Tips for debt-free new year…

FIN24- If you’re setting your financial goals for 2018, it is a good time to include matters like protecting your finances, being financially free and getting rid of debt woes, according to Matthys Potgieter, spokesperson and debt expert at DebtSafe.

Potgieter highlights seven significant steps you can incorporate into your 2018 financial resolutions:

1. Re-evaluate your monthly expenditure to make room for savings

It’s easy to miss the small and ad hoc bills that all add up.

However, if you calculate and pin down your expenses on a budget sheet, you’ll know exactly what your actual spend per month is and what you can save. This will also help you draw up an accurate budget that truly reflects income and expenditure, so that you can prevent accidental budget overspending.

2. Check your credit record and make sure the info on it is correct

Do you know what your current credit profile looks like?

You can download your record once a year for free. Visit the websites of TransUnion, XDS or Experian.

It is always good to know that your credit record is in check. Be alert and make sure there’s nothing fishy going on with your credit score. If you see something suspicious, sort it out right away by getting in contact with the relevant credit bureaus.

3. Stop playing victim and put an end to your reckless borrowing

You are responsible for your debt and finance management. If you are not going to control your spending splurges, nobody else will.

Don’t be a blame-shifter. Instead, do the necessary research and compare rates and costs from different credit providers to see if you can afford a loan(s) or item(s) before applying for any credit.

4. Catch up on your reading and become financially literate

It is about time that you read up on the National Credit Act and regulations, the National Credit Regulator, the Consumer Tribunal and what alternative dispute resolution agents (like the credit bureaus, debt counsellors, the ombudsman for banking services or the credit information ombudsman) involve.

You won’t just broaden your consumer rights knowledge, but you’ll also create a money-savvy culture for yourself by being a financially clued-up person.

5. Put a dent in your debt

Consider one of two options when trying to get rid of your debt:

  • Make use of the so-called snowball effect by paying off your smallest debt first (like a clothing account); or
  • Use the avalanche method, where you pay off your debt with the highest interest rate first – like your credit card.

6. Protect your debt

Debt obviously has a negative connotation, so how are you supposed to “protect your debt”?

Life happens and you must therefore protect what is most important to you. You don’t want to leave your loved ones with a debt mess, do you?

Make sure you have credit-linked insurance to take care of yourself and your loved ones when unpredicted (or in some cases predictable) things happen like temporary or permanent disability, retrenchment and maternity leave as well as death.

7. Talk to professionals in the financial field

Talk to your financial adviser or banker, and get their feedback and support.

Fin-24: Sanlam warns investors of Steinhoff setback

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FIN-24: Steinhoff’s share price collapse has knocked about 1% off the annual returns of typical Sanlam investors, the Cape Town-based financial services group said in a market announcement.

The share price of the embattled global furniture retailer [JSE:SNH] has dropped over 90% this month, after its CEO Markus Jooste abruptly resigned and it announced that PwC was investigating “accounting irregularities requiring further investigation” in its books.

The Stellenbosch-headquartered group’s 2017 audited results are on hold, and it has warned investors to not rely on the figures contained in its 2016 results.

Steinhoff is now facing at least seven different probes in Europe and South Africa, as well as a number of possible investor lawsuits.

Sanlam said that in a “typical balanced portfolio” of an investor, Steinhoff exposure would have accounted for approximately 1.1% of the portfolio assets on 1 December 2017.

At the time Steinhoff shares were changing hands at about R55 a share. At 12:40 on Wednesday, shares were trading at R4.61, down 1.5% from their previous close.

Sanlam said the steep share price decline would cut the returns of typical shareholders by about 1%.

Investors who held a larger Steinhoff weighting in their portfolios would be worse affected. “The negative impact on the return of a South African Swix Equity index fund would be approximately 2.1%,” it said.

Steinhoff was for years seen as an integral part of many SA share portfolios.

Once in the top 10 of the JSE by market capitalisation, the “Ikea of Africa” now risks dropping off the list of the top 100 biggest JSE companies altogether.

US agency gives green light to trade Bitcoin on major exchanges

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New York – A US regulator cleared the way Friday for bitcoin futures to trade on major exchanges, but warned investors the digital currency is prone to elevated risk and volatility.

The decision opens the door for the Chicago Mercantile Exchange and CBOE Futures Exchange to offer contracts for futures of the virtual currency, rather than trading the actual currency.

The deal with the Commodities and Futures Trading Commission agency also enables Cantor Exchange to offer bitcoin options, another type of derivative contract, which allows for trading without taking ownership of an underlying asset.

CFTC chair J. Christopher Giancarlo said after “extensive discussions with the exchanges” they “agreed to significant enhancements to protect customers and maintain orderly markets.”

The agency said the exchanges agreed to modify the derivatives contracts and promised to coordinate with the CFTC and each other to guard against market manipulation and other irregularities.

“Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” he said in a statement, warning that “investors should be aware of the potentially high level of volatility and risk in trading these contracts.”

The agreement with the exchanges does not mean the CFTC endorses the digital currency or the various trading products, he said.

The announcement comes a day after a Federal Reserve governor Randal Quarles, the Fed’s vice chair of banking regulation, warned that digital currencies like bitcoin could pose a threat to financial stability as they gain wider use because of the uncertainty of how they would fare during a crisis.

