personal finances as 12.1.3 12.1.2 12.1.1
TRANSCRIPT
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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PersonalPersonal
FinancesFinances
A S 12.1.3 12.1.2 12.1.1
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Would you like toWould you like to
Control your Finances?Control your Finances?
Issues that affect personal finances suchas taxation, retirement planning, changinginterest rates on credit, investment andthe ability to not be in debt.
Make sure you
understand
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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TaxTax
Income tax: It is paid by all individuals that earn
more than a certain amount. This amount isdetermined in the National Budget each year.
Other taxes: This includes small business &company tax, rates & taxes on home, fuel tax,
custom & excise duties, property transfer fees etc.
VAT: It is an indirect tax and is levied at14% on
the value of all goods and services. Some goodsare exempt from VAT e.g. brown bread.
To pay for services like education, health,roads etc., the Government raises money
through various taxes e.g.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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tax = R20250 + 25/100 x (180000-125500)= R33 875
Tax payable = 33875 7740 = R26 135
Deduction = 12 x R2 180 = R26 160
Due to him = R26 160 R26 135 = R25
An extract from the 2007/2008 tax rates forindividuals in S.A. reads:
If the taxable income exceeds R112 550 but not R180 000,the tax is R20 250 plus 25 % of the amount over R112 500.
Shariffs taxable income is R125 000 p.a. The
primary tax rebate applicable is R7 740. Theemployer deducts R2 180 p.m. for PAYE. Howmuch tax is due to him or still owed by him?
A Tax Rebate is a fixed amountdeducted from the tax payable.
1.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
5/22
Shariff drives a tourist bus each Saturday and getsR315 for this. SARS instructs the Tourist Company
to take off25% for tax as it is extra income.
Income = 75/100 x 315
= R240
New cost = 315/75 x 100
= R420
What is the net incomethat Shariff receives each
Saturday?
The Company gives Shariff an increase tocompensate for the tax that has to be paid.
What is the total cost to the company per week?
2.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
6/22
Shariff buys a flat for R300 000 (the market value).
What will the rates and taxes be, per month, if themunicipality charges rates at 1,295c in the Randp.a. on the market value?
What will the insurance be, per month, if the
homeowners insurance p.a. is calculated at R0,55per R100 on the market value?
Rates = 0,01295 x 300000
= R3 085Rates p.m. = R323,75
Insurance p.m. = 0,55 x 300000/100 12
= R137,50
3.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
7/22
Shariffs Municipality bills him for water (excludingVAT) as follows:
First 6 kl Free6 10 kl R3,99 per kl10 25 kl R5,25 per kl25+ kl R8,15 per kl
How much VAT does he pay if he uses29 kl of water?
Costs = 6x0 + 4x3,99 + 15x5,25 + 4x8,15= R127,31VAT = 14/100 x 127,31
R17,82
4.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
8/22
Shariff has to buy a stove. He sees two advertsfor similar stoves.
El Co storePrice (excluding VAT):
R1 899,00
PE Co storePrice (including VAT):
R2 159,00
Where must Shariff buy the stove? Explain.
EL Cost with VAT =114
/100 x R1899= R2 164,86
Buy at PE-Co cheaper
5.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Saving OptionsSaving Options
Instead of a single lump sum investment you caninvest in an annuity.An annuity is a number ofequal payments made atregular intervals (monthly, quarterly etc.) subject to
a rate of interest for a period of time.
Another option is to invest in the stock exchangeand buy a certain no. ofshares e.g. unit trusts.These shares can be sold at any time but you needto be careful as sometimes the shares decrease in
value and you may lose money.
Annuity Formula: A = P[(1+i )n 1]i
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
10/22
Thinking of his retirement, Shariff started investingat the age of 30 in an RA by making regular
monthly payments of R250. Calculate the value ofthe annuity after 35 years if the average interestrate is 6% p.a. compounded monthly.
A = P[(1+i )n 1]i= 250[(1 + 6/1200)
35x12 -1] 6/1200 R 356 177,57
Determine the interest earned on this investment.
Amount paid = R250x12x35 = R105 000Interest = R356 177,57 R105 000
= R251 177,57
1.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
11/22
Shariffs friend, Abdul, started investing R250 per
month at a rate of 6% p.a. compounded monthly,
when he was 20 years old and stopped contributingwhen he turned 30. What was the value after 11years?
A = P[(1+i )n 1]i
= 250[(1 +6
/1200)12x11
-1] 6
/1200 R46 580,66
How much did he contribute?
A = R250 x 12 x 11 = R33 000How much interest was earned?
Interest = R46580,66 R33000
= R13 580,66
2.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Abdul decides to leave the money in the accountfor 35 years at 6% p.a. compounded monthly.
What is the accumulated value of his savings?
