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A simple plan to transform your savings today

by , 03 June 2021
A simple plan to transform your savings today
A recent survey by FNB amongst its middle-income clients (R15,000 - R42,000 per month) shows that over 80% of the customers don't have a cent in savings they can access within 7 days in case of an emergency.

The bank says only 6% of its clients would be able to see themselves through a loss of their salary for three months - and that's even considering access to credit cards and overdraft facilities.

According to FNB - those with the least savings spend the most on travel, accommodation, liquor and servicing debt they already have…
 
And we’re not even considering retirement here. Have you thought of how much you will need to save if you want to continue your current lifestyle in retirement? Well, you can have a look at this handy calculator to see what your current expenditure would equal the day you retire.
 
So – to put your finances in better shape you need to make a couple of smart decisions TODAY.
 
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How to build up some savings IMMEDIATELY
 
First things first – pay off your most expensive debt. If you owe money on a credit card, short term loan or overdraft facility focus on paying that off first. It might mean you have to skip one holiday this year. Or don’t buy that bottle of 12-year-old whiskey. You don’t have to drop all your luxuries. Rather identify one or two ways to save an extra R500 or R1,000 a month.
 
Once your high interest debt is paid off – you’ll have some cash for your emergency fund, or an investment account. You won’t just have the R500 or R1,000 extra each month, but also the amount you were paying in interest on the loans.
 
Before you know it, you could save up R10,000, R50,000 or even R100,000.
 
And then it's time to shift into a higher gear…
  
Transform your investing using the DRIP strategy
 
DRIP investing – is also known as a “Dividend Reinvestment Plan”.
 
The idea behind this is that instead of cashing out dividends paid to you by the companies you invest in – you rather buy more shares in these companies.
 
Some companies even give you the option to do this before hand – and if you elect to, they will automatically add new shares to your account instead of cash. And in that case, it's even free of brokerage!
 
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How Does DRIP Investing Work?
 
Let’s say you own 2,000 shares in a company called Bowler Metcalf.
 
In the past year the company’s paid dividends of 29.5cps and 19.4cps.
 
That would be equal to R978 or roughly enough to buy an additional 100 shares in the company.
 
So now you end up with 2,100 shares in the company. In the coming year it grows its dividend by 10% to 53.8cps.
 
That means you now receive R1,129.80 worth of dividends. So, your total dividends received grew by 15.5%.
 
If you elect to reinvest that at, say R10 a share you’d get a further 112 shares leaving you with 2,212 shares in the company. Should its next dividend grow by only 5% - you’d get a cash pay-out of R1,249.55 and again you’d be able to grow your holdings in the company for a bigger income the year thereafter…
 
Now here’s the thing – Bowler Metcalf hasn’t missed paying a dividend since 1992.
 
Its first dividend in 1992 was only 2cps. Its latest 12-month dividend is 48.90cps. That’s growth of 2,345% in the dividend!
 
 
Why just this week Hosken Passenger Logistics declared a final dividend of 26cps – bringing its full year dividend to 44cps. That’s equal to a dividend yield of 11.4%.
 
Compared to the interest you can get in the bank, an 11.4% dividend yield is astronomical. Especially considering this is a company that remained profitable and continued to pay a dividend even through last year’s hard lockdown.
 
In this month’s issue of Red Hot Penny Shares I reveal my five favourite dividend investments right now. These are companies that not only pay market beating dividends, but stand to make you significant capital gains as well. Transform your savings now – click here.
 
Here’s to unleashing real value
 
Francois Joubert
Editor, Red Hot Penny Shares


A simple plan to transform your savings today
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