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Are you concerned with how your money is invested? For some people, it’s not enough to simply watch their money grow, they want to know that the investments they’re buying into are doing good for the environment and society.

It’s called sustainable investing and it’s closely tied to the principles of ESG, which stands for ‘Environmental, Social and Governance’. Let’s take a closer look at what the three letters mean:

• Environment: Investors look for companies that might be involved with sustainable energy production, for example, or sustainable food production, or reducing waste. An example of a company that considers its environmental impact would be one that uses renewable energy sources that emit fewer greenhouse gasses, or one that adopts a no-deforestation policy.

• Social: This criterion is all about people. How will your investment choice improve the lives of others? An example is a food and beverage company that gets its supply by working with small farmers, thereby improving the livelihoods of those farming communities.

• Governance: Governance refers to how well a company is run. Does management only look out for themselves, or are they concerned will all their stakeholders? Do they have efficient policies to care for staff? A company with good governance discloses all its policies, has transparent accounting methods, and has clear guidelines for eradicating bribery and corruption.

Why invest sustainably?

It comes down to what you stand for. Of course, you want to make a profit with your investments, but are you happy to make a profit at the expense of society and the environment?

As the world moves towards a more environmentally-friendly state of mind, studies have shown that there's actually a strong link between doing good and making money. Companies that are solving some of the world's biggest problems are naturally most likely to grow.

How do I do it?

There are several ways. When you’re investing, or when you’re chatting to your financial advisor about your investment strategy, you can outright avoid any funds that hold ‘sin’ stocks like tobacco, casinos, alcohol and firearms.

Or you can apply the ESG principles, which gives you some more flexibility. You can still invest in a fund that holds mining stocks, for example, if the mining companies in question are rehabilitating the environment and doing good in the communities they operate in. The ESG scores for most companies can be found online, so you can check them out before making your sustainable investment decisions. Similarly, there are specific unit trust and mutual funds that focus on ESG. Chat to your financial advisor if you need some guidance.

Keep in mind that your money is not limited to what you see on your banking app – it’s part of a much bigger picture. By investing sustainably, you can make sure your money choices are aligned with your values.

You’re probably familiar with income tax, import tax and property tax, but there are plenty of other ways the government takes a little bit of your money. Understanding these less-familiar forms of tax will help you get a better grip on your finances. If you own a small business, it can help you navigate your various financial obligations. Let’s dive in!

1. Capital gains tax (CGT)

This is tax imposed on profits earned from the sale of certain assets, like stocks, bonds, property and valuable collectibles. Tax is levied on the difference between the purchase price and the selling price of the asset, and the rate varies depending on your income and how long you’ve owned the asset. Make sure you’re aware of CGT if you suddenly decide to sell the house that has been in your family for generations!

2. Value-Added tax (VAT)

This is tax applied to the purchase of goods and services. In South Africa, the standard VAT rate is 15%. Some things are exempt from VAT, like certain basic foods and residential rental, for example. It’s a ‘transparent tax’, which means it’s stated on receipts and invoices – you can see exactly how much tax you’re paying on each transaction.

3. Estate tax

Also known as estate duty’, this is levied on the value of a deceased person's estate (what they own) before the rest is distributed to their heirs. Tax is usually calculated on the net worth of the estate, including assets like property, investments and other valuable possessions less liabilities that at the time of death. There are various deductions and rebates when it comes to estate tax – it’s advisable to consult with an estate planning professional to help minimise the impact for your beneficiaries.

4. Donation tax

Also known as ‘gift tax’, this is imposed on the transfer of assets or property as a gift from one person to another - the giver pays the tax in this case. It prevents people from avoiding estate tax by giving away their assets before their death, and it applies to cash and non-cash gifts above a certain threshold. That said, there are usually exemptions and exclusions for small gifts, certain charitable donations and gifts between spouses. In South Africa, taxpayers can donate up to R100,000 with no tax implications.

5. Expat and exit tax

South Africans working abroad but still paying tax in South Africa are required to pay tax on any foreign income and any locally-sourced income. There are tax treaties between certain countries and also a foreign-income exemption, however, which allows expats to exempt a portion of their income from South African tax. (As always, there are certain criteria that have to be met.)

Exit tax is imposed on individuals who give up their South African citizenship or residency; or who move their assets outside South Africa. The technical term is to ‘emigrate financially’ and if you decided to go that route, you’ll be charged capital gains tax on your worldwide assets. (You’ll also have to start paying tax in the country you’ve emigrated to.)

