r/PersonalFinanceZA • u/Snoo39147 • 5d ago
Budgeting Advice - 24 year old
Hi guys
I’m a 24 year old earning a net of R53k a month with saving around 40-50% of my salary.
Been working for 1.5 years now and built up my rainy day savings to R300k which is needed due to the job insecurity in my field which I may be facing soonish.
My car is fully paid off.
I have started to max out my TFSA as of this financial year.
I don’t own property to my name currently and aiming to buy one in the next 2 years hence building a good deposit before starting to invest in a RA.
Just wanted advice on how better to maximise my finances?
Any advice or tips?
Appreciated thanks
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u/Consistent-Annual268 5d ago
If you're that concerned about a job loss I wouldn't commit to a 20y property purchase. Perhaps worth considering simply investing your money in equities.
Ps you don't mention what your TFSA is invested in, I assume (hope) that it's in some sort of World Index Fund.
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u/Snoo39147 5d ago
I’m also thinking the same. Very hesitant. The idea of it becoming a rental property and paying itself off is appealing but huge risk 🤣
My TFSA is 70% into NASDAQ and 30% into top 40. It’s been a good philosophy for now.
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u/Docviator 5d ago
As someone a few years ahead of you in the medical field (and not in any way a financial expert):
- Sounds like you are disciplined and forward-thinking
- It’s a good idea to have a rainy day fund, with your upcoming career uncertainties. How much you should have in it is debatable, but it’s best to think of it in terms of months, and I hope it’s not all sitting in a bank account. You don’t need immediate access to all of it, you just need it in something relatively low risk that you can access.
- Get started on your RA sooner rather than later. Maximise on the growth and the tax benefits.
- Buying property is very appealing in theory, and appeals to our egos, but I’d advise caution. A property is a massive commitment, and comes with many unexpected expenses. They don’t just simply “pay themselves off”. If it’s something you’re interested in, I’d advise doing proper research, getting more familiar with how the finances of a rental property work, and waiting until you have proper, consistent employment. I say all of this as someone who does own property.
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u/Snoo39147 4d ago
Hey ! It’s great hearing from somebody in similar shoes!
And yes I’m just now learning about the different accounts! It’s been in a lovely money maximiser so far just out of hesitancy but after a few months of stability i think im ready to lock it away for atleast a year now
And yeah i do think atleast waiting for a MO post may be the best bet before making big investments like property. I’m still stressed about not finding a tenant/them not paying rent so I don’t think I’m ready as yet if I can’t really afford a few months of no rental income !
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u/Docviator 4d ago
Absolutely. Again, I’m not a financial adviser or expert, but you could put a few months’ worth in a relatively stable unit trust with modest growth potential, and keep a few months’ worth in the money maximiser (which was my emergency account when I was still with FNB too).
And yes. Even if you do have a tenant, the rental income is unlikely to cover the costs of bond repayments, rates, levies, and management fees, let alone unforeseen repairs and months without a tenant. It’s a huge decision. In addition, people often approach rental properties with a misunderstand of how to actually make money from them, and instead try to pay them off rapidly just to feel good.
Good luck with your career and your financial journey. Keep being sensible.
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u/StronggLily4 5d ago
Ye like what if a sudden economic downturn causes you to lose the job, combined with whoever pays the rental being unable to pay rent
They could squat on the property for a year and you'll lose it to the bank
Don't walk a tightrope like risk is important but beware of overleverage
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u/Consistent-Annual268 5d ago
NASDAQ is not a real index with a real philosophy, it's basically a random bunch of stocks ("the top 100 non-financial institutions that happen to list on one specific stock exchange instead of any others"). Generally speaking, you have been lucky that tech sector has outperformed in the last decade, but there's no guarantee they will remain the dominant sector in the next 3-4 decades. Consider moving to a World Index Fund which diversifies you across more companies, sectors, geographies and currencies and will be more stable over a longterm timeline until retirement.
