Personal savings topped finance agendas this month. Motivation for a greater savings culture in SA by Finance Minister Pravin Gordhan was heard at the 10th anniversary celebrations of the SA Savings Institute. Emphasis fell on the need for a changed mindset toward increased personal savings, from young children to those planning for retirement. Low interest rates resulting in marginal investment income on cash savings remains a concern. In addition is the discussion on Retirement Policy Reform, aiming to reduce tax payable on retirement savings.
With seven months of the annual calendar past, property owners, tenants, and potential owners are reminded of escalating financial responsibilities, from footing utility bills to tax submissions while providing for the festive period due in less than five months. For some this season brings good fortune, such as owners of second homes and coastal holiday houses who enjoy optimum rentals during high season. Whereas others pay for annual holiday expenses out of long term savings, annual bonuses or increased credit card debt, out of necessity.
As tax returns on personal income are due shortly, it also provides the opportunity to review personal savings when submitting tax certificates on all income, from employment to personal savings on investments, as well as rental income on property. The latter being a more complex commodity best discussed at professional level, also available on the Property Advice Centre of this portal.
Take a look at how to increase savings opportunities as an occupant of any property, be it primary or secondary ownership. or landlords and tenants.
Set goals for long and short term savings
Short term – plan monthly budgets to include savings for property related expenses, from utility costs to maintenance and improvements, which when annualised can materialise in significant savings.
Long term – provide for ‘financial stresses’ such as the inability of meeting monthly bond re-payments, retirement planning, as well as savings to facilitate maximum deposits for house purchases, in particular for first time and secondary homes owners.
Bank Savings
The larger the deposit, the lower the re-payments, as interest on outstanding balances is calculated daily. Ewald Kellerman, Head of Sales, FNB Home Loans says coinciding debit orders with salary payments produce additional savings. About over payments on bonds he says: “As little as a 10% additional payment per month into your bond could save approximately four years of repayments, and R250 400 in interest on a R1-million loan, over the life of the loan based on current interest rates.
Negotiate best fixed or flexible interest rates.
Revise interest paid on outstanding debt regularly.
Costs to buyers
Budget for once off expenses, including transfer duty, VAT, bond registration, plus bank and attorney fees.
Tax for sellers and buyers
Investigate the implications of Capital Gains Tax (CGT) prior to selling or buying, i.e. ‘base costs’, and in particular as CGT applies to secondary properties.
Consult professionals regarding income received from short and long term rentals.
Home office space – consider proportionate tax deductable benefits.
Municipal rates and taxes –research valuations, object and appeal where necessary.
Consider commuting tax benefits when planning residential locations
Inheritance tax
Investigate SARS annual allowances for income on gifts and legacies.
Credit
Protect a good credit record –realise the total expenditure over the long term after adding interest at well above 20%.
New homes
Negotiate agency commission and conditions of sale.
Relocations during off peak periods during mid month and week days are cheaper.
Old houses
Save costs by planning maintenance to coincide with seasonal wear and tear.
Utilities
Qualify for municipal energy and water saving incentive programs. Investigate optimum savings on consumption both in and outdoors.
Insurance policies
Good building and content coverage is essential, so is negotiating the best premiums.
You can beat inflation by saving at least 15% of monthly income.
Discover the magic of compound interest, says the South African Savings Institute. http://www.savingsinstitute.co.za/sivehicles.htm