HOW MUCH SHOULD I PUT IN EQUITIES?

I know that allocating a higher percentage to growth assets such as equities is a great long-term investment strategy, but how do you know how much exposure you should have?

Name withheld

A monthly budget addressing income and expenses provides a realistic view of your position and enables you to avoid financially overextending yourself. This is a good place to start. You should consider using the windfall to address any short-term debt you might have, focusing on paying off debt with the highest interest rate first, and setting up a an emergency fund of three to six months of your salary.

If you’re on track with those, you might consider investing the full amount as a lump sum into your RA, because contributions up to 27.5% of the value of your remuneration or taxable income (whichever is higher) can be deducted from your income, with a cap of R350 000 on the deduction. Retirement contributions provide for the future and reduce your annual tax payable, and you can provide your employer with proof of your contributions, to adjust the monthly tax deducted from your salary. Paying less tax each month ensures more money in your pocket over the short term, which will enable you to continue contributing to your RA and repay your vehicle loan more comfortably.

When buying a new vehicle, you should budget for an increase in your car insurance.

You should also pay attention to special terms and conditions, such as balloon or residual payments that might become due at the end of the finance term. It is important to be realistic about what you can afford.

Speak to a financial adviser to ensure that your circumstances are addressed, to make the most of your income and any extra money you may receive.