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u/Boring_Ad_1005 4d ago
This “diversify into everything” is not a good strategy, especially when young. The Nasdaq has returned about 16% a year over the last 20 years. The Word index is like half of that around 8%. Tech is the future, like it or not. I am 100% nasdaq in my TFSA and its work great. I don’t see tech slowing down any time soon, do you?
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u/Consistent-Annual268 4d ago
The question is not whether tech is slowing down, the question (as always) is whether the market has correctly priced in the growth already. You're not buying tech in a vacuum, you're buying it at a market price determined by the sum total intelligence of all the hedge funds and investment firms in the world whose only reason for existence is to sit there all day analyzing stocks and discovering price. And knowing whether or not tech (or any one sector or company) is correctly priced and will continue to be correctly priced until the day you retire is not a bet people should take with all their retirement savings.
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u/ramsamyk 5d ago
Do rental property of you have time to be hands on. If you dont, do not touch it. Rather use a property EFT or unit trust.
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u/ramsamyk 5d ago
Hi.
I recommend the allan gray balanced plus fund.
Fees abit higher but returns consistently around 9.5% excluding recent rally last year.
Drawdown usually 6 weeks so if you access to funds it not to bad.
I have my emergency fund in this unit trust Investment.
You doing great. Dont forget to live a little.
The savings will only really grow after 10 years. Be consistent.
Buy a relatively cheap car eg. I had a Hyundai i30
Cars effectively only make you money after 7 years or so when u factor in opportunity cost.
When you 35 plus than you can spoil yourself with that dream car but by than the novelty would be gone.
Look at PPS if you can join. Monthly fees about 10 to 20% higher however it's a long game. My profit share is 80% of my yearly contributions. In 5 years they will be paying me for my insurance. I should have 3 million profit share when I retire.
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u/Then-Algae859 5d ago
Oh God.... im 32 and way way behind this 😂. For 24 you're doing great
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u/Snoo39147 4d ago
Thanks mahn!
Wouldn’t be in this job without my family’s support and i just gotta make sure I uplift them and myself now
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u/Powerful-Surprise539 1d ago
Bro I'm a Year younger, Earning 10k-15k, Might needa follow in your foot steps soon
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u/Fluid_Signal3483 5d ago
Well done on having such good savings habits! I think it’s worth investigating if you really want/need to buy a property. You may be better off saving that money in equities and renting. Property is in many instances not a good financial investment.
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u/Then-Algae859 5d ago
Since when? Property is the only real financial asset 😂 thats why the wealthiest of people invest in property. Renting is just throwing money away
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u/Physical-Valuable982 21h ago
I am of this opinion as well. I hope they answer you so that I ca understand better.
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u/Passion_gap 5d ago
Income protection is very cheap if you set the payout delay period to 3 months and have an emergency fund to cover that.
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u/Snoo39147 4d ago
Really need to look into that and dread disease now that I’m a little more settled in with budgeting !
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u/klairehiro 5d ago edited 5d ago
Have you had a look at the wiki in this sub? that's a good starting point: https://www.reddit.com/r/PersonalFinanceZA/wiki/index/
If you're worried about job security it looks like your emergency fund (rainy day savings) should cover about 12 months expenses for you which should be kept in something like a notice deposit account. Note that banks CODI insurance only covers R100k per bank per depositor so it could be a good idea to split the savings between different banks.
Buying a home doesn't seem like a good idea for you if you are worried about job security and it is usually not the best return these days (if planning to buy for the rental income).
It would probably be better to invest your funds into world ETFs like Vanguard Total World or 10x Total World (there are others as well). I personally use EasyEquities as the fees are low but there are other options as well.
Retirement savings should usually be about 15% of your income. I use Sygnia again for the low fees.
The wiki has a lot more detailed information.
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u/Snoo39147 4d ago
Definitely going to look more into RAs and start in the next month or two!
Thank you!
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u/Substantial-Gap7141 5d ago
Software engineer?
