Okay, so you might be reading the title of this post and wondering what it has to do with investing and personal finance... it has everything to do with it. I wanted to title this post with "My best financial decision ever" but that seemed boring, so I went with something more real and direct. I am going to share with you my best ever financial decision in this post. This decision is one I think a lot of people have to consider if they want to get ahead financially...
let's go...
A sample of my story
One of the most difficult times in my life was when I lost my first major job. I had been earning R35 000 per month and saw myself as a person who was doing well. It felt like the good times would never stop but just like that, the income was gone. The company I worked for got shut down. I had known a few months prior that this would be the reality. However, I had not made any serious attempts to plan for the future. I had little savings, no assets, credit card debt and nothing to show from "my good salary". I was a stubborn fellow who thought he was smarter than everyone but my inteligence had failed me big time... and I started to make things worse. How?
The major mistake I made is that I bought an apartment, I thought I would be able to replace my job pretty fast, but it turns out I was wrong. This drained my savings. I thought about putting up the place on AirBnB but did not have any more money to buy me time to set things up (eg: 3 months to cover expenses and get the place to be decent). So instead, I got an agent who was able to find me a tenant but with a rental payment that only covered my bond. The levies, rates and taxes I would have to cover myself (keep in mind I barely had any money). I spent my last few cents moving some items out the property, I was moving back home, lol I was so broke I had to ask the guys moving my stuff for a lift, they literally moved me and my furniture back to my mom's place. This was a new low for me...
I was Unemployed, Single and Living with my Mother. (Get the title now? lol).
Fast forward 7 years later and my situation is pretty good (If I say so myself). Getting to where I am now was not easy, it required a lot of hard work and sacrifice. I look back on those days with laughter now and no longer feel embarrassed. The lessons I learned were priceless. So, what was the thing that saved me... you won't want to hear it but here is it...
MOVING BACK HOME...
You see moving back home did not just save me from losing my property, but it also got me to focus on key areas of my life that I had been neglecting. I understand that not everyone can move back home, if you are one those people then read this as
"Downgrade Where You Live".
Here is how Moving back home or Downgrading will help you.
Tip #1 - Resetting Financial Expenses
Decreasing a Large Expense
The biggest financial cost for people is mainly housing (where you live) and moving back home can give you a break from this large expense. Throughout my working life I had been paying between R3900 (my first rent) to R9500 (my last rent) per month for housing. When I got my apartment, the bond was R7000 per month. Add rates. taxes and levies and this climbed to R8550. Luckily, I converted the electricity to prepaid which made it easier to manage. None the less, it was a large monthly expense and quickly drained my savings. So going home gave me a break from this. Downgrading to a room or sharing with friends can also dramatically decrease your rental/bond costs. The savings you make here will come in handy later.
Replanning My Life
I also got time and space to reflect on mistakes I had made. I realized I was driven purely by emotions and then used logically sounding points to justify my actions. Such as telling myself "I needed to live in Bryanston, people will like me at work if I do", "I need this space, it makes working better because I am closer to the office".
But the truth was...
I wanted to be the cool achiever who had everything together. I wanted to be the person respected for having their own place, I wanted freedom and honestly, I just wanted my friends to be jealous... I just never considered the risks and costs.
Moving home allowed me to assess my relationship with money and with people.
And so, I was able to replan every aspect of my life. My relationships, friendships, my values, things I was willing to focus on and deciding what I needed to let go of. It was a hard yet beautiful time. It resulted me being more mature, more intentional about my life and having a clear path and goals. The biggest lesson I learned was that I could never truly reach my potential while worried about how I will pay for certain things.
Move back home or Downgrade and watch how simpler life becomes when you are not too stressed and emotionally pressed about bills.
Paying Down Debts...
The savings I made from not having to pay a large portion of my income to a property was that I could now get rid of some debts. Fortunately, the only debts I had was a small personal loan in arears, a maxed-out credit card and Telkom account. and oh, the outstanding Gym fee from an uncompleted contract.
I started by paying down the credit card which took me 9 months to get rid of. I then followed up with the personal loan which took 3 months. The Telkom account, well I have no idea what happened with that one. It vanished from my credit report and Telkom never contacted me about it. (lol maybe this explains the share price performance). When I checked they did not have any records of it, so I got off free. I remember reading about how Telkom "blacklists" people and was always worried about that, but it never happened. It has been 7 years, so I guess that debt is gone. (I do not recommend you ignore your creditors and debts though, face them head on, I was lucky). And lol the gym fee I paid when I eventually wanted to rejoin the gym (unlike Telkom they never forgot me)
If I had not moved back home, then I would not have had the room to wiggle out of my financial challenges. The biggest challenge was obviously a decreased income and no savings, but this too became a lot easier to solve while at home...
Tip #2 - Make Saving Money Religious
I had to rebuild my Capital Reserves (fancy speak for the word "savings"). Thus, I became very religious about saving money. I cut all expenses that were not helping me improve my financial situation. I also cut out social expenses (hence the term "single" in the blog title).
My savings idea started out as "saving 10%" of all income. Any amount of money that flowed into my bank account I saved 10% of it. From R10 to R1000 to R20 000, any amount that came in I saved 10%. Eventually I started saving even more as I enjoyed watching my bank account have more and more money. This is one of the best feelings you get when you save money, seeing the money stack up in the account.
I did not build an emergency fund until later though, but I eventually built one. This was tough to do as I always felt I could do something else with the money but the peace of mind from it is well worth the cost of money sitting in an account and gaining 6% per year (banks though).
Here is a quick summary of my savings approach
Build a 10% fund. Save at least 10% of all the money that flows into your account.
Build an emergency fund slowly with 5% of the money that flows into your account
Build a tax-free savings account using 5% of the money that flows into your account or using half the money in the 10% fund.
By doing just these 3 things you will have money in the bank, money to protect you from emergency costs and money to slowly start investing with and saving towards retirement (thinking about retirement is boring but you have to start at some point)
After all of this, you then have to invest in the most important thing...
Tip #3 - Invest in your Income Potential
This is the most important investment you can make. I love shares (and everything else in the stock market), I love side hustles, AirBnB, property investing etc... but nothings beats investing in your income potential especially at the start of your financial journey.
But what is meant by "Income Potential"...
It is the skills you have that you can sell to others to earn a paycheck. Most people get broke by default because they do not invest in high earning skills. I am going to say something a bit controversial here but here we go...
Not all degrees and passions are equal. Political Science degree? trash, Sociology? trash, Art? trash, Film? trash, Gender studies? trash, Music? trash, Fashion? trash, Social Worker? trash and the list goes on. The economy pays the highest prices for what is needed the most. If you find that you are not getting employed or getting employed but not earning much, then you need to check if you are truly providing value to the economy. Your skills might make a small percentage of people a lot of money, but it does not mean that will be your case as well. You need to gain skills where the majority of people in the profession make a lot of money.
Eg: The richest and most successful fashion designers such as Calvin Klein, Ralph Lauren, Donatella Versace are richer than the most successful and richest medical doctors in the world. But in their profession, they are the minority, the majority of fashion designers are barely making ends meet, but the same cannot be said for the ordinary medical doctor, most are doing well. So, it is important to learn skills