Master of Money Management

We work 100,000 hours, Make sure they count

Rate this post

We have all fantasised about what it would be like to have the wealth of the Billionaires that make the Fortune 500 list. It must be an amazing feeling to know that you can afford to buy almost anything your heart desires. The reality is that most of us will have to be content with a nine-to-five job, and a savings plan that will hopefully allow us to stop working at some stage. In reality insurance industry statistics tell us that only 5 in 100 people will be able to retire with enough money to support themselves if they decide tire at 65. The good news is that most people earning a salary will be able to achieve a comfortable retirement, but only if they fine tune their savings strategy as they move up the career ladder.

So if you are starting out on a career path or if you are already pretty far down the track it is important to know that one day you will want to stop working, even if you love what you do. It does not take a degree in mathematics to understand, that in order to get off the work treadmill, you will need to have a fair amount of cash invested. Knowing how and when to save, as your career and income progresses, is therefore critical.

There are a number of reasons why most people don’t save enough. Debt is a big one but things are compounded by the fact that most people don’t save enough and even when they do, they save in the wrong places. So the first rule is that you can’t go it alone you need experts to put you on track and a commitment to a long term view of saving. However before you call an advisor there are some basics that you need to know.

Get familiar with your company pension scheme.

If my own experience is anything to go by, I can safely assume that the large majority of young adults going into their first jobs pay very little attention the “benefits” on offer when they join a company. The human resource department may hand you a pile of papers talking about group life cover, disability, defined contribution plans, retirement annuities, UIF, pensions and provident plans. This volume of information, rivaling War and Peace, usually gets shoved in a drawer with the parking tickets and the band aids. I know it’s not the sexiest reading material in your library but ignoring how your company plan works may end up costing you money. For example, if you buy a home the bank will require you to have life insurance. You may already be paying for cover via your company, by not knowing this, you may go out and sign another policy.

A company savings plan is not enough to retire on.

Another cost of ignorance is assuming that your company savings plan will be sufficient for your retirement. Many factors affect the final payout of the fund , the fact that you are paying a regular amount every month does not guarantee financial independence. The progress of your savings should be checked at least once a year and you should solicit the help of a financial planner to advise you whether you are on track or not. It will probably be “not” so there is a good chance that you will need supplementary savings.

Don’t spend your pension.

This is by far the biggest reason why people retire with insufficient cash in their piggy banks. Lets say for example that you worked for the same company for seven years, and in that period you accumulated R100,000 in savings. If you then decide to leave for greener pastures, and receive this cash, chances are your wardrobe will be looking a lot newer or you will be driving around in a new set of wheels; bad move. Firstly by spending this money you will be charged tax at your marginal rate, and secondly you will have blown 7 years of retirement savings. That is an awful lot of money to try and make up. And its not just the R100,000 you lose out on, but the growth of that money too. Lets say you had not spent the money and reinvested it, ten years later at a growth of say 9% your R100,000 would be worth R245,000.

You need to increase the amount you each year by at least the inflation rate.

In order to give you a clear picture of how inflation affects your pocket we have to look to the future. Lets assume that food costs, on average, rise by 7% per year over the next 10 years and your take home pay rises by 4% per year.

If you are currently spending R2,000 per month on household groceries and your take home income is R10,000 per month – your grocery bill will equal  20% of your take home pay.  Ten years from now the same groceries will cost you (At 7% inflation)  R4,020. If your salary increases at 4% per year over the same period your take home pay will be about R14,908. This means that your identical household shopping would then represent 27% of your take home pay. So the impact of this is you end up paying more money on basic goods and your standard of living would take a knock.

The above scenario carries huge significance for everyone who is saving money for their own home one day or even for their retirement. If you save R500 per month and only achieve a 4% net return per year; against inflation of 7% per year, you are actually going backwards in terms of buying power.

This is of course the worst case scenario, but what it illustrates is that when you save you have to be aware of the effects of inflation on your money. It is no good saying you can afford to save R1000 per month and then keep your savings at that level into the future. You need to increase your annual savings by at least the prevailing inflation rate to see a decent return on your investment.

Save at least 15% of your salary each month.

Experts recommend that you save at least 15% of your pre tax salary every month, and this needs to be done for at least 25 years to ensure a comfortable retirement.

So now that you know the basic rules the next step is to learn how to save as your career progresses. Most experts will agree that it is never too early to start a savings plan but one has to be careful what one chooses when just starting out on a career. Because young people tend to move around a lot and even go for stints overseas, it is better to stick to flexible investments in the first few years. It’s no good signing up for a ten year endowment and then move to Hawaii a few months later. It could be done, but it is a big responsibility and your income may be erratic. So stick to short term fixed deposits, money market accounts and unit trusts for the first few years of your working life. While investing in property is always a good idea, it can prove to be problematic if you move frequently, buying and selling homes in short time frame can send you to the poor house because of all the costs involved. Even if you rent out your home, the management of tenants from a long distance can be a real headache. So hold off for a while and take this time to save as much as you can towards a deposit.