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u/Snoo39147 5d ago
Doctor 😬 hence the unemployment that may come
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u/Edrahimovic1001001 5d ago
I'm assuming your still in your training years? I would suggest renting until you have a solid working space/place. Use the cash you have as backup/savings for going into something specialized. Would also consider starting to put around 10-15% of your savings into an RA, since you already have a healthy amount saved up. Rest can go towards TFSA and a Sinking fund for car/home deposit/specialization courses down the line imo. Good luck out there, hope the job market opens up soon
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u/Individual-Blood-842 5d ago
As a fellow dr who went through the struggles you are talking about.. you really don't need 300k in a savings account. If push comes to shove, you can always locum. I locumed for quite a bit and assisted in surgeries on the side while I was figuring things out. I know it gets harder every year, but there always seem to be some locum opportunities available if you look for them.
With regards to investing, I bought one flat so far and have been renting it out. I got a 30yr access bond and had a decent deposit. So I actually managed to have only a R300 deficit each month if I subtract all the costs and the bond from the rent. And now that its paid off, I can use the access bond to buy a house. It does come with risk though, I lost about 15k when my estate agent had a psychotic episode and his company closed down, but that's not huge in the greater scheme of things.
I still invest mostly in stock, but the rental property has worked out very well for me so far. But my main advise is to not keep 300k in a savings account. I did also keep a substantial amount of cash while I was saving for wedding, honeymoon and possible house purchase, but I put it in a fixed deposit account to at least get a bit more interest.
Hope that helps.
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u/Snoo39147 4d ago
That’s truly the plan! It’s also lovely to hear from people who pulled the trigger on property in my shoes and it works out
Missed out on a great deceased estate apartment being sold at 60% of market value because of fear 🤦🏽♂️tenants were paying around R4k more than the bond repayment would have been which covered the levies by far
I guess it just will need more planning and research because R15k may be a pinch when unemployed ?
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u/Individual-Blood-842 4d ago
It does sound like that was a good deal.
15k can hurt, sure, but overall my experience has been pretty positive. I always feel so detached from stock and I don't really know how much to put into stock because of all the crazy things happening globally. Just having a concrete thing like a flat feels rewarding in a different sense, and I find that reward motivates me to save even more, while the stock market fluctuations just seem to drain me.
Each to their own, but I prefer to diversify and not really ever go all in on one thing. But the worst thing by far is to get stuck in that "analysis paralysis" and just never do anything. Good luck out there!
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u/Particular_Water_117 5d ago
If your comfortable answering, how come there's potential job insecurity for doctors? I was under the impression that they're solid.
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u/Docviator 5d ago
I’m not OP, but it’s multifactorial:
- We’re training plenty of doctors (having expanded class sizes and opened additional questionable medical schools), and probably need them, but the highest demand is in the state sector, which cannot afford to employ them all
- There is a fair bit of work in the private sector, but employment opportunities for junior doctors are becoming scarcer as the sector becomes saturated. There are only so many private EDs and GP practices able to hire someone fresh from their community service year, and alternate work is harder to come by.
- Training posts to specialise are getting harder to come by, partly because we’re producing more doctors, and partly because we simply don’t have the capacity to allow everyone to specialise in their preferred fields.
- There are work opportunities in the state sector, but in places or disciplines that some people aren’t interested in. I’m not saying this is the case for OP, but one does encounter many junior doctors who complain about the lack of work while simultaneously refusing to take work outside their comfort zones.
- While I would hesitate to exaggerate their impact, especially in the current climate, some jobs are also taken by doctors who trained elsewhere. This also includes South Africans who decided to train abroad (primarily in Mauritius and China).
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u/Icewolf496 4d ago
Which schools would you regard as questionable? Not denying just genuinely asking
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u/Docviator 4d ago
My opinions on this are not evidence-based, and I am reluctant to name any specific medical schools. Additionally, I have known some amazing doctors who came from substandard medical schools and some horrid doctors who qualified at more historically reputable medical schools. I qualified at one of the more reputable universities, and I have former classmates who are brilliant and former classmates who are probably unsafe.