A = P(1 + i )n
= R46580,66(1 + 6/1200)12x35
R378 400,39
Which was the better investment,Shariffs or Abduls? Discuss the factors
that influenced your decision.
How much interest was earned on the totalinvestment?
Task
Interest = R378400,39 R33000
= R345 400,39
This is a lump sum investment for 35 years
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
13/22
Abdul bought2 000 unit trust shares at R1,38 pershare. They are now worth R3,17 per share. He
had the shares for 6 months.
How much did Abdulpay for the shares?
What was the %increase per share?
If he chooses to sell the shares now, how muchdoes he get for his shares and what is his profit?
Cost = 2000 x R1,38= R2 760
Increase = 1,79/1,38 x 100
129,71%
Sell = 2000 x R3,17 = R6 340Profit = R6340 R2760 = R3 580
3.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Interest can be compounded daily, monthly,quarterly etc. To make a fair comparison whenthe compounding periods are different we mustconvert the interest rates to their equivalent
effective annual rate using, E = [(1 + i )n
1].
The Best RateThe Best Rate
Emily bought a laptop using her credit card. Theinterest rate for the loan is 22% p.a. compounded
daily on the full purchase price. What is the effectiverate?
E = (1+ 22/36500)365 -1
0,24599
Rate % 24,6%
The effective rate of an investment will always be
higher than the given interest rate p.a., wheninterest is compounded more than once per year.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Plan A 5,50% p.a. compounded annuallyPlan B 5,45% p.a. compounded semi-annuallyPlan C 5,35% p.a. compounded monthly.
PLAN B:E = (1+ 5,45/200)2 - 1
0,055242rate % = 5,52%
PLAN C:E = (1+ 5,35/1200)12 - 1
0,054831Rate % = 5,48%
PLAN A: rate % = 5,5%
Which is the best interest rate for a guaranteed fixeddeposit savings offered by U-Bank?
Plan B is the best
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Balancing the numbersBalancing the numbers
Bank statements or account summaries arewritten records of what happens to your savings,loan, credit card spending etc. It is important tokeep track of the balances in your different
accounts.
You took a loan from the bank for R4000. Interest iscalculated on the outstanding balance at the end of
each month. The bank statement shows R38,33charged for interest after the 1stmonth.
What is the annual interestthat the Bank charges?
38,33/4000 x 100 x 12
11,5%
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
17/22
Is the new balance of R523,47 correct?Show your working.The amount must be added onto how muchyou owe the card company.
Date Balance
b/f
Pay-ments
(-)
Cashadvances
(+)
Pur-chases
(+)
Inter-est(+)
Newbalance
Jun 24 243,74 50,00
Jul 3 175,60
Jul 7 150,00
Jul 24 4,13 523,47
Shariff has a Chargmee credit card.He received this statement.
193,74
369,34
519,34
What do the (+) signs in the columns mean?yes
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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Date Balanceb/f
Pay-ments
Cashadvances
Pur-chases
Inter-rest
Newbalance
Jun 24 243,74 50,00 193,74Jul 3 175,60 369,34
Jul 7 150,00 519,34
Jul 24 4,13 525,47
Interest is 18% p.a. compounded daily on the unpaidbalance from the previous statement & cash advances.Interest is not charged on purchases made during thecurrent month.
Show how the interest of R4,13 was determined.
Interest = 193,74x18/36500 x13 + 343,74x18/36500 x17
R4,13
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
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How wouldyou use yourcredit card,and not payany interest?
The minimum payment is 2,5% of the closingbalance of R525,47. Shariff only paid the minimum
due and spent R120 the next month. What is theclosing balance on August 24?
Pay = 2,5/100 x 525,47
R13,14Int = 18/36500 x 31 x 512,33
R7,84
Closing balance= 525,47 -13,14 +7,84 +120= R640,17
Pay off the totaldebt amounteach month.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
20/22
Dont Fall into the minimum trap !
If you just pay the minimum due on a creditcard, you will barely cover the interest you
owe, let alone the debt. It will take youyears to pay off your balance, and you willend up spending thousands of rands morethan the original amount you were charged.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
21/22
Marc and Liesl have rented a 2 bedroom townhousefor 5 years. They pay rent plus utilities. As they they
are expecting their first child, they are consideringbuying a small house.
Town
house costs:Rent = R3450/month
Refuse = R1659/yearElectricity=R2700/year
Parking = R90/month
House costs:Bond Loan=R780/weekWater= R165/month
Electricity=R690/month
Rates & taxes = R5940
Should they buy the house? Justify your answer.
Discuss the pros & cons of owning a house.Task
2.
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8/4/2019 Personal Finances AS 12.1.3 12.1.2 12.1.1
22/22
House costs per month:= 780x4 + 165 +690 + 5940/12= R 4 470,00
Townhouse costs per month:
= 3450 +1659
/12 +2700
/12 +90= R3 903,25
Cheaper to carry on renting !