Avbob fined for violating FSB policy rules

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The Financial Services Board (FSB) on Tuesday announced that it imposed a penalty of R100 000 on Avbob Mutual Assurance Society on December 1 2017.

This followed after the registrar of long-term insurance referred a case against funeral insurance provider Avbob to the FSB’s Enforcement Committee for the violation of policy holder protection rules.

The case involved an intermediary agreement Avbob entered into on October 28 2010 with a Mr T Nyadombo, who provided services as an intermediary for a savings product underwritten by Avbob.

On December 10 2014, Nyadombo’s authorisation was withdrawn. However, he continued unlawfully selling products on behalf of Avbob, therefore contravening policy rules.

Among aggravating factors, the financial services regulator said that “Avbob failed to demonstrate sound insurance principles and practice in the interests of the policyholders”.

Avbob was also not aware of the changes on Nyadombo’s FSP licence until the contravention was brought to its attention by the registrar’s office, said the FSB.

Avbob’s cooperation

In mitigation it was taken into account that Avbob accepted responsibility for the violation, cooperated with the investigation and the subsequent enforcement action, and implemented measures to prevent similar contraventions from recurring.

Facebook is coming for your kids…

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New York – Facebook is coming for your kids. The social media giant is launching a messaging app for children to chat with their parents and with friends approved by their parents.

The free app is aimed at kids under 13, who can’t yet have their own accounts under Facebook’s rules, though they often do.

Messenger Kids comes with a slew of controls for parents. The service won’t let children add their own friends or delete messages – only parents can do that. Kids don’t get a separate Facebook or Messenger account; rather, it’s an extension of a parent’s account.

A kids-focused experience

While children do use messaging and social media apps designed for teenagers and adults, those services aren’t built for them, said Kristelle Lavallee, a children’s psychology expert who advised Facebook on designing the service.

“The risk of exposure to things they were not developmentally prepared for is huge,” she said.

Messenger Kids, meanwhile, “is a result of seeing what kids like”, which is images, emoji and the like. Face filters and playful masks can be distracting for adults, Lavallee said, but for kids who are just learning how to form relationships and stay in touch with parents digitally, they are ways to express themselves.

Lavallee, who is content strategist at the Center on Media and Child Health at Boston Children’s Hospital and Harvard University, called Messenger Kids a “useful tool” that “makes parents the gatekeepers”. But she said that while Facebook made the app “with the best of intentions”, it’s not yet known how people will actually use it.

As with other tools Facebook has released in the past, intentions and real-world use do not always match up. Facebook’s live video streaming feature, for example, has been used for plenty of innocuous and useful things, but also to stream crimes and suicides.

Hooked on Facebook

Is Messenger Kids simply a way for Facebook to rope in the young ones?

Stephen Balkam, CEO of the nonprofit Family Online Safety Institute, said “that train has left the station”.

Federal law prohibits internet companies from collecting personal information on kids under 13 without their parents’ permission and imposes restrictions on advertising to them.

This is why Facebook and many other social media companies prohibit younger kids from joining. Even so, Balkam said, millions of kids under 13 are already on Facebook, with or without their parents’ approval.

He said Facebook is trying to deal with the situation pragmatically by steering young Facebook users to a service designed for them.

Facebook said Messenger Kids won’t show ads or collect data for marketing. Facebook also said it won’t automatically move users to the regular Messenger or Facebook when they get old enough, though the company might give them the option to move contacts to Messenger down the line.

Can you rely on your home to fund your retirement

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For many South Africans, including SA’s ageing community, the bulk of their equity is tied up in one asset, their home.

But, should that home be relied on to fund retirement?

No, say Maystone Wealth’s certified financial planners. If it’s your home, it’s a non-performing asset.

“You can’t extract value out of it if you are living in it, nor is it generating an income,” explains Maystone’s Kevin Joss.

“Additional cash might be extracted when selling and downsizing. But it’s an uncertain variable and not something to be relied on. That also presumes you want to sell.

You don’t want to be put in a position where you are forced to sell to derive retirement income.”

Colleague Dino Paizes adds: “Capital upside from selling your house should be seen as a bonus, not part of your retirement plan or the income required to live on.”

While the risks associated with being forced to sell are reduced when the home is in a prime location, realising the expected equity is not always a given, especially in a challenging economic and political environment, caution Joss and Paizes.

House price growth is declining and 10.1% of homes are now selling at a deflated price.

Homes are also staying on the market longer, now 15.6 weeks compared to 11 weeks in 2015, says John Loos, household and property sector strategist at FNB.

Demand in particular for larger freehold homes – many of which are home to SA’s ageing population – is dwindling as the popularity of safe and secure smaller properties increases.

There has been a steady pattern of “life stage” downscaling from ageing households, which currently comprise 26% of total selling, by far the largest single group of home sellers in the third quarter of 2017.

Also rising is the percentage of homeowners downscaling due to financial pressure, now 14%, up from 11% in early 2016, according to FNB figures.

Where one’s home is the only asset to fund retirement, extracting the best and realistic value – whether from the proceeds of a sale or the renting out of the property – is paramount and best done with the guidance of a financial planner.

A good certified financial planner will weigh up replacement retirement home purchasing and rental options in conjunction with monthly income requirements.