6. ‘Sin’ tax

This is a slang term for excise tax imposed on goods or activities that are considered harmful to public health or society, like tobacco products, alcohol, sugary beverages and gambling. The purpose of sin tax is twofold: to discourage the consumption of unhealthy or addictive substances; and to generate revenue for public welfare programs or healthcare initiatives.

If you’re unsure about whether you’re liable for any of these taxes, set up a meeting with a tax professional who will be able to guide you through it. You might not be able to avoid tax, but you should make sure you’re only paying as much as you have to!

Offshore investing (or ‘overseas’ investing) is when you invest in assets that are outside South Africa. The investment is usually made in a currency other than Rands, in a country exposed to different geopolitical risks, and with different regulatory and tax laws.

But different is good! And it’s exactly what you need when you want to spread your eggs between different baskets; when you want to ‘diversify your assets’, in investment speak.

But first, it’s important to understand the pros and cons of investing offshore…

The good

The main benefit of investing offshore is diversification. You reduce your exposure to South African-related risks: a long list that includes political and economic instability; corruption; power constraints; labour strikes; unrest and social inequality. By investing in a currency other than Rands, you can also hedge against the volatility of our currency.

Another plus is that overseas markets give you exposure to companies and brands that can’t be accessed easily in South Africa – a wider range of industries and asset classes, all of which increase your investable universe and your opportunities for returns.

The bad

Yup, there are downsides. While being exposed to different currencies can act as a hedge against the Rand, if those currencies weaken against the Rand, the value of your overseas investment will be reduced when you convert back to Rands… This could lead to losses if there are large currency fluctuations.

A classic example is when South Africans invest offshore at a time of panic and extreme Rand weakness (say US$1:R20). A few months later, the Rand recovers to US$1:R16. This is a -20% currency movement and the value of your Dollar investment will have dropped by 20% in Rand terms.

Offshore investing can also come at a higher cost, depending on how you do it. There are sometimes additional expenses like currency conversion fees, foreign brokerage fees and custodian charges.

And don’t forget about tax. Depending on how your offshore investment is structured, it might be subject to complex tax laws and reporting requirements. It’s a good idea to get professional tax advice to avoid unintended consequences.

So, what’s the answer?

The best way forward is to seek advice from a professional financial advisor with offshore experience – they’ll be able to suggest the best and most cost-effective ways for you to diversify your investments. You might invest in a Rand-based fund with offshore exposure, or you might convert Rands to foreign currency and invest in an entirely offshore fund. Other options might include investing in an exchange traded fund or an offshore index.

To avoid getting caught investing when the exchange rate is bad, the best thing to do is invest little bits monthly so that you average out the exchange rate you buy into.

Good luck!

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According to a recent PWC Employee Financial Wellness report, 57% of employees said that finances are the top cause of stress in their lives.

Are you one of those people?

Maybe you grew up in a house where your family never talked about money, or maybe money was always a negative topic. Here are five ways to talk about money with your partner in a way that makes it a positive conversation!

1. How do you want to split expenses?

Think of your household expenses as coming from various ‘pots’ – here are three options:

• One pot: This is when you merge your respective bank accounts and share one account. It doesn’t matter who pays what because you’re seeing your income and expenses as one. (If you don’t want to change bank accounts, set up a joint 22seven profile, which will combine all your transactions in one place.)

• Two pots: Each person is responsible for certain things. The list is reviewed every year to adjust to circumstances. You pay what you need to pay towards the household and the rest is your own.

• Three pots: Each person keeps their own account, but you also open a joint account for household expenses. Each partner contributes a certain amount to the joint account each month. Some couples pay 50/50; some pay a different split depending on how your incomes differ.

2. How should we deal with debt?

Do you have a loan that you’re paying off, like a student loan, car loan, home loan or a few store cards? It’s nothing to be embarrassed about! Be honest with each other so that you can decide the best way to tackle your debt together.

3. How do you want to save, and how much?

One person might want to save 80% of their salary, others might want to save none… It’s good to talk about it. Lead the conversation by outlining your ideal life: When and how do you want to retire? How do you want to pay for emergencies? Do you want to save for your kids’ university education?

The answers to these questions will determine how much you need to save as a couple. From there, you can choose a savings product; or chat to a financial planner to help you come up with a strategy that will work for your lifestyle and income.

4. Do you need to support anyone?

Many people support parents or other family members. If you’re one of those people, make sure your partner is aware of your obligations! Talk about it: you might be able to find a creative solution together, which benefits all parties.

5. What about fun money?

This is the cash you set aside to enjoy life. Obviously, the more you set aside for fun, the less you’ll have for other things like paying off debt and saving… It’s important to find a balance. For you, fun money might be going to a restaurant once a month; for your partner, it might mean an annual holiday. Either way, use 22seven to factor fun into your budget to make sure you set enough money aside.