When you have decided that you are going to stay put for the foreseeable future then you could consider investing in a retirement annuity (RA). An RA is a great way to save if you are on a fixed salary because you get a tax deferment of 15%.  In other words if you earn R10,000,00 per month and save 15% of your salary you will only pay tax on R8500.00. You could also now look at investing in a property. There is no doubt that property is an essential component of a good investment strategy.

Once you have been in a career for five years or more there is a good chance that you have changed jobs at least once and often with these job changes, come higher salaries. Do not waste this opportunity to maximise your savings. It may be tempting to notch up your lifestyle but if you can resist getting caught up in the image culture and invest instead, you will be well on your way to wealth.

Once you have been in a career for ten years or more you will in all likelihood benefit from meeting with a financial advisor to work out how much money you should be saving in order to retire comfortably. You aim should be to have sufficient capital invested to afford you an income similar to that of when you were working. Owning our own home should be a priority because ideally, you should aim to be bond free by the age of 40. That way you still have 20 years or 240 pay cheques left from which to save, without being eaten away by a bond repayment. We spend 100,000 hours of our lives working, we earn millions in that time, so it is entirely possible to get wealthy from our chosen career, we just need to formulate and stick to a game plan.

Comments to We work 100,000 hours, Make sure they count

  • Buying Cialis In Israel Cialis Compresse 10 Mg Buy Cialis Amoxicillin And Yellow Tablets Effexor Buy Online Kamagra Tablets Next Day Delivery

    Mataburiz January 19, 2020 6:46 pm
  • I very like this blog. Everything is cleared.

    Earn Online June 5, 2020 5:12 pm
  • excellent issues altogether, you simply gained
    a new reader. What would you recommend about your put up that you
    simply made some days in the past? Any positive?

    Here is my webpage – agen bandarQ

    Mirta June 19, 2020 11:14 pm
  • Excellent site you have here but I was curious about if you knew of any
    discussion boards that cover the same topics discussed in this
    article? I’d really like to be a part of online community
    where I can get feedback from other experienced people
    that share the same interest. If you have any suggestions, please let me know.
    Bless you!

    Feel free to surf to my web blog; g think

    Savannah June 20, 2020 3:15 am
  • Hi there would you mind letting me know which hosting company you’re using?
    I’ve loaded your blog in 3 different internet browsers and I must g say this blog loads a lot faster then most.
    Can you suggest a good internet hosting provider at a honest price?

    Thank you, I appreciate it!

    Mac June 20, 2020 9:23 am
  • I simply couldn’t go away your website prior to suggesting that I actually
    loved the usual info an individual supply on your guests?
    Is gonna be again ceaselessly to investigate cross-check
    new posts

    Take a look at my web blog; dominoqq

    Eddy June 20, 2020 3:21 pm
  • I loved as much as you will receive carried out right
    here. The sketch is tasteful, your authored material stylish.

    nonetheless, you command get bought an nervousness over that you wish be delivering the following.
    unwell unquestionably come more formerly again as exactly the same nearly a lot often inside case you
    shield this increase.

    My blog post – g give

    Geoffrey June 21, 2020 3:09 am
  • Good day! Do you use Twitter? I’d like to follow you
    if that would be okay. I’m absolutely enjoying your blog and
    look forward to new posts.

    Feel free to visit my homepage – also g

    Sheena June 21, 2020 1:07 pm
  • I always spent my half an hour to read this blog’s articles all
    the time along with a mug of coffee.

    Feel free to surf to my page hosting services

    Francesca July 16, 2020 2:10 pm
  • Hi there! I just wish to offer you a huge thumbs up for your great info you have right here
    on this post. I will be coming back to your website hosting companies for more soon.

    Josie July 17, 2020 10:20 pm
  • Helpful info. Lucky me I discovered your website accidentally, and I
    am stunned why this coincidence didn’t happened in advance!
    I bookmarked it.

    My webpage – web hosting company

    Ericka July 17, 2020 11:45 pm
  • Excellent blog here! Also your site loads up fast!
    What best web hosting sites host
    are you using? Can I get your affiliate link to
    your host? I wish my website loaded up as quickly as yours lol

    Willy July 18, 2020 3:59 am
  • I do not even know how I ended up here, but I thought this post was good.

    I do not know who you are but definitely you are going to
    a famous blogger if you are not already 😉 Cheers!

    My web page :: hosting services

    Mazie July 18, 2020 5:12 am
  • Wow, awesome blog layout! How long have you been blogging
    for? you make blogging look easy. The overall look of your site is
    fantastic, let alone the content!

