February is the month that those of us who are provisional taxpayers have to pay our second payment of the 2024 tax year. To avoid a penalty we are supposed to be within 80% of what your total income will end up being. And then of course you hopefully kept the cash aside to pay the state coffers.

It is also the month to add a lump sum to your retirement annuity if you have not taken full advantage of your 27% allowance against your taxable income during the year. It’s a worthwhile thing to do because you will reduce your taxable income and be saving more. If you are a monthly paye earner, you will get a present in the form of a refund later in the year when you do your tax return. But again, you will need the cash hanging around somewhere to do it.

This is also the month for those of you who make use of a travel log for SARS – we must remember to write down the odometer reading on the 29th. (I see we’re having a leap year this year)

So it’s a bookkeeping month for some of us.

All the best to anyone swimming the Midmar Mile this weekend. There is a road around the dam that can be used…. or you could take a canoe…. or sail a boat. Says he who has swum about eight of them.

A couple of weeks ago I wrote about the modest houses that Warren Buffett and his business partner Charlie Munger, had lived in for most of their lives. (Just in case there is a reader who is not sure, these men have been highly successful investors for decades and are two of the wealthiest men in the world)

Today I have some snippets of advice that I found from their comments, regarding good saving and spending habits for us simple men in the street.

• Avoid debt for depreciating assets (That’s basically everything except a house)
• Be careful of buying too many things you don’t need
• Avoid costly habits, like dining out and designer clothes
• Do not save what is left after spending; spend what is left after saving
• Live below your means
• Maintain a frugal mindset
• “Someone is sitting in the shade today, because someone planted a tree long ago.” (Ignoring the power of compounding. i.e. Time for your investments)
• Invest in assets that generate income
• Track your expenses: know where your money goes

I think they are saying: Save first, then live a simple lifestyle on what you have left.

Food for thought.

I write to you this morning from down south in KwaZulu-Natal, from one of those hundred-and-something year old farm houses scattered across our country by early settlers. Rambling gardens and remnants of days of high society life, when the elite of the area would arrive in their wagons for a spot of tennis or bowls followed by high tea. The big old tree where they would rotate their wagons around and disembark, still stands in front of the old stone front wall. The tennis court and bowling green long gone and overtaken by orchards and plants. Something simple about those days….

Google is a very powerful tool. Most of you will know that it follows what you regularly search for and learns to bring you leads on those subjects. For me it’s motorbikes, history, 70s and 80s music, and yes, financial stuff. I have recently been reading a couple of articles around Warren Buffett and his long time business partner and friend, Charlie Munger. (Charlie passed away last year)

The topic that I’m going to specifically write about today, is that both of these men stayed in their same houses almost all their lives. Buffett bought his first house in 1958 and still lives in it. Munger said that he refused to follow his rich friends who built mega-mansions. He said that in practically every case, a fancy house does not make the person more happy. I am not going to pass a subjective opinion on that – maybe not for me to do. However, I will remind you that the house we live in is not an asset. Yes, we put it on our assets and liabilities, but that’s just so that the bank or SARS can see what they could take away from you.

Why is it not an asset? Because it costs us money while we live in it, because it does not put money into our bank account, and because you cannot access the value of it while you live in it. (Borrowing against it does not mean you’re accessing the value of it.) Yes, whoever inherits your estate could now access the value of it, but it’s not an asset while we live in it.

So, like these two incredibly wealthy men, be careful how much money you spend on your house of residence. It’s wealth you can no longer use.

Yes it is Monday. Friday just got lost somewhere.

Most of you know that I regularly get online presentations to listen to. There are a lot of investment and compliance and regulatory ones that get thrown at us. But every so often, one of the insurance companies that I use puts together a session for us to join and learn from. Last week there was one from Hollard and the topic was disability, and in particular, disability income protection.

But what they did, was spend most of the one hour talking with two actual clients who were living on permanent disability income protection. Being a live session, there was first the settling down stuff of saying: “Can you all hear us? Can you see us? Please have your mics turned off. Thanks for joining.” And so on….

The first client was a lady who, from a physical point of view, was reasonably functional and mobile, but had been driven to the Hollard offices for the interview. For the second interview, the live feed had to be switched to the client’s house, where a remote team was ready for the conversation to happen again. This interview was with a man who was physically immobile and in stayed in bed permanently. He couldn’t move any part of his body, but he was mentally 100% and could listen to questions and respond and speak. The cause of the disability for both clients was a motor vehicle accident. They both finished talking by saying a number of times, ‘please make sure you have disability protection’.

I currently have two clients living on disability income protection. I see and hear and feel what it is to have the benefit, and likewise can see what the result would be if they did not.

For some of you, I find this benefit in your employee benefits – one of the reasons I nag you for your pension fund statement. For others, you have it personally. For some, we might still need to get it sorted out. Most of us won’t ever need it. Thankfully. That’s just how the stats work. More people need to pay than use it. Like the Lotto. And medical aid. But if you’re the one that does need it, and you don’t have it, life will be very difficult and a big and permanent financial drain on people around you.

