When it comes to money I am the worst. I would rather start a cold war in the Democratic Republic of Congo with no artillery than balance a check book – dramatic, I know, but have you tried balancing a check book? And, most likely, the profound reason my Dad was so adamant I do right by my money.
Now let me fill you in on my financial context:
- I am 26 years old,
- I still live at home,
- I have a company car that I don’t technically pay (I am a sales rep – perk taxes are something I’ll leave Dineo to explain), I do also own a car of my own.
- I have two degrees that I paid for
- I have a five figure investment portfolio,
- A thriving credit card with a 20 000.00 limit (which is paid)
- And I work in an industry that is known for paying in reward hugs than in cold hard rands.
- If there is one thing I am good at when it comes to money, it’s spending it.
Lesson one: “Start saving from the day you are born”
This is my Dad’s go to mantra when it comes to money.
Me: “When was a good time to start saving?”
Dad: “It’s already too late; you should start saving from the day you are born. But now is a good a time than any”
I reasoned to put away (the 10% rule) R170.00 away each month when I first started working, my salary as a bookseller was mediocre to say the least. Think about it R170.00 x 12 = R2040 x 2yrs = R4080.00 (excluding interest depending on what account you have). This is a fairly significant about of money. I paid for my 21st birthday party, took myself to Greece last year for 10 days, and fund my two-week trip to Thailand (including spending money). You need consistency and patience when it comes to saving.
Lesson two: pay yourself (savings) first, then your debt
I was lucky enough to be given an intern position at a very good publishing house two years into bookselling. I was now partially financially free. Oh, the freedom to buy myself lunch without bankrupting myself, but with great financial power comes great responsibility. I was now in the habit of saving, growing frustrated and nervous. I was working hard and earning interest at approx 3% (now it’s 4.8% varying from account and BA rate). I was paying a car, varsity, and myself. Granted there were times when paying myself came last because a car needed servicing or I went on holiday with friends.
Eventually, paying myself became like allowing a stop order to run off my account. It takes three months to develop a habit – and since you’re reading this, you have already started late when it comes to saving, well according to my Dad.
Lesson three: never cash in your pension when changing jobs
This happens to everyone. You climb the ladder in your career; you move jobs, careers, and even cities. Human Resources will hand you a statement listing your pension contribution and for a flickering second you’ll turn into Rumpelstiltskin, and start spending that pension – I mean you are starting a new job, it will grow again? Wrong. Never cash in your pension unless you’re going on pension.
This was me a year ago – I could have travelled Europe, ridden an elephant in India, bought a house, perhaps even had cosmetic surgery. I didn’t draw out my pension so it leaves me with the list to do when I am 70. Keeping your pension is like paying yourself for the future. Trust me with this, it’s an easy money gamble, transfer it, don’t pay tax on it, and let it simmer like a good spicy curry – you’ll need it.
Lesson four: Compound Interest, Compound Interest, Compound Interest is like Location, Location, Location
This is an even more complicated lesson to learn, it’s not a difficult concept, but still. Compound Interest is the principle interest amount that is added to a savings or loan amount – but we are talking saving. So, for example, I place R100.00 in a savings account offering me a 10% interest rate.
Month one, I earn R10.00 on my saved R100.00.
Month two, I earn R11.00 on my R110.00
So the pattern goes. You begin to earn interest on your interest.
Lesson five: buy your own house, not someone else’s
While I understand paying off a bond that ultimately leaves you with a property investment. I see this as a huge advantage paying off your own bond. However, as a 26-year-old, I want nothing more than to walk around the kitchen naked, not pick up my washing, and experience a sense of ownership.
BUT, if we look at the property market now, measure up the average earning rate of people between the ages of 24-30 years it’s extremely difficult to ‘own’ a house, unless you are a CA or Dr. So renting is the next alternative, well, that is if you aren’t living at home, already.
Kelly sells books to make a living, and likes to pretend that the R500 note in the Monopoly set is real, so real, she even fans herself with it some times. She cannot balance a check book, or a trial balance, and sometimes has to Google what Earning Per Share means.