A Day of Contemplation

I think it’s imperative to take at least one day off a year to step back, see where you are at and plan forward for matters spiritual, personal and financial - A Day of Contemplation.

As an example, because Retirement reforms have just been enacted effective 1st March 2016, let’s look at Retirement Annuities and cigarette smoking!

These 2 matters are connected in that smoking is expensive, it reduces longevity and gives you health issues. On the other hand providing for retirement is expensive and depends partly on longevity and health issues. It’s chilling to realise that only 6% of South Africans retire comfortably due in part to using possible retirement funding income for non essentials.

So let’s look at the real cost of smoking – at R1 000 per month on your gross salary of R30 000 per month.

The R1 000 is net of tax but it’s actually R1 450 gross of tax with your marginal tax rate at 31%. If you give up smoking you could contribute R1 450 to a Retirement Annuity at a cost of R1 000 per month, net of tax.

...SALARY...	TAX BRACKET	RETIREMENT CONTRIBUTION	TAX SAVINGS	RETIREMENT RETURNS IN 10 YEARS
R30, 000	31%	R1 450	R450	R200 000
R50, 000	39%	R1 640	R640	R226 000
R65,000	41%	R1 695	R695	R235 000

In real terms, after stripping out inflation and costs, a R1 450 per month contribution to a Retirement Annuity at an after tax cost of R120 000 could result in a saving of R200 000 in ten years time or R235 000 if your marginal tax rate was at the maximum of 41% which would equate to a R1 695 monthly contribution.

And you would be healthier and live longer. A sobering thought! Talking about sobering, alcohol….…….

This is but one example of financial matters to consider – what about others such as wills, homes, insurance, cell phones etc  all inter connected to the greater picture.

By the way, after drafting this missive, I immediately gave up smoking.

Please set aside at least one day a year as A Day of Contemplation.

I hear you say you don’t have time but that won’t carry  this year as it’s a leap year – a whole extra day to make the 29th February your Day of Contemplation.

Greg Beykirch
Finance Director

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