It was quite something … quite moving…. to listen to the two clients talk. They spoke about how they lived, what they missed doing, what they couldn’t do… with their children. Kick a ball to his son, the man said.

Today is that dark day when many people go shopping for things they don’t need with money they don’t have. It’s a have-to-do thing for many I suppose. The feeling of ‘I’ll miss out’ is very overpowering for some. If it is something you really would use or need anyway, then that’s good.

The slogan that always bother me, is: ‘Buy this for only R1,999 and save R500.’ We don’t save by spending. It doesn’t make sense. You didn’t save it – you simply didn’t spend it.

But how it is possible – to save the savings if you really needed to buy that thing – is to actually ensure you put that R500 somewhere, because you would have spent it on this thing when the price was higher. So move another R500 into your home loan account, or put it into your motorcar HP, or let’s add it to one of your investments, or continue to build the cash you keep in a savings account for emergencies. These things would be saving the savings.

The biggest winners today are probably the banks, because so many folk will shop with money they don’t have, meaning they spend on their credit cards, which is borrowing money from the bank who then charge us interest.

Me… I don’t do crowds or queues very well. So I’ll just hide indoors today and avoid the shops.

I had a surprising number of you readers reply to my Thoughts last week regarding that Ponzi scheme I wrote about, saying you know someone who was in it and lost all their money, or who were lucky enough to have withdrawn their funds in time. I just want to make a few additional comments regarding all this.

The ‘brokerage’ was…is…. a Trust, with Trustees to make decisions and taking ‘due care’ – already a lower level of regulatory control than if it was a Company. It seems that Investors into this structure paid their money to the Trust’s Bank account and not directly to the investment manager. My point here is never pay your money to the broker’s / brokerage’s bank account. If you are asked to pay your funds to the Brokerage’s Bank account, that’s a red flag.

When you ask myself or Adrienne or Jacki to help you do an additional investment, we always either give you the banking details of Allan Gray or Marriott or our offshore investment managers etc, so that you can do the EFT directly to them, or we create those instructions whereby they withdraw the funds from your bank account. Money paid first to the brokerage’s account has time to sit before they do the pay-away to the investment manager, and then, maybe it doesn’t even get paid-away, or maybe it’s not being paid away to an investment manager at all, but becoming part of an ‘investment structure’, that has different variables to it. All difficult to track. And that’s what happened here….. someone had the ability to do things with the money coming in.

This week’s Daily Maverick had an interest article on this scheme. Plus there are other big investment managers making comments as to if and how they had any dealings with one of the underlying investment managers that did seem to receive funds. I follow with interest.

I’m going to be controversial here. If I worked for a corporate I might have been called in and told that I cannot express my opinion in this way. But thank goodness I’m unemployed, so I can have my say. And sorry, the letter is a bit long this week.

Yet again, over the last 2 weeks another ‘Ponzi’ scheme has been in the news because it collapsed. Billions of Rands of investor money gone. Many investors have lost everything, maybe some will get back a few cents in the Rand when investigations and winds up are all done. The principal owner/operator has turned himself in at a police station, thinking he will be safer in jail than on the street.

Why was this money lost? Because it actually never owned anything, any assets. I have gone on at times about how your money in a unit trust fund actually owns assets, either actual shares of companies, or bonds or listed property, etc. In such a scheme as the above, it is very hard to know what’s being owned, if anything at all. People begin to get great ‘returns’, but these are shown either by statements that simply get generated but mean nothing, or through income payments on a monthly or whatever basis. All appears very good so they tell their mates. The operating company/guy even does presentations to people, showing these ‘returns’. It might run very successfully for years, for many years, while money keeps coming in. It eventually collapses, either because whatever electronic game and equation that was being played in the background to manipulate the ‘potential’ value of the investments backfires, (because nothing is actually being owned) and/or because a few investors begin wanting to draw all or a lot of their money out and the system suddenly begins to have a cash flow problem. Your income is initially paid out from the funds received by the scheme, but later, the income might be getting paid out by the next inflow. Not good….

Why do people go here? Many folk want to make their own choices for investing, not using the right process to identify something that might not work, not using the right person or not knowing how to really dig down, determine, ask the right questions, see what’s going on. Many investors in this example were even advised to go in by registered Financial Advisors and apparently the offering was even registered with our industry authorities. (But in my opinion, the people working in these industry regulatory spaces – they are just humans, not necessarily knowing themselves what to ask)

I have had an ‘investment scheme’ presented to me many years ago. It was a property syndication that eventually collapsed. You didn’t get your money back. The guy who brought this to me….. the numbers simply didn’t make sense to my simple brain. Expected returns were claimed to be xyz. I said to him your return figures are irrelevant because you cannot control an expected return. Commissions were too much: this is how they succeed in getting some advisors to market their product – they offer to pay us too much. He couldn’t explain the underlying ownership well enough and clients wouldn’t be able to draw their funds out for an initial time period. That’s always a raised flag to me: all assets based on the stock market are saleable within a few days. Anyway… I invited the guy to leave my office and that was that. I had colleagues that invested their clients in this, and these colleagues were so distraught when their clients lost their money. I said to them but this and that and the other… They said but they thought this and that. Too late.