finance journal where I track my monthly spending. I just cannot believe that I last did this in June 2013. At the time my goal was to spend 60% and invest 40% of our income to help me (and hubby) to retire comfortably in our early 40s. Well that has changed a little bit. Retiring early is still our top priority but 60% has now become 50%.

It has been a very busy year. After paying up our last homeloan we went back to the banks and opened three new mortgages. And as most of you know, I am back at work and not miserable at all. Back in June 2013 we managed to live on 52% of our income. I really live well when I do this expenditure tracking stuff. I also enjoy it after a few months of starting because my spreadsheet is already set with fixed income and expenditure and formulas. November was a good month in that, we had a higher than norm income. We managed to live on 48% of our income.

Our November 2014 monthly spending and budget report:

INCOME	NOV'14	JUN'13	NOTES
Real Estate	11%	33%	Target is 25%. I only use NET (after costs).
Personal Income	49%	46%	We are working on growing other income streams to bring this lower.
Interest/ Dividends	0%	2%	Target is 10%. Our emergency fund interest was too low.
Online Income	2%	19%	Target is 10%.
Other	38%	0%	We got surprise money this month, skewing the results a bit.

Interest on my Emergency Fund is 5.25%, and the fund kept low. My stocks have been reduced by the huge sale we had to raise some funds.

SPENDING	NOV	JUN	NOTES
Real Estate	20%	34%	Still due to renovations.
Transportation	3%	0%	Fuel, insurance, hubby's tiny installment
Online	2%	0%
Internet/ Phones	2%	1%
Consumer	8%	4%	Includes food
Credit Card, Cash & Fees	7%	0%	Hubby used his credit card to fix the car.
Giving	5%	7%	This should be at around 10-12%.
Life Insurance	0%	1%	Fixed
Invested	52%	48%	We paid most of it into the Money Markets. I no longer top my Just Invest (Nedbank) savings up.

We lived on just above 50% of our income in June (comparing to 20% in May). Our Net Worth impressively well.

TRACKING 2013 GOAL PROGRESS (These are outdated; I will change these after setting new goals for 2015)

1. MAIN GOAL: net worth growth by at least 25%.-- 23% so far.
2. BUDGETING: invest at least 40% of income.-- 50.8% so far.  
3. EMERGENCY FUND: 3 months worth of living expenses.-- DONE.
4. GIVING: give of more than 10% of income.--5% so far.
5. REAL ESTATE: Construct at least 4 flats/ increase the rental income by 30% .-- not yet.
6. MORTGAGE: Pay up our home .-- DONE.
7. STOCKS AND DIVIDENDS: Get at least R12,000 in dividends.-- not yet.
8. EXTRA INCOME: Online income to R8000 per month by December 2013.-- +/-R3700 April.

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