r/PersonalFinanceZA • u/Mr_last_minute_ • 4d ago
Budgeting Trying to recover financially after bad decisions in my 20s need advice
Hi, first time posting here.
A bit of background: in my early 20s I had around R700k invested, but bad financial decisions and impulsive spending wiped it out completely.
I’m now 31, earning R38k per month, and trying to rebuild properly. I currently invest R3k/month split between:
Tax-free investment account
Index fund
Rainy day fund in an Allan Gray balanced fund
I bought a house 2 years ago at what I thought was a good price, but I massively underestimated the actual cost of owning a large property.
My monthly costs are roughly:
Bond: R11k (I pay R14k)
Rates/taxes + electricity: ~R6k
Insurance: ~R1.2k
So housing alone costs me about R21.2k/month before general living expenses, fuel, insurance, DIY repairs, etc. Most of the rest of my salary has been disappearing into maintaining the house.
I’m considering relocating back to my hometown, but decent medium-sized houses there are around R1.7m, which doesn’t seem affordable for me right now.
Current financial position:
Investments: ~R10k
Interest-free debt: R280k
I’m trying to figure out the smartest move financially:
Rent out my current house and rent/buy in the new town
Sell the house and buy another one
Sell the house and rent a flat for a few years while rebuilding financially
Would appreciate any advice from people who’ve been in a similar situation.
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u/cupcakenessa 4d ago
I would say first try renting out part of your home like a room to see how that works financially if you want to keep the home. I am in the same boat I had no idea that the price of owning a home could be so expensive since everyone painted owning a home as if It was the best financial move - then if you don’t maintain or even upgrade the home it’s sometimes difficult to sell for the same or higher than what you bought It . Then also buying a new home requires again the down payment. lol so I started renting out the home which is helping so if advice you to try the same then if it’s still expensive then you can look to sell for a better chance at financial freedom
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u/Consistent-Annual268 4d ago
Please answer this:
Tax-free investment account
Invested in what?
Index fund
Taxable account? Invested in what? Why are you investing in a taxable account when you haven't maximized your TFSA yet?
Rainy day fund in an Allan Gray balanced fund
Why? If it's a rainy day emergency account it should be in a safe investment like a call account, or better yet parked in your bond (if it's an access bond). The balanced fund has an equity component that can lose value.
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u/Mr_last_minute_ 4d ago
The rainy day is in the event that I lose my job to still be able to cover a few months expenses
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u/Consistent-Annual268 4d ago
That should be in a fixed income fund like a call account or a fixed deposit. Not in a market-exposed investment which could be down at the very same moment you need the funds.
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u/Clean_Tangerine_4075 4d ago
What they are asking is why are you using a long term investment vehicle for an emergency fund instead of a savings account. The investment vehicle is for long term prospects where the aim is for you not to withdraw funds but let them grow, plus the is an equity component which add equity fluctuation risks. For an emergency fund you need quick liquidity for emergencies where you get funds instantly (car broken down or medical emergency where you have finished you medical aid funds so you use the emergency fund).
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u/Straight-Contest91 4d ago
You clearly can't afford to own the house you own dude, more than half your salary is gone after just your housing?? just sell and rent until you can actually afford to own a place like that.
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u/Mr_last_minute_ 4d ago
Yeah to be fair its more about the freedom it provided In terms of hobbies and dogs however now I know the true costs
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u/Consistent-Annual268 4d ago
There's no freedom without financial freedom. You've tied concrete blocks to your feet and think it's a life preserver. You're even further away from affording hobbies and dogs than you were before the house.
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u/FinWiseApp 4d ago
Your Rates/taxes + electricity bill sounds very high to me?
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u/Mr_last_minute_ 4d ago
Yeah since they installed these prepaid meters everything has gone up it use to be 2.5k in total
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u/901zFinest 4d ago
What’s your short and long term goal. That can best help one answer your questions. I do believe you should maximize your TFSA first.
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u/Mr_last_minute_ 4d ago
I'll be honest I don't generally have a goal right now other than getting my financial foundation set correctly. From the comments it seems my investments are too scattered
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u/901zFinest 4d ago
This case id say maximize savings and investment funds. Renting out comes with its own problems in this country. If I was in your shoes I’d likely try to sell the house. Go rent and focus on rebuilding my funds before purchasing another.
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u/Mr_last_minute_ 4d ago
So do you guys recommend stopping the split I'm doing and only maxing the TFSA first?
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u/Separate_Hold9436 2d ago
Either rent the house out or get a partner to help you split the bills, selling will put you too far behind. I think you will lose about 400k selling due to selling costs, moving costs and rebuying a new home.
Houses are also getting more and more expensive ( unless you live in a neighborhood where it doesn't like certain JHB areas )
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u/CanYouFeelItComing 4d ago
If your house is in a good spot, you can generally rent it out for basically your salary every month.
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u/901zFinest 4d ago
Renting in this country comes with its own problems and emergency fund. They want to build the financial fund first before renting the unit.
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u/Specific_Musician240 4d ago
Rent out a room or rooms in your house.
Or focus on your career, do some job hopping.
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u/Different_Monitor508 3d ago
I am a bit confused. Are you in your early twenties or 31 years old. Here is what you posted in r/Pretoria quite recently...
Gym buddy Centurion side
Hi, I'm 31/M wondering if someone would be keen to gym together it's been a while since I gone to an actual gym had a bit of a back injury last time at virgin active and been struggling since with hectic back spasms probably due to improper from or something even though of working with a PT?
Just want to get to ideal weight and start enjoying offroading and MT biking.
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u/PrettyRichHun 4d ago
Rent out the house. Get martied to someone who wants to build a life with you. Join forces financially and more than double your investments ROI across the board. My cery unpopular opinion is that our generation is getting married much later or not at all. And its impacting how quickly we can compound our growth.
I say this as a currently unmarried person... but God knows I love the maths.
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u/901zFinest 4d ago
Unmarried but giving marital advice? Marriage isn’t a financial investment and comes with other financial burdens.
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u/PrettyRichHun 4d ago
Only if you marry someone who doesnt work or makes significantly less than you. But all things being equal you absolutely get a better financial ROI on your money when you are married than when you are single. And it compounds over the years. I work closely with credit providers and trust me, being married gets you different treatment to being single regardless of your marriage contract. Here is a generic study for you as well. Marriage does compound your income and wealth at higher rates than when you are single. Just marry well I think. marriage research paper
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u/Rude_Bet5894 20h ago
Thats what i thought the second i saw his living costs! If the OP has a stable partner, who is financially responsible and ready to get married, its a net positive to add a second income. I earn more than double is pay but if i was not married, i would not be living my current quality of life because my house would take 50% of my income.
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u/bkb-aka-puna 4d ago
Velocity Banking my friend It changed my life for the better It can also ruin you if you are not disciplined
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u/jeromeza 4d ago
Electricity bill is too high. Likely you could go full solar and even save on that bill...
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