I’ve only ever known debt as the wrathful destroyer of wealth and happiness. Lately, however, I’ve come to realise debt can be a powerful tool in your financial arsenal - if you treat it with respect. Someone recently explained the logic behind maxing out his child’s tax-free account instead of saving for her education.

If a single year’s tax-free contribution can cover much of your child’s living expenses in retirement, imagine what 15 years’ worth can do. Giving a tax-free account time to grow will have greater benefits in the long run than if she started contributing when she started working. Instead, she can use her starter salary to pay back low-interest study debt with her retirement taken care of. It’s genius.

This conversation got me wondering whether I’m making the most of the debt I have available. My home loan is currently the dumping ground for all my savings. This brings down my repayment period and guarantees a higher interest rate on cash savings than any bank can offer me. In this episode we discuss how low interest debt instruments like student loans and home loans can be used to inch us forward financially. We discuss why cars and clothing accounts won’t form part of this strategy and try to figure out when a credit card can help.

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Alexander

My studies are financed by my parents’ home loan that has an interest rate of 9%. This interest rate is still currently better than student loan interest rates I could obtain (10%+). The idea is that I’ll start to repay my parents as soon as I start working. I calculated that I’d most likely graduate with R350,000 to R400,000 student debt owed to my parents.

Should I use the very little free cash I have from my monthly allowance, vacation work and mentoring remuneration to:

1. Contribute to my all-ETF TFSA at EasyEquities?

or

1. Contribute to my savings account with TymeBank (at a 10% interest rate) to pay off my student debts sooner when I graduate?

I know the amounts I’m investing/saving now might be insignificant relative to the massive amount of student debt. But I’d still like to know what is better: investing in your TFSA or attacking student loan debt as soon as possible?

Clarke

My wife and I are in the process of finalising plans to build our dream home. We’ve saved up about 50% of the funds required, which is sitting in a money market account.

We hope to get close to 90% building loan from the bank which would enable us to use very little of our own cash in the initial stages of the build. Hopefully we can pour that money into the loan as required in order to keep interest payments to a minimum while having access to the bond if required.

I’m currently working on an exact schedule of cash flows, but I would require to draw down our investment periodically over the next 7-9 months in order to keep the loan amount to a minimum.

Which investment would you advise I could look into apart from money market accounts or fixed deposits that might yield greater returns without substantial additional risk?

Siphathisile

When I did my articles 2017-2019, I went to the SARS website and answered questions to see if I need to file a tax return. The website said I didn't need to, I'm guessing because I earned too little. Now that I am a qualified professional I know I will have to and I have no clue where to begin...stories about long queues at the SARS offices make me keep procrastinating on going there.

My company offered to pay half my medical aid. Should this affect my PAYE tax amount? Am I paying tax on my gross amount or on my (Gross plus medical benefits) ? I asking because the difference in the amount is nearly R500 and that hurts.

Am I liable to pay UIF since I am not a permanent resident and I am not a citizen of south africa? Will I be able to claim if I was ever unemployed in South Africa?

Shaunton

Do you think it would be more beneficial to add more contributions to my RA or do you think I must open an easy equities ETF account if I want to save more over and above my TFSA and RA?

Steve shared an excellent article.

• Reduce your tax bill in the current tax year
• Reduce your tax bill in the next tax year or in future tax years (any unused portion carries over indefinitely)
• Reduce your tax bill when you withdraw or retire from a retirement fund
• Help you to get tax back from SARS on your living annuity income when you file your tax return
• Reduce the tax bill on cash your beneficiaries may choose to take from your retirement fund or living annuity on your death

Francois has an idea for a calculator to work out how much money you have left until you die.

It should show you how your savings grow on a daily basis!

So what must it do?

1. You tell it how old you are and when is your birthday.
2. You tell it to what age more or less you intend living. 8, 90,100
3. You tell it what your balance is of all your money and assets.

It then works out how many days are left from your current day to that age and it calculates how much money you can spend per day up to that age. If you don't spend any money today, tomorrow your daily spend automatically increases since you did not spend anything today or you received interest overnight or whatever.

You see your balance grow NOT monthly, but daily! Later you add on expenditures and it automatically calculates your new daily balance and so on.

MacGyver

I have a TFSA through FNB. I max it out every year, it's the first money I put away.

However, it sits in cash in this FNB TSFA. How do I go about transferring this to Easy Equities Tax Free account so that I may invest in ETFs instead of it simply sitting in cash in my FNB account?

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