Financial SOP's (Standard Operating Procedures)

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Dear readers,

Hope the Monday blues aren’t getting you down too much. If you’re a yachtie reading this- just remember that you could be land-based buying your own groceries and paying rent. So suck it up and let’s dive into some basic personal finance housekeeping:

What are Financial SOP’s?

Financial SOPs are STEPS that help you prioritise the way you spend your cash and are essential for maintaining control in financial operations. This helps individuals manage their finances in a systematic and efficient manner.

(Please note this is my personal recommendation of priorities as an unmarried, 28 year old male with no kids. Yours might vary. PERSONAL finance is PERSONAL after all.)

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Steps

1. Set Clear Goals

2. Build an Emergency Fund

3. Pay Off Bad Debt

4. Tax Free Investment Vehicles

5. Hyper-accumulation.

6. Prepay low interest debt.

7. Automate

Deeper Dive into Each Step

1.) Set Clear Goals

• Personal finance is personal.

• One person might be paying off student loans, another is saving to buy their first house.

• If you have a clear goal in mind, you can reverse engineer your way to get there.

2.) Build an Emergency Fund

• I recommend 3-6 month’s expenses depending on your situation.

• Note that this is expenses, not income.

• Ideally have this money accrue interest in a high-yield savings account (more on this later).

• This is your rainy day fund for when the proverbial shit inevitably hits the fan.

3.) Pay Off Bad Debt

• Bad debt is any consumer debt with high interest e.g credit cards, car loans, student loans etc

• Bad debt goes hand in hand with depreciating assets (no, your Hilux bakkie is not an appreciating asset)

• Good debt is normally tied up in an appreciating asset for example the mortgage on your house. These tend to have lower interest rates.

4.) Tax Free Investment Vehicles

• Take advantage of investments with good tax incentives.

• In South Africa, we have an option to do this. Your contributions are capped at R36 000 per year, R500 000 overall.

• Pro tip: set a debit order on your credit card of R3000p/m and this will help you build a healthy credit score.

• Reach out to me via email if you want recommendations on a similar product.

5.) Hyper-accumulation

• This is where we should really cash in as yachties. (50%+ of salary)

• With very little expenses, we can have very high savings rates.

• This means we can make large contributions each month to our investments.

• The more you put in now, the more there is to compound while you are asleep.

6.) Prepay Low Interest Debt

• Once steps 1-5 has been taken care of, look at tackling other forms of debt.

• Example: every time we get charter tips, I deposit all of it into my mortgage. (after I have 9 cocktails and a cheeseboard on drop off day of course)

7.) Automate

• Set up your finances in a way where you don’t have to think about it.

• Example: set a debit order for the 1st of each month so 50% of your paycheck goes into your investment accounts.

• Automation forms habits and habits are fucking lekker.

• This will also help you stay disciplined to stay the course, despite what the markets are doing.

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That’s it for today, hope you find this information valuable and feel free to reach out to me at theyachtinginvestor@gmail.com if you have any questions or concerns.

Catch ya later,

- Charl Minnaar