    Here is my blog post – web hosting companies

    Carey July 21, 2020 10:09 pm
  • If some one desires expert view regarding blogging afterward i propose him/her to visit this weblog, Keep up the pleasant work.

    Here is my blog post: web hosting reviews

    Linette July 22, 2020 1:07 am
  • You can certainly see your skills in the work you write.

    The arena hopes for more passionate writers like you who are not afraid to mention how they believe.

    Always follow your heart.

    Feel free to visit my website best web hosting 2020

    Modesto July 25, 2020 2:29 am
  • I’d like to find out more? I’d want to find out some additional information.

    Visit my web site :: best web hosting sites

    Eloise July 25, 2020 11:19 pm
  • wonderful issues altogether, you just received a new reader.
    What could you recommend about your publish that you just made some days in the past?
    Any sure?

    Feel free to visit my web site webhosting

    Roosevelt July 26, 2020 12:07 am
  • Hey! I know this is somewhat off-topic however I needed to ask.
    Does managing a well-established website hosting services such as yours require
    a large amount of work? I’m completely new to operating a
    blog but I do write in my diary on a daily basis. I’d like to start
    a blog so I will be able to share my personal experience and thoughts
    online. Please let me know if you have any kind
    of suggestions or tips for new aspiring bloggers.

    Rob July 26, 2020 10:37 pm
  • Hmm it looks like your blog ate my first comment (it was super long) so I guess I’ll just sum it up
    what I wrote and say, I’m thoroughly enjoying your blog.
    I as well am an aspiring blog blogger but
    I’m still new to everything. Do you have any points for rookie blog writers?
    I’d genuinely appreciate it.

    Check out my web-site ::

    Geraldine July 27, 2020 9:20 am
  • Hi, I check your new stuff on a regular basis. Your humoristic style is awesome, keep it up!

    My web-site – cheap flights uk

    Sherry July 28, 2020 12:41 am
  • Thanks for sharing your thoughts on skyscanner flights.

    my homepage; book a flight

    Nichol July 29, 2020 4:34 am
  • When I originally commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get
    three e-mails with the same comment. Is there any way
    you can remove me from that service? Appreciate it!

    Feel free to surf to my web site; cheap flights to florida round trip

    Rich July 29, 2020 7:48 am
  • Hello, i read your blog occasionally and i own a similar one and i
    was just wondering if you get a lot of spam responses?
    If so how do you protect against it, any plugin or anything you can advise?
    I get so much lately it’s driving me crazy so any support is very
    much appreciated. adreamoftrains best hosting
    web hosting services

    Derrick July 30, 2020 12:42 pm
  • I like it when people get together and share views.
    Great website, keep it up!

    Here is my website scyscanner com

    Roxanne July 31, 2020 12:51 am
  • I don’t know if it’s just me or if everybody else experiencing
    problems with your blog. It seems like some of the text within your content are running
    off the screen. Can somebody else please comment and let me know if this is happening to them too?
    This might be a problem with my internet browser because I’ve had this happen previously.
    Thank you

    Rodrick July 31, 2020 3:06 am
  • This is the perfect web hosting companies site for everyone who wants to find out about this topic.
    You understand so much its almost hard to argue with you
    (not that I personally will need to…HaHa). You definitely put a brand new spin on a subject that has been discussed for years.
    Great stuff, just wonderful!

    Janessa August 5, 2020 11:38 am
  • Excellent blog right here! Also your web site a lot up very
    fast! What host are you the use of? Can I am getting your affiliate hyperlink to your host?
    I desire my web site loaded up as quickly as yours lol

    Here is my page :: website hosting

    Angela August 5, 2020 7:09 pm
  • Quality articles or reviews is the main to invite the people
    to pay a visit the website, that’s what this best web hosting company site is providing.

    Lida August 6, 2020 9:40 am
  • Hi there! This is my first comment here so I just wanted to
    give a quick shout out and tell you I genuinely enjoy reading your posts.
    Can you recommend any other blogs/websites/forums that cover the same topics?
    Appreciate it!

    Also visit my blog post: best web hosting sites

    Christy August 6, 2020 3:38 pm
  • Thank you for the good writeup. It in fact was a amusement account it.
    Look advanced to more added agreeable from you!
    However, how can we communicate?

    my web-site :: web hosting service

    Stuart August 7, 2020 4:39 am
  • I am in fact glad to glance at this website hosting services posts which
    consists of lots of valuable facts, thanks for providing
    such information.

    Barbra August 7, 2020 5:05 am
  • You have made some really good points there. I checked on the net for additional information about the issue and found most
    individuals will go along with your views on this web hosting companies site.

    Jamila August 7, 2020 2:46 pm

Leave a Comment

Your email address will not be published.

Menu Title