Broadly, I think that medical education benefits from:
- Resources: Being located in a well resourced province allows access to the necessities for daily clinical exposure. Students are losing learning opportunities if they are wasting time looking for PPE and dropping off blood samples, and they are sometimes learning bad practises as a result
- Expertise: This tends to be clustered around urban environments. This also tends to be retained in historical centres of excellence, and it takes a while to build generations of good clinicians. If your training circuit has one junior hepatobiliary surgeon, they’re less likely to be available to teach undergraduate students.
- Experience: Even having the medical expertise isn’t the same as having the academic expertise. Building a good curriculum is complex, iterative process. There’s no template, there are many role players, and even more strongly held opinions, but it takes ages to develop insight and build a strong curriculum.
- Order: A disordered environment isn’t conducive to learning. Medical schools that are associated with poorly run universities with weak administrative capacity do their students a disservice. Additionally, while I’m sure many student protest actions are for worthy causes, unrest on campus impacts learning, infrastructure and safety.
There’s a lot more to it, but this is what my tired brain can muster at this hour.
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u/Icewolf496 4d ago
I still think by comserve year most students are by and large on the same level.
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u/Docviator 4d ago
I respect that opinion. Internship and community service do seem to have some levelling effect. My still-non-evidence-based opinion is that there is far too much variation between internship/comm serv experiences, and that in general, and that, with a very wide distribution (perhaps even bimodal) in competence, those processes leave far too many outliers.
I’ve seen many interns passed through rotations purely because it’s easier to do so than to hold them back and deal with the patient risk again, and I’ve seen the results of many of these being let loose in their community service year, where there is usually far less supervision and less of a safety net.
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u/CartographerWeary690 5d ago
I think you’re doing very well. Do you have debt?
First point - get a good medical aid if you don’t have one. Make sure your car is insured properly. Save some money towards maintenance monthly on your car, this helps a lot to cure the “I need a new car itch” when your car starts needing some TLC.
You have the benefit of time on your side with regards to retirement- but I would still consider starting, albeit small with retirement beyond the TFSA. Every R1000 you put in now is really significant by the time you retire.
I am in a similar situation, but something I am really conscious of is not to “upsize” house with the deposit growing. Have a % goal for your deposit and stick to it. Don’t tell the realtors anything, because they’ll start showing you bigger and bigger places. Stick to something small you can pay off quickly that you can live in or rent out.
Just keep in mind the maintenance cost, levy, property tax, insurance etc. The cost of a house far exceeds the bond even if you rent it out. So rather go smaller, pay off sooner and have the cash to maintain it properly.
Now - how you save that money matters. The longer you “lock it away” the higher your potential interest becomes. I have an investment account which isn’t linked to my banking app that has a debit order going off monthly. Out of sight and out of mind. There are many of these options out there where you can invest conservatively, or moderately, or aggressively. I would caution against aggressive in the current market though. Stick to something boring but reliable. But don’t leave that cash sitting in a plain-Jane bank account earning 5%.
For your emergency fund, keep that for short-term, liquid availability. Do not use your TFSA for emergencies. Might sound obvious- but so many people I’ve coached do that and they don’t realise they are making a mistake.
I strongly recommend looking into courses from MoneyMarx and Money with Carla to help you understand investment in the SA context, so that should you ever need to work with financial advisors you understand the basics and can run the cost:benefit calculation. If you don’t get a flat-fee advisor it can get very expensive very quickly which makes sense in some cases, but not in most cases for people in their early 20s still building out their portfolio.
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u/Snoo39147 4d ago
Hey mahn!
Yeah so no debt at all right now. Car is paid off. On a solid medical aid. Bought my current dream “sports” car with a TON of bargaining on fb marketplace and bought it for R150k under its value
but yes thanks for the great advice ! I am looking for a cheap flat as a starter investment for medical students as I was in their situation not long ago hence I know pricing/needs and what not.
Using a money maximiser for now with FNB - but looking to move over soon to something higher yield
And yessir TFSA is not to be touched 👍🏽it’s the long game
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u/CartographerWeary690 4d ago
Awesome stuff!
