Income tax amendment: Smart saving and investment strategies
COLUMN
The most important change introduced by the gazetting of the Income Tax Amendment Act (No. 8442) on 16 September was that the tax threshold for individual taxpayers increased from N$50 000 to N$100 000, with effect from 1 March 2024.With this, many Namibians will now have some more money at their disposal to manage wisely. But how?
First and foremost is to focus on the building of an emergency fund. Having money saved for emergencies such as a medical emergency or home repairs saves one from further financial stress. If possible, try to build up at least three to six months' worth of living expenses in a separate account. Even a small amount, such as N$200 monthly, will contribute a lot in the long run to this.
Next come the short-term goals, such as buying a car or going on vacation. It's well worth setting up a special savings account for these. Automating savings makes it easier, and you'll be working bit by bit toward your objectives without dipping your hand into other savings.
Once you have already set up your emergency fund and short-term savings, you are ready to venture into investments. For the low-risk takers, fixed deposits promise a guarantee with an assured return, though that might not be too high. Unit trusts expose you to a diversified portfolio of investments managed by professionals.
Higher risk
Investing in stocks involves taking a higher risk in anticipation of a possible higher return. Investment in stocks can be very rewarding for the potential long-term holder of shares on the Namibia Stock Exchange. Real estate investment is another solid avenue for those with more capital. It provides rental income and an appreciation of the value of the property.
It is equally important to not forget to save for retirement. Savings through either a pension fund or retirement annuity are not only an investment in long-term security but may also carry possible tax benefits with them. If you start saving earlier, you'll be able to gain more with compound interest.
Finally, throughout these financial options, develop a habit of learning more about personal finance. Read books, join online courses or even get expert advice; the more you know, the better equipped you'll be to make good decisions about your money.
With the threshold for taxation having been increased, many Namibians are allowed to revisit their financial strategies. Now, make full use of the extra money in your pocket: create an emergency fund, plan for short-term goals, and understand intelligent options to invest in.
*Mignon du Preez is the group marketing, public affairs and sustainability executive at Old Mutual Namibia.