We’re not saying you should lay out your entire financial life plan on a first date, but if you’re married or in a long-term relationship, you have to get used to talking about money. It is possible to live within your means and be happy about it, but only if both parties are open and honest with each other.

Have you heard of the term, stealth wealth? It’s all about embracing a lifestyle of modesty and discretion while quietly filling up your coffers. The spotlight has recently highlighted this way of living thanks to popular TV series like Succession.

What’s the underlying philosophy of stealth wealth, and what can we learn from it?

Stealth wealth (say that fast three times!) is basically a decision by wealthy individuals to keep their financial accomplishments on the low-down and reject the conventional trappings of luxury. They avoid flashy displays of wealth, like fast cars and big homes, and rather blend in with the crowd.

Often, these individuals are proponents of mindful spending and investing, and they focus on the value of experiences over the accumulation of material possessions.

Why it’s not only for rich folks

We get that the ultra-rich would like to keep their money low-key for whatever reason, but what does this have to do with me, you might ask? Well, the stealth wealth mindset can help you save more, invest better and spend less.

Stealth wealth means you don’t have to worry about social pressure. You don’t need that flashy watch to ‘prove’ your success. Rather, by deciding to live modestly, you’ll find that you’ll have more resources to devote to your long-term financial goals, which means you’ll achieve them quicker.

Another benefit is less stress! If you don’t care about keeping up appearances, you’ll be more chilled and relaxed in your everyday life. Staying on trend can be so exhausting…

But what if I want to show off a bit?

Yes, okay. You’ve worked hard for your money and you’ll buy that Country Road tote bag just because. But what you really want to avoid is lifestyle creep. This is what happens when you spend more because you earn more – it might be upgrading your gym plan after a promotion at work, trading in your KIA for a BMW, or spending more on those little luxuries like clothes and shoes, just because you have the extra cash in your account.

Final word

Stealth wealth is a refreshing alternative to being flashy. By embracing a more unassuming way of life, you can find peace and focus on yourself. The philosophy encourages mindfulness, humility and achieving long-term financial freedom.

And remember:

“You have nothing to prove. Let your hard work speak as you remain silent.” – Christina Daniels

If you own a set of wheels, insurance is vital. But the terminology used in policies and contracts can be difficult to understand. Here’s what you need to know so that you can maximise your benefits and coverage.

‍Comprehensive insurance

‍The most extensive cover for your vehicle, protecting against damage caused by accidents, theft, fire, natural disasters and vandalism. It often includes third-party liability, too. (See below.) Because of the extent of the coverage, this is typically a more expensive option.

‍Third-party, fire and theft

‍Third-party provides cover for damages to other people's property, or injuries caused by your vehicle. But third-party alone doesn’t cover damages to your own vehicle resulting from an accident. Fire and theft only covers your vehicle in case of fire damage or if your car is stolen. Third-party, fire and theft is typically less expensive than comprehensive insurance and might be suitable for an older vehicle with a lower market value.

‍Excess

‍This is the amount you’re required to pay when you claim, before the insurance company covers the remaining costs. It can be split into two categories: compulsory excess, which is set by the insurer; and voluntary excess, which is an additional amount you choose to pay to reduce your premium. Understanding the excess amount is crucial as it directly affects how much you have to pay from your savings when you file a claim.

‍No-claims bonus (NCB)

‍Some insurance companies offer this discount if you don’t make any claims during a specific period. It’s basically a reward for responsible driving and a way to reduce your premium. The longer you go without making a claim, the higher your NCB and the greater the potential savings. Maintaining a no-claims record can significantly reduce your car insurance costs in the long run.

‍Market value

‍The estimated worth of your vehicle in the current market (what you would get if you sell your car today) – an essential factor in determining the coverage and pay-out in case your car is written-off or stolen. It's important to keep track of your vehicle's market value as it may change over time and affect the adequacy of your coverage.Did you know that if you own a car, 22seven can do all the hard work for you? Just add your car as an asset via our Web App to get an estimate of its current market value. Over time we’ll automatically update its value so you can keep track of those changes inside 22seven alongside all your other money stuff. To get started, visit the add manual account screen on our Web App, choose Vehicle from the account type list and follow the prompts. Don’t forget to also link your vehicle loan to 22seven if you’re still paying off your car so your net worth remains accurate.

‍Underwriting

‍The process an insurer uses to evaluate the risks of insuring your vehicle, which in turn allows them to determine the premium you have to pay. Insurance companies consider factors like the driver's age, driving record, vehicle make and model, location and intended use.

