Net worth update July 2014 (+2.67%) 15.43% YTD

 

July was a good month – total net worth grew to R3.8m ($360k). Still on track for the R4m target by year end.

Growth this month came from some cash back on tax return filing, savings towards shares and RAs – this pushed our savings rate to just under 65% this month. There was little growth in the market value of existing shares in July and the exchange rates were mostly flat.

Have managed to increase savings for the future due to finally switching to Discovery Insure and its excellent 50% cash back on fuel expenditure from BP (capped based on their points system, go read about it on their site if interested). So that’ll probably drop our expenses by a further R600 ($55) per month with the aim of increasing this over time.

Also, made some changes on life policies to reduce the monthly expenses here slightly and hopefully switching to annual cash back rather than every 5 years. Based on our Discovery Vitality status we could get back to 50% of our premiums which always helps.

Reducing some costs (life insurance)

So been looking at making some changes to life insurance and car/home insurance in order to reduce some unnecessary costs.

A lot of great ideas for reducing this cost are explained in one of my favourite books, Living rich by spending smart

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that details one of the best ways to save cash is to increase excesses or to cancel unneccessary cover. Excesses can be increased since you have savings and are self-insuring. Insurance should only be obtained for catastrophic events.

Another site that explains this well is one of my favourite blogs, Mr Money Mustache: 

In my case that would be death or disability of a significant earner, theft of all household contents, fire, or third-party liability on motor vehicles.I have also kept my comprehensive insurance for the vehicles, since they’re both still 2 years old and have value in the R200k range – so not quite ready to completely remove my own theft and collision insurance and self-insure. I could move up the excess to like R20-R50k and still be comfortably insured, while reducing premiums – or use Discovery insure’s excess funder. But that is an idea for another post.

For now, I’m reducing life insurance premiums by removing unneccessary cover (life cover and income cover for my spouse as we have more than enough savings and we are not dependent on her income). The extra cash will just go towards our own investments.

Every Rand saved has two benefits:

1. One rand of extra savings, which compounds rapidly over time,

2. One less rand of costs that needs to be replaced with investments. This equates to R12 per annum less costs, and at a 5% withdrawal/income rate a total of R240 less in savings required. The R500 savings on the life insurance per month would be the same as having an additional R120k in savings.

 

My life insurance is through Discovery Life, and together with high credit card spending through their credit card products, being on Gold for Vitality (just reached in April), and their health intergrator products (through their medical aid) I have reduced the premiums quite significantly and reduced the increases. Their payback is awesome, so will be getting between 20%-50% back on my premiums after 5 years as well which further reduces how much I’m paying. I haven’t found anything else that comes close – the only option to further potentially reduce my premiums would be to switch to a life insurer that offers term insurance. DIscovery only does insurance that pays out at death, so you are guaranteed to get a capital amount, while term would expire at say age 65 at retirement. I think that I’ll probably cancel my life insurance long before that due to having enough savings to cover any life insurance payouts my dependents would actually get. Probably another 5 years or so.

Next up is reducing premiums on car and home insurance – looking at switching to Discovery Insure. With the paybacks on life cover (integrator product) as well as paybacks on fuel (required to be spent at BP) I might be able to cut the costs on this quite significantly. Will assess and see.