Something student friendly sounds good if you manage it properly. I know a lot of people are pretty anti property. I just think the current social media idea is that it’s “hands off income”. It’s not. It’s active management. I think where a lot of people get tripped up is when they maximise what they can finance and not focus on what they can actually afford. I recommend listening to Dave Ramseys real estate podcast. It’s American but a lot of good advice and hearing other people’s experiences on the topic.
I’ll DM some of the product brochures for some of the investment account options I’ve researched.
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u/Longjumping_Desk_338 5d ago
You’re a medical intern? If yes, that emergency fund will be very important post comm serve but will rapidly drain if you’re paying off a property.
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u/Snoo39147 4d ago
That’s my thoughts ! Looking to pull the trigger confidently once a secure job is secured post comm serve So I guess 1.5 years of saving up left !
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u/Longjumping_Desk_338 4d ago
I was an intern 2020-2021. Wanted to buy property but I was too scared to pull the trigger back then given the possibility of not having a job soon. Ended up choosing to stay off the market, but the Cape Town property market had since taken off and I kick myself every time I think about it.
However, I did not have a full and proper salary until October the year post comm serve, so those 9 months of bond payments would have sucked. And not having to pay those bond payments meant I could choose not to jump into a GP or Emergency medicine job as a necessity, and waited until I got a post in the department I wanted.
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u/Snoo39147 4d ago
9 months of unemployment back in 2021? I thought it was only just starting to get bad now 😭glad you’re in a department you’re interested in now!
And yeah that’s my biggest concern! Property is just getting more expensive and I feel like jm missing out
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u/AndainCK 5d ago
Don't use your savings as a deposit on a house. You'll very likely get a 100% bond for the full amount. Then dump your saved cash in there to reduce the lifetime interest income, whilst still having access to the money for a rainy day.
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u/Snoo39147 4d ago
Didn’t think of that before! Makes a lot more sense and gives me a lot more security knowing the money will still be somewhat “avail” Thanks mahn
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u/HecticJuggler 5d ago
On paper this is sound but in reality, circumstances & perspectives change so much over the lifetime of a bond that increases the risk of accessing the reserve. Swings in the economy, family and lifestyle changes sometimes put that reserve at risk.
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u/Chuckydnorris 5d ago
But you can get a better interest rate or bigger bond with a deposit, so there's a balance to be found.
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u/Edrahimovic1001001 5d ago
If the markerts crash the bank ain't letting you touch that shit lmao
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u/MegaSwega 5d ago
Access bonds won't limit your withdrawal of the additional funds you've paid into the bond in the past.
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u/Ecstastea 5d ago
From your finances you're doing well, but I'm pretty sure I can tell you're single since you are clearly able to make your own financial choices. So stay single until you've saved enough in tax efficient account, emergency savings, and are making decent monthly deposits to long term investments.
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u/Snoo39147 4d ago
Haha single for now 🤣
my fiancé is also a professional finishing off her training years so I’m lucky enough to be in this situation where we have our own financials going !
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u/StronggLily4 5d ago
You know you can possibly make more renting, while that money grows in investments, than if you buy a property on bond
It's a misconception that owning property is always worth it, it's very expensive
I'm 28 years old, and my 2c is just beware that money can suddenly dissappear. I was also earning about 50-60k a month sometimes way more and one day poof its gone
I found myself going from +R180k in the bank to -R500k debt rn in my bank
Don't overleverage yourself like I did at such a young age
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u/Snoo39147 4d ago
That’s the biggest worry I have ! It’s great to hear it from people with experience so I know that I’m not being “slow” and avoiding progress with properly !
Thanks mahn !
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u/Fireseeker30 5d ago
Could you provide a breakdown of how your 40 - 50% savings (assuming net) is split?
From the information you've provided so far, assume it's something like
- R15k rainy day fund
- R3.8k TFSA
So where is the other R2 - R7k of monthly savings going? Without knowing that, it is difficult to provide an informed opinion.
But working with a gross of R70k, if you already started putting 15% (R10k) towards long-term (retirement) savings, from your first intern salary, continue maintaining that. If you haven't started (not sure if you took GEPF or everything paid out) or were putting in less than 15%, consider upping it to 17.5 - 20% to account for these last couple years. This can either be TFSA, RA, or any other investment - as long as you plan to only use the proceeds in 40+ years (ie at retirement).