Policy exclusions

‍Specific situations or circumstances that are not covered by your policy. Common exclusions might include racing, illegal activities (duh), intentional damage or using your vehicle for commercial purposes without the appropriate commercial cover. Read the terms and conditions carefully to make sure you understand the limitations of your coverage.

‍Optional add-ons

‍Extra items you can add to boost your cover. Roadside assistance might fall into this category, offering a safety net in case of a breakdown or other emergency. Other add-ons might include hail damage, the use of a rental car while yours is being repaired, scratch and dent cover, and more. It’s worth looking through these offerings at various insurers.Remember to review your car insurance often, compare quotes from different insurers, and ask questions! Armed with knowledge, you can ensure you have the appropriate cover at the right price to protect yourself on the road.

An ETF (exchange traded fund) is an investment fund made up of several similar assets that you can purchase as a whole. ETFs are traded on an exchange just like stocks. This can best be described as purchasing a basket of eggs (the ETF), with each individual egg representing an asset such as a commodity, bond, or share.

What makes them so special?

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When you invest in shares, there are a lot of decisions that need to be made, such as which companies or industries to invest in and how to best diversify your portfolio so that you are less affected by market fluctuations. Often, these kinds of decisions are best left to the pros.

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An ETF does that work for you. You can choose to invest in one fund that will track a range of companies or assets that form part of your bundle so that your portfolio is automatically diversified.

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ETFs can also be themed, for example, if you’re conscious of the environment, you can choose an ETF which invests in a range of environmentally sustainable companies.

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The benefits:

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• Investing in an ETF diversifies your investments since you’re exposed to many companies and different asset classes, like property, bonds, or equities(shares).
• Minimum investment amounts are low. Some providers let you invest as little as R5.
• ETFs are passively managed, meaning their costs are very low.
• You can purchase ETFs through your tax-free savings account.

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Choosing an ETF

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Here are some key points to consider: 

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Risk profile

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There are four main asset classes: shares, bonds, cash, and real estate. While it’s essential to invest in a diverse number of shares, investors often aim to have a balanced investment portfolio, which usually includes all asset classes. Different classes have different risk profiles, so deciding how much to invest in which class depends on your own investment style, age, how long you intend to keep the investment open, and other factors. 

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Local vs offshore

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You can choose to invest in the South African market and/or offshore. Although you can gain exposure to various industries by investing in a single ETF, it would be wise to consider a split between South African exposure, such as the JSE Top 40 ETF, and an ETF that tracks an offshore index, like the S&P 500.

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Industry

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You can choose sector-specific ETFs that focus on technology, finance or property. Certain industries are seasonal, performing better in some months compared to others. Consider this when choosing your fund.

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Fees

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When comparing two similar types of ETFs, with similar returns, the one with the lower fee will generally maximise the return due to the smaller expense ratio. An ETF’s total expense ratio (TER) is the total cost of running a fund. It includes management fees and additional costs like legal, trading, and audit fees. The TER is a percentage, calculated by dividing the fund's total costs by its total assets. A fund’s TER is an easy way to compare investment products. 

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Fund fact sheets

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ETFs are always accompanied by a fact sheet that gives an overview of the fund. This gets updated each month and includes how aggressive the fund is, what investment period is ideal and what the TER is. If you are new to fund fact sheets, check out our Slice on learning to read a fund fact sheet and invest like a pro. 

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You can browse through the fact sheets of every fund that’s listed on the JSE.

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Tax season starts on 7 July for the tax year ending on 28 February 2023. For most of us, it’s a confusing time when we hope we did everything right and that we won’t be penalised for something we probably don’t understand! Let’s have a chat about some of the most common concerns about tax.

‍Do it online

‍Gone are the days of waking up at 4am to stand in the queue at SARS. To make tax season easy for you and your tax guy (if you have one), make sure you’re registered for eFiling if you need to submit a tax return. SARS has a landing page with answers to most questions you might have about this – go take a look.

‍Use 22seven to simplify your life

‍Use the date range filter on the Transactions/Tracking page to set the dates for the tax year. This will show you all your income and expenses within the timeframe. You can even filter it per category to see a summary of specific expense types, like commission earned, donations etc. When it comes to medical aid, you can create a custom category for your medical expenses to help you work out how much you can deduct without scrambling through doctor’s e-mails and receipts. You can even export your 22seven data to a spreadsheet and send it to your tax guy, which makes their job so much easier and more accurate. Check out our How to use 22seven to rock your tax return article for more tips and tricks.

