A simple three part Financial Plan Checklist for South Africans starting their road to Financial Independence

This plan for someone starting out there journey towards financial well-being.

It is for someone with at least a decade to go until their planned retirement, preferably more. If done well, 10-15 years is enough for many to become financially independent, in a world where most claim that it is impossible to save.

A few disclaimers before we begin:

  • This is not my plan
  • I’m not a financial advisor
  • I’ve not included many of the reasons why
  • Be careful of taking advice, it’s given freely, but can be very expensive

Some people learn better by doing, by starting, financial anxiety will reduce and deeper levels of understanding will emerge over time.

The below is not an optimal plan, there is no optimal plan and a great plan will depend on your circumstances. But an “okay” plan you do is far better than a perfect one you don’t. Start and correct course as you become more aware and confident, in the meantime watch out for flashy marketing or unrelated incentives. Ultimately you should have a plan of your own, which might look very different to the below.

The Fundamentals

The wealth equation is simple:

Spend less than you earn and invest the difference.

Then, I work to the following fundamentals:

  • Start Early – Allow time for compounding.
  • Reduce fees and taxes  – A 1% fee reduction could add 25%-50% to your retirement fund over your working life.
  • Diversify – Across industries, asset classes and economies. Eggs in many baskets.
  • Rebalance – Don’t worry about this for now, an index fund will do this for you, by rebalancing, we buy low, sell high.

Remember more savings is better than less, some savings are better than no savings, no savings is better than debt. Depending on your starting point, the checklist below may take 1-2 months or 1-2 years. Direction of travel is important.

Do this plan and you should be fine, the parts are overlapping, but in a reasonably rational order. Remember to challenge everything you spend your money on regularly, comparative value changes, you change, your preferences change.

Downloadable checklist for you to customise and complete –


Part 1 – Understand your finances

  • Open a 22 Seven account to get visibility and understanding – don’t get too caught up in the detail. It’s for awareness.
  • Subscribe to the Fat Wallet Podcast start with:
  • Join the Fat Wallet Facebook Group (say hello to me)
  • Maximize the value of your bank account – this usually means the cheapest (Tyme? Capitec?), but it depends on use. I have an Investec (FNB and Nedbank before that) account, pick according to what you use, not what you would like to use.
  • Do a review of all your regular expenses over the last 12 months. Ask how you can reduce them all? – This will help assess the value. See the Frugal Experiment if you don’t think there is room to save.

Part 2 – Sort out Future you

Figure out your needed/desired/targeted saving and investment ratio.

More is better, but if you are not targeting early retirement, I have the following rule of thumb, if you start in your 20s, 20% should be fine; 30s, 30%; 40s, 40%.

If you want to retire earlier, you need more – see the maths here. You may need to complete part 3 to get to your targeted %, but at least start with something, even 5%, then maybe 10%.

  • Inventory your debt – Debt steals from the future you, with interest. Pay down debt (assuming you have stopped accumulating first) – either highest interest rate first (Avalanche method – financially may be best) or smallest amounts (Snowball method – emotionally may be best).
  • Build an base emergency fund (1 month expenses) – have instant/24 hrs access – with an inflation matching rate (5%-6%+).

Once you are out of debt and you have funded a base emergency fund, it’s time to start building wealth.

  • Add to your emergency fund to build a security fund (2-6 months of expenses) – that you can access within a month – try get slightly above inflation interest rate (6%-9%+).
  • Start building Wealth by Investing – split between Tax Free Savings Account (TFSA) and Retirement Annuity (RA/Pension)
    • Open an Easy Equities account for your TFSA  maxed out at R35k per year. If you are nervous, start lower to get your confidence up, even R100 will make a difference over time. Don’t draw down on this, it’s not refillable -keep it simple, this should be your first investment priority each year and then the last money you want to spend in your life, so leave it, leave it, leave it. There are many places you can invest in, but to get you started, maybe start with GLOBAL from CoreShares.
    • If your employer offers a Pension/Retirement Annuity (RA) – Maximise the matching contribution and/or open a personal RA with ETFSA (I like the Wealth Enhancer Fund) or Sygnia (I like the Skeleton 70). Look for low fees (less than 1%), diversified and passive. The tax benefit is limited to 27.5% of income and R350k per year to get a tax rebate, but feel free to start with lower to get a feel for it, you are doing exceptionally well if you can reach the limit.
  • Set a reminder to review annually (early Feb works well) to give you time to top up your RA and take advantage of TFSA as early as possible.
  • Create a will – I’ve heard Capital Legacy are good. FareWill did my UK one. Less urgent to start with.

Part 3 – Current you

Work out your Spending Ratio (the balance of saving) – optimise the key buckets and depending on your preferences and what you get value out of.

Consider your priorities, circumstances and earning levels, the biggest gift you can give yourself is keeping your fixed expenses low.

  • Review Insurances – Don’t necessarily go for the cheapest, you are paying for future claims, cheap can cost a lot in the long run.
    • Medical aid – Minimum of a hospital plan and customise to value. There is a tax credit of about R300 a month. – I use Genesis.
    • Medical Gap coverMedical aid often has shortfalls, especially when medical professionals charge more than the medical aid rate. This will often be a better result than upping your Medical Aid cover. – I use TRA.
    • Income protection (dread and disability) – I use Momentum.
    • Car – Minimum of third party – I use Naked Insurance
    • Life – Only if you have financial dependents – I don’t.
    • _______ Other – Basically insure for anything that could ruin you.
    • Set a reminder to review annually – perhaps November or January to align with price increases. As they increase, threaten to leave (even if they don’t increase).
  • Reduce Household Expense – rent etc.
    • Transport
    • Food – mentally split between functional and entertainment
  • Regular Subscriptions
  • Phone – I use Telkom
  • Internet – I use Cool Ideas
  • Bank (if not done in part one)
  • TV
  • ________
  • ________
  • ________
  • Add to your security fund for specific savings goals, like a second hand car (never new), holiday etc.
  • Set a reminder to review annually.

Remember to start and correct. You can learn by doing.

Some rules of thumb

  • Complexity equals fees – someone is getting rich, probably not you. A 1% lower fee could increase your retirement pot by 30%-50%.
  • Wealth takes time, not money – The Compound effect
  • Avoid products wrapped in other products.
  • Don’t try and intuit % and amount differences – 1 million seconds is 11-12 days, 1 billion seconds is almost 32 years. Do the maths in excel or Google the calculators you need.
  • Every Rand needs a job. Ask why do you want this money to do for you.
  • Property is a second job.
  • It’s not about timing the market, it’s about time in the market.
  • Over the longer term risk changes. Cash can become riskier than investments.
  • Good marketing often means a bad product. We are not looking for sexy.
  • Make conscious choices.
  • We make good financial decisions to have a good lifestyle, not the other way round.

Some Further Resources

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