Would tend to agree with the other comments about property, especially if you don't know where you'll be in a year or 2 (in the current climate, you go where you get a post). If the plan for the property was buy-to-let investment, I don't have any opinion as you'll hear people who do well, and just as many who had one defaulting tenant who wiped out their gains. Really a personal call you'll have to make.
The rest you already seem to be have a solid foundation. Consider income protection (I have it, never claimed), medical aid. Avoid costly financial mistakes (generally stick to broad ETFs, try minimise lifestyle creep, no need for life insurance if you don't have dependants) and you'll be more than fine. Also enjoy your youth! Your twenties fly past very quickly - prioritise things and people that make you happy.
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u/Snoo39147 4d ago
Woah guys! Thank you all for the AMAZING feedback and guidance!
Glad I made this post and got some really great insights! Awesome community!
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u/Complete-Abrocoma883 3d ago
It's worth it to invest in a property you plan to live in. Otherwise you'd still have rent as expense. Monthly repayments may initially be slightly more than rent initially due but as rent will only increase over time, the repayments will decrease as you pay off more of the loan. Just my opinion.
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u/LostDoubt 1d ago
I was earning roughly in the same bracket when my financial advisor told me to the following:
I took out 4 x 5year short-term investments. At the end of 5yrs, I had the option of cashing one or more out or letting them roll over for another 5yrs with compound interest.
Instead of a 13th cheque I had an option of getting a little extra per month. I invested that into an Allen gray high risk investment for the that year and it always paid out more than a 13th cheque.
Life insurance on a parent (depending on age/co-morbidities/risk) can be the highest return on investment. Get in when they have a clean bill of health and your premiums are low. I’m sorry if I seem cold but we all die…
Property is good but like others have advised, do your homework. My medical manager had a property portfolio and his advice to me was: “Save 50% of the property’s value as the downpayment, take a bond for no longer than 10years and aim to pay it off in 5” —it seems unrealistic and in some ways it is, but his point was do not get stuck in paying interest. Oh and buy off plan so you don’t pay a transfer duty and go to a few auctions to get a feel for it.
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u/Jeruanamo-89 5d ago
You’re doing really well so far. R300k gives you 12 months of expenses which is a great buffer, but you could probably invest that 40-50% (max out TFSA first and then do a combination of RA and a discretionary investment). Personally, I do around 15% for the RA and the balance in discretionary. If you keep up this savings rate you’ll be able to retire early. But of course, life happens. It sounds like you know this already, but check the fees of whoever you choose to invest with and when markets plummet (as they are bound to do), invest more, not less.
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u/Snoo39147 4d ago
Thanks man that’s great advice !
I only realised recently when doing my research about broker fees and what not And I didn’t realise a tiny % can be worth tens of thousands of rands in the long term !
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u/Affectionate-Fix-519 5d ago
Save your money and start thinking about entrepreneurial opportunities
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u/Snoo39147 4d ago
Big risk right now but hopefully a coffee shop in the future 🤣
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u/Affectionate-Fix-519 4d ago
Think bigger than that I wanna see a multiple coffee shops air bnbs. Good luck!
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u/xx11xx01 4d ago
Wait let me guess. You earn that amount at 24 working in ... ? ! FINANCE
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u/Icewolf496 4d ago
Intern doctor
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u/Snoo39147 4d ago
Yep intern doctor !
Crazy thing is I’m earning one of the lower salaries of an intern doctor There’s people in “rural” hospitals netting 60-62k!
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u/Icewolf496 4d ago
Thats really good. Im a 4th year student but its sad to see how the interns immediately buy brand new 3 series and polo gti's. Especially with post comserve being uncertain.
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u/Snoo39147 4d ago
I worked like 8 jobs through medschool and bought a cheap car - sold it as an intern and topped up R100k more only which is around R2k a month - but I paid it off instantly
if you’re smart FB marketplace is your best friend (pls don’t get robbed)🤣
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