‍Don’t pay more than you have to

There are lots of ways that you can pay less tax – we’ve covered them extensively in the past. A retirement fund, for example, comes with three important tax benefits: your contributions are tax-deductible; the returns on your investment are tax-free; and when you retire, you can withdraw a lump sum without paying tax (up to a limit and subject to certain rules). Read our Slice on this topic so you don’t miss out. A tax-free savings account (TFSA) is another great way to save. If you invest in a traditional investment product like a unit trust account, you pay tax on any growth within the investment. Not so with a TFSA: you get to keep all the earnings without giving any of it to SARS.

‍What about provisional tax?

‍If you have a side hustle or earn income outside of your 9-5 job, you might be required to pay provisional tax – when you pay SARS smaller amounts two or three times a year instead of once a year. This is sometimes also a better tax arrangement for freelancers, or if you have your own business. Provisional tax can get complicated – make sure you know whether you’re supposed to be paying it so that you don’t get penalised.

‍Know what you’re looking at

‍Ah, tax certificates. What on earth do all the codes mean? Here’s a brief description of the most common types you might need to request, or that your employer or broker might send to you.

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‍Final word

‍Don’t stress! If you’re employed by a company and you don’t have a trust fund (if only!) or any side projects, tax season is relatively simple. You’ve probably paid all the tax you need to pay already and you just need to file your return. But if your work situation is more complicated, you might need to spend some time on the SARS website or enlist the help of a professional. Good luck, and fingers crossed you get some money back!

You manage your money and invest using 22seven. But did you know that you can use it to win at taxes too? We’ve made this tax season even easier by partnering with TaxTim. On TaxTim, use the code 22SEVENMYTAX and receive a 25% discount.

TaxTim is your digital tax assistant that asks questions relevant to your personal tax needs. With an easy-to-use conversational interface, you’re basically talking your way through a tax return. And, thanks to an integration with SARS, once you’ve completed your tax return, you can instantly submit it without having to log into eFiling.

Here are a few ways to make your 22seven profile TaxTim ready:

Use categories to allocate your income and expenses

Part of the magic of using 22seven is the predefined categories that allocate a purchase from Pick ‘n Pay to ‘Groceries’, or that card swipe at Engen to ‘Fuel and Transport’. These are important for tracking your monthly budget, but could also play a part in your tax return.

Mighty medical expenses

Take medical expenses for example. It’s one of the most claimed tax deductions as many taxpayers have a medical aid benefit from their company. While these contributions attract a monthly tax credit, you’re also allowed to claim certain medical expenses that were paid by you without being reimbursed by medical aid. To make the most of the medical portion of your tax return, simply create custom categories for your medical expenses. For example:

• Medical (Recurring): Monthly medical aid contributions.
• Medical - Claimed: Medical expenses that medical aid paid, or reimbursed you for, in full.
• Medical - Unclaimed: Medical expenses that you paid for out-of-pocket, or only partially settled by medical aid (you’ll need to use the split transaction feature for this particular instance).

Only the amount over and above 7.5% of your annual taxable income will be considered as claimable for medical expenses, so if it’s only one or two doctors’ appointments it’s probably not worth your while to claim.

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Hands up, commission earners!

If you earn more than 50% of your annual income in the form of commission you’re allowed to claim all expenses directly related to earning your income. This would, no doubt, include all those tank fills, a fair amount on business lunches, and a portion of what you pay in keeping yourself connected to the interwebs and cell phone towers. If you’ve used custom categories cleverly, you can simply export your transactions to an Excel worksheet or quickly tally up the total amounts to claim by using the advanced search. Then when TaxTim asks you about expenses, you simply give him the amount and you’re on to the next section.

Expenses to take note of:

• Interest on car payments.
• Fuel and car maintenance costs (remember to keep a detailed logbook for your mileage too).
• Cell phone contracts / airtime.
• Entertainment expenses (SARS have become sticky with these, so you’ll have to have proof it was a legitimate business expenses that resulted in income and not just a lazy liquid lunch with pals).

Moonlighting / Freelancing / Building an Empire

If you’re part of the growing number of South Africans working two jobs (one full-time for a company and the other building your own aspiring empire on the side) then you can get even smarter by using custom categories to separate out your personal transactions, from those related to your sideline gig.

For example, buying your little Johnny’s school stationery at CNA should be categorised as ‘Stationery – Personal’, whereas paper and printer ink for your freelance gig should be allocated a ‘Stationery – Business’ category. Income earned, or invoices paid from your part-time endeavours should also be split from your “normal” job so you can quickly determine your profit (hooray) or loss (don’t worry, you’ll get there) based on the difference between income and expenses.

What’s your tax season survival tips?