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It's pretty easy to save a third [of your income] if you get paid a %^&!-load. She still has R43 000 a month to spend! Things are a bit different if you only get paid, like, R20 000 a month. I’m sure Bill Gates or the Guptas save more than a third of their incomes too…— Facebook commentator, echoing a sentiment shared by many
It’s easy for her; she earns a fortune!
Regular listeners of Bruce Whitfield’s The Money Show will be familiar with Julia, the young savings superhero who has taken social media by storm.
Although Julia earns more than R1.1 million per year she lives in a modest house and drives a Toyota Etios. She invests a third of her income and, already a multimillionaire, is well on her way to achieving lifelong financial freedom.
Most people felt inspired by Julia’s story, but a substantial minority was not impressed. The sentiment was that anyone can invest a third of their income if it’s as massive as Julia’s.
However, just because you earn much less than Julia, doesn’t mean you can’t replicate her example.
I wish I earned R20 000 per month, but I don’t. But, that doesn’t stop me from investing at least a third of my gross income each and every month.
Here’s how I do it…
I pay myself first
I am the most important entity in my life. Not my landlord, not my gym and certainly not Telkom.
I always pay myself first.
What I mean by that is, instead of saving whatever is left at the end of the month, I make the very first payment to my investments. Only after I have invested do I pay my other bills or spend a single cent.
In other words, I save and invest a third of each salary cheque at the time I receive it. The money is gone and I’m forced to adjust my spending.
I’m an unforgiving “creditor”. In the same way I can’t simply stop paying my phone bill if I’m struggling to make ends meet I also can’t skip a payment to myself.
Will Telkom cut me slack if I can't pay? No ways! In the same way, I don’t cut myself slack either.
If you're normal, then saving what's left at the end of the month is freakin' impossible. It's not that you don't want to, it's just there's never anything left. You swear that next month will be different, but it never is. You get a raise and think to yourself that you should save some money now that you can. Except you can't.
Am I right or am I right?
In the same way that work expands to fill the available time, expenditure rises to meet income.
No matter how much you earn, by the end of the month it's gone.
Does this mean it's impossible to save? Of course not! But, you've got to pay yourself first.
Advertising is hazardous to your financial health
I find joy in people and experiences, not things.
I am staunchly anti-consumerist. I believe you cannot be materialistic and happy.
I believe that advertisers deliberately create feelings of inadequacy. They try to convince you that you don’t want what you have and manipulate you to covet what you don’t have.
Advertisers actively try to cultivate feelings of dissatisfaction. This is one of the reasons I don’t have a TV.
I don’t buy into advertisers’ idea that living the good life is all about owning a fancy car or a powerful smartphone.
The good life. Right here, right now
Many people who seemingly have everything are utterly unhappy. “The good life”, to me, is all about being grateful for my countless blessings, not stressing about money and having enough time for my loved ones and myself.
I don’t own much, and I don’t yet have a fortune, but I am very wealthy.
I have deeply internalised this lesson life taught me - stuff can’t make you happy. However, these things can: being grateful and giving thanks; savouring small pleasures, forgiveness, loving kindness towards yourself and others, maintaining intimate relationships with family and friends and prioritising their happiness, exercise and healthy living; having a purpose, being passionate, serving others, losing yourself in whatever you're doing.
Jesus, Buddha, Mohammed… They all lived very simple, yet eternally revered lives.
I abhor debt
It is easy for me to save, because I’ve never been in debt.
I rent, with my wife, a one-bedroom flat. I have nothing against owning the home I live in but I’d rather diversify my investments. Maybe one day when I know I’m staying put I’ll take the plunge.
I saved up (a whopping R20 000!) to buy the 1998 Mazda 323 that my wife and I share. I’ve added more than 200 000 kilometres in the seven years that I’ve owned it and I intend to drive it until the doors fall off. When that happens I’ll simply buy another one (to me a car is nothing but appliance, a means to get from point a to point b) with cash I’ve saved up exactly for when that happens.
I’m 37 years old and never had a credit card in my life. I don’t need it and I couldn’t care less about my credit score. I save up when I want to buy something.
I derive great joy from simple pleasures
I am alive and breathing! I suffer and thrive; I think and feel! What a pleasure to be sentient in this perplexingly vast universe!
My wife and I go out often even though we keep to an extremely tight budget. We’ve cultivated in ourselves a willingness to enjoy simple pleasures. For example, we love going out for dinner, but there’s no way I can afford gourmet-anything.
All I need to eat like a king is my soul-mate or close friends.
A Monday Spur burger special tastes glorious – and the whole experience is epic – if I share it with people I love and I’m mindful of being grateful. Mixa’s restaurant may be cheap and cheerful, but with the right people and the right attitude it becomes an opulent pleasure!
It helps living in Cape Town where city and nature, inextricably intertwined, offer so much in terms of costless amusement. We get for free what others travel halfway around the planet to enjoy.
It’s become part of who I am
Saving and investing is easy for me, because it’s become part of my lifestyle. It also helps that my wife and I are on the same page in this regard.
Although it was tough in the beginning, it has now become easy to share one rusty car between the two of us. I walk everywhere I can. I take trains, buses and minibus taxis.
You would be shocked if you realised how much your car is keeping you from saving.
I plan for emergencies
Emergencies are an inevitable and unceasing part of life so I plan for them. In fact, I have three separate, ring-fenced emergency funds. The first one is the largest one, because it has to save me should I lose my job or something else happens with a massive, unforeseen financial impact. I keep on growing this fund, but endeavour to always have at the very least three months’ salary available at the click of a mouse.
In addition to a hospital plan I have a medical emergency fund. Fortunately my wife and I are very healthy, so its balance is growing quite nicely. It is ring-fenced for medical expenses that I cannot finance out of my disposable income.
I also have a small emergency fund. I’ll deposit a R200 here and R100 there into this fund from time to time. Its function is to help me get through months when my expenses are more than normal. It’s a great help and it’s often the only thing between making and breaking my budget.
It’s a grudge purchase, sure, but I’ve insured my income, should anything happen and I lose my earning capacity.
We fix things.
We use tape when the battery-cap of our seven year old digital camera doesn’t close properly. When my jeans or socks become too holey, my wife fixes it with her 39 year old, handed down Bernina. Fixing a sock, admittedly, saves you cents, but it’s a way of life now, so it’s just what we do.
Self-confidence is key
I don’t feel ashamed that my curtains are old and torn. They’re functional and didn’t cost me a cent.
I buy almost nothing new.
We bought our dining room table at a bric-a-brac store along with three chairs. The fourth I took from a dumpster; it was perfectly functional.
I’m actually quite proud of my Mazda; it’s one of the main reasons why I’m approaching financial freedom.
Self-confidence is very important when you’re working on becoming financially free. So many people consciously and unconsciously buy stuff they don’t need, or even want, to impress other people. You’ve got to love and accept yourself deeply and unconditionally.
You are not your car or your house or your clothes or your phone. Happiness can only come from within.
My people make me happy; not shopping. I love and I’m loved (what else is there?) so my life has meaning. I don’t need anything they’re selling.
Why am I doing this? It’s not about becoming rich. It’s about living the good life, now, at this very moment. It’s about having the resources to help those I love when they need me. It’s about having time and being free from financial worry and eternal toil.
*Disclaimer: I don’t have children yet. I realise they’re expensive and I wouldn’t be able to save and invest as much as I do when I have them. That’s why I’ve already started saving up for when that day comes, hopefully soon!
This article first appeared on 702 : How I manage to invest a third of my income (despite earning peanuts)