For most of us, a retirement annuity is the biggest investment we'll ever make. More than any other investment decision, your RA should be scrutinised and prodded at every opportunity. This week Alexis Whitehead wanted to know how to choose a provider. We often mention 10X, although Sygnia claims to be cheaper. etfSA.co.za, home of our bestie Nerina Visser, also offers index-tracking RAs. Which is the right choice?

Equipping yourself with the right tools to make financial decisions, I believe, is the best way to healthy finances in the long run. I believe I should have the right financial building blocks in place if I hope to be successful financially. To recap, those are:

• No debt

• An emergency fund to cover my expenses for at least three months

• Medical aid

• Dread disease and disability insurance

• Retirement savings

I also try to develop mental models that would make financial choices easier. Those include:

• Calculating cost per use: In an ideal world, I want the cost per use for everything I own to be somewhere between R1 and R10. I like to think about it in terms of renting the same object. If something costs R2800 and I use it 280 times, would I be willing to pay R10 to use it every time? What price would I be willing to pay to rent something once?

• Opportunity cost and future value: If I compound the price of an item, will the object of my desire be worth giving up that amount in the future? I lose the opportunity to invest that money when I spend the money on other things.

• Cost compound: Fees compound in the same way earnings do. If the fees apply to assets under management, I also try to remember that the assets grow constantly. 1% of R10 000 is easier to stomach than 1% of R10m.

In the end, your money should make sense to you. Who you choose isn't as important as why you choose them. Having a plan is half the battle won.

kris