Financial Independence RSA

[gracer]

Seems like it's time again for my quarterly F.I.R.E. update. For context please see original post.

As always mentioned this post is for those interested in personal finance and the F.I.R.E. movement. I hope to show that early financial freedom is a possibility for South Africans. Your income is obviously a major factor, but savings ratios are key to achieving F.I.R.E. imo.

Here's the numbers at year end:

Family of 2, all numbers shown are from our combined finances.

Age 27

Household income:
●Pretax: Around R260k/month
●Post tax: Around R165k/month

Average monthly spend: R55-60k/month with following breakdown:

●Rent with utilities: R10k
●Medical aid and insurance: R8k
●Petrol: R2k(we don't drive much at all)
●Groceries: R8k
●Cellphones: R1k
●Other payments(depends on the month): R4k-10k
●Interest on property bond: R10k
●Spending money: R10k

Average monthly savings: +-R105k
R85k - getting paid into rental property with outstanding bond just about R1m;
R20k - Retirement annuity

Nett worth at EOY: R3.5m

Comments:

We finally paid off one of our rental properties. Pushing the bond we managed it in just over 3 years. With current high rates we aim to push on the second one to get it paid up ASAP.

I my other updates I mentioned that end of year nett worth aim is R3.5m, but I think we might reach R3.7m. This is not the case anymore due to some high cost expenses. Our end of year nett worth for 2024 aim is: R5.2m. This goal might get affected by some more high cost expenses, but hopefully we can keep it above R5m.

On our current trend the projected future nett worths will look something like this:

Age:
26 - R2.6m;
27 - R3.5m;
28 - R5.2m;
29 - R7m;
30 - R9m

My big aim was to have R10m by 30, but this seems like a bit of a stretch. Obviously future income might increase with stock gains, but I'm not betting on it getting us there. Not complaining though, i think we're on the right track.

Thank you to the community and mods for keeping this sub fun for all the finance freaks. Stay safe this festive season. See you all in 2024 with some new updates.

 

[resjudicata]

@gracer It's Hard to see the people live your dream.

 

[gracer]

@resjudicata There are different levels to personal finance. Our level is definitely not for everyone, especially in their 20s. Maybe 30s/40s. It's about sharing progress jn this community. If someone makes a similar post earning R1m a month or R10k a month it will provide some insight into budgeting and spending habits and hopefully expand knowledge.

Unfortunately, these posts are rare, but I've learned a few things from insightful questions or comments on these type of posts in other forums. Just hope to achieve the same here. You might not learn anything from what I say or reply, but hopefully, someone makes a comment that gives atleast one reader a "Aha!" moment.

 

[artistforet]

@resjudicata It’s also nice to see that you can make your dream come true. Especially when you see it’s happening inside your own country.

 

[prarierose91]

@gracer Total legend those savings numbers are amazing. Any plans to move aggressively offshore. Looks like ZAR is having some temporary strength?

 

[gracer]

@prarierose91 I would definitely move more cash offshore, but I believe the rand is undervalued. Once we get back to R17/dollar or lower interest rates, it all goes offshore to my other accounts.

The yearly average of Rand to Dollar devaluation has been around 7% for the past 20 years. So if you couple that with inflation, you need an average return >11% to just retain your original Rand value that you got paid with. Show me how many industries have had 11% salary increases per year x 20 years in RSA? It's insane how people are getting poorer by the day.

 

[alfiano]

@gracer You can’t add inflation to the annual nominal devaluation, it’s already baked in. The US has lower inflation/interest rates so the ZAR has to devalue to maintain parity.

The average real devaluation has been about 1.3%pa.

So your nominal return has needed to be 1.3% above inflation (5%).

 

[gracer]

@alfiano I remember now reading something about this. This is actually correct. Thanks

 

[lee11]

@gracer My wife and I (27yos) just played a drinking game on everything we lost on against you and yeah we are drunk af now. Netting 70k income and 20k going towards saving. 400k debt for car and credit cards. 60k total savings. Thanks for the motivation.

 

[gracer]

@lee11 I think a savings rate above 15% of take home salary is you being ahead of the curve. You guys are almost double that, well done! You can have a drink on me.

 

[immanuelsdottir]

@lee11 no no hang on there is no well done here. You have R60k savings but have credit card and car debt.

Pay off those with all those savings, you're losing more in debt.

You cannot have a savings account but at the same time have credit card and car debt, the loss per month doesn't work.

 

[lee11]

@immanuelsdottir Agreed that we aren’t doing to well. It’s an emergency fund while we work on the debt. Covers 2 months expenses working towards getting that to 6 months.

 

[immanuelsdottir]

@lee11 that's fine the "emergency fund" but as in an emergency just use your credit card. You'll save so much more every month by not having to pay credit card debt of like 24% or something mad.. just think FNB money max is like 8%+ and credit card debt is like 24%- so you're losing 16% per year... rather do it the other way around. Otherwise the car and card are going to take 10 years to pay off and would have cost you double...

Rule 1 : pay off your debt first before you invest, otherwise you won't have time to invest.

 

[lee11]

@immanuelsdottir That makes sense. We’ve had a toxic relationship with our credit cards in the past which we have have reduced from about 100k to 50k now. Just antsy about falling back into those past behaviours and never paying them off completely.

 

[immanuelsdottir]

@lee11 dining out, pubs, restaurants, coffee, clubs etc. swipe swipe swipe swipe... it'll suddenly hit you like a ton of bricks. Find things to do at home rather than go out spending. Going out used to be a special occasion, now it's demanded like 4 times a week! Change that, go back to the old ways

 

[blanksora]

@gracer Out of curiosity, what do you and your spouse do if you don’t mind sharing?

 

[gracer]

@blanksora We're in healthcare. Pays well when you're young, not so well when you're older as hours = money and you need to scale down eventually from all the extra hours.

 

[faith2017]

@gracer healthcare? Do you mind sharing your opinion on NHI and how it might affect you in future ?

 

[gracer]

@faith2017 Hi. I shared my thoughts on that here

 

[faith2017]

@gracer Thank you