I’m 20, what should I be focusing my income on?

[blair89]

Hi all!

I popped a question on this sub about 2ish years ago after I inherited about R100k at 18, asking for advice on how to utilise that money. Much to my surprise, R100k doesn’t go very far in this economy, especially when you’re young and dumb lol. However, I maintained then what I still maintain now, I don’t want to end up in the same kind of poverty my parents found themselves in and are still paying the consequences for.

I now work two part time jobs, study full time at a private college (out of necessity not choice, trust me, these fees are chipping away at my sanity) and I’m in the process of paying off the loans I took out to cover my fees for the last two years. I don’t receive any financial support from my mom/family. I’ve still got another 2 years of studying ahead of me (yay law!). I often feel overwhelmed when it comes to finances because I feel like I’m making enough to barely cover all my expenses, and if there is a little left at the end of the month, I spend it mindlessly. I feel like I should be thinking about the future, like saving for a house or retirement etc. but I simply don’t know where to begin. Should I just focus on paying off my debt? Should I take on another job to increase my income and pay my debt off and also put money aside for a house/retirement? There’s a lot of advice on social media but most of it, I find, is catered towards foreign countries/economies. If you were in my position, what would your game plan be? Thanks!!

 

[alfiano]

@blair89 My 2c for a game plan:

1) Look after your mental health and studies. If that means getting the extra job so you find financial security or have some disposable income, awesome. If that means not taking the extra job because it’ll distract from making the most of college and your self development, then don’t.
2) if you have extra cash after point 1, yes, always get out of unsecured debt ASAP.
3) this could swap with point 2, but once you’re finished with college, are there more courses/Coursera/LinkedInLearning etc or other ways to increase your earnings potential? Invest in yourself.
4) next up comes an emergency fund (try get at least 3 months expenses)
5) aim to max your TFSA in globally diversified equities (this is for retirement)
6) if you get into a 31%+ tax band, consider opening an RA with a low-cost provider. Even if you don’t get to 31%, look to start contributing before you turn 30. Take whatever employer match you get.
7) expand your emergency fund to 6 months expenses
8) invest outside the TFSA for 5+ year horizons in globally diversified equities.
9) don’t buy a house until you’re ready to have children/settle down, unless you really need ownership. Renting is not throwing money away, contrary to popular belief.

Any questions? All the best and well done on being so determined to look after your financial health!

 

[toreto]

@alfiano Would you mind to explain your last point? I still see renting as throwing money away

 

[alfiano]

@toreto What SLR_ZA said, plus what you would have earned by investing your deposit in equities, plus what you give up in earnings or higher expenses by being unable to move if offered a better job. People also forget that maintenance each year is low and then every 10ish years you’ll have to drop tens if not hundreds of thousands of rands on fixing/replacing part of the house.

Here are the must watch videos:

• Rent vs Buy 1
• Rent vs Buy 2

 

[vancouverguy]

@toreto Ots only throwing money away if - for the same price you are renting for - you can pay the mortgage and rates and taxes and insurance and maintenence and transfer costs on an equivalent place.

 

[blair89]

@alfiano Thank you so much for your detailed advice!! It’s so helpful and also comforting knowing that I’m not “behind” in a sense haha thanks so much!! I’m already looking at ways I can get further qualifications that won’t compromise my work life once I’ve graduated, so this will definitely be a focus once I’ve finished studying!

 

[vancouverguy]

@blair89 Don't save for a future house while you have current debt you're paying interest on.

Pay yourself first - move some money into a separate account and at the end of the month pay that towards your debt before you can buy anything or spend it

 

[blair89]

@vancouverguy This is actually a really good tip! I’ve been thinking about opening another account to stash extra money left around and leaving it solely for paying my debt back but I wasn’t sure if the banking fees would be worth it. I’ll certainly look into it now! Thanks!!

 

[everyoneneedsjesus]

@blair89 As a student and working, don't stress about saving yet. Focus on studies and having enough money for that and surviving. Saving can happen later, you have plenty of time

 

[blessed15]

@everyoneneedsjesus Even R100 invested per month when your 21 will outpower R5000 per month when your 35. Coz compound interest. Sure you can catch up savings later but why be hard on yourself. Plus, getting to know how and where and setting up accounts now while you have the mental interest and capacity will make the barrier to entry lower later.

 

[djj1973]

@blair89 What necessitates a private institution? Isn’t it maybe possible to transfer with your credits from the private place? Or study directly through Unisa?

 

[blair89]

@djj1973 Unfortunately I didn’t do so well in my matric year, and just just passed on the skin of my teeth (it was just as COVID was “wrapping up” and my dad had just passed away). No public university accepted me with my marks at the time. When I found out I was accepted at Varsity College for law, I was so desperate just to be able to study somewhere, I accepted the offer immediately. I worked my butt off since and managed to bag distinctions for 50% of my modules to date, but every time I reapply to a public uni, I’m rejected because of the matric marks. It really is an effed up system

 

[djj1973]

@blair89 You might want to reach out to some people directly at admissions offices. Given your circumstances your performance is admirable, and I think you deserve a place in a cheaper university! Most first year students fail a course or two anyways.

Edit: to add, I am not an expert on this, but I feel like there should be some mechanism by which to relax matric requirements.

 

[maxballard]

@djj1973 If he applied for a higher certificate at Tuks, UJ or unisa and did that for a year he'd been allowed to go from that to studying law in those same universities. Once you get that, the matric requirements don't matter.

 

[blair89]

@maxballard *she haha, and I didn’t know that unfortunately until I’d already started studying. I’m already halfway through my degree, so it wouldn’t make sense to switch now. However, I wish this information was made available to prospective students before they apply to university

 

[maxballard]

@blair89 Yup. All high schools teachers keep telling kids is that if your matric results aren't good, that's your life. It's unfortunate

 

[blessed15]

@blair89 Even R100 invested per month when your 21 will outpower R5000 per month when your 35. Coz compound interest. Sure you can catch up savings later but why be hard on yourself. Plus, getting to know how and where and setting up accounts now while you have the mental interest and capacity will make the barrier to entry lower later.

 

[blair89]

@blessed15 thank you for this! I think sometimes when it comes to investing, many “beginners” feel bombarded and overwhelmed by the thought of it because there’s this idea that you need to be investing hundreds of thousands of rands in order to be successful at it. Whereas that actually doesn’t seem to be the case.

 

[job28]

@blessed15 How can invest even R100 per month ? I don’t know myself

I keep hearing about investing but how do I start ? I have about 50k saved

 

[vancouverguy]

@job28 Read the wiki and use the search function.

Martyclarks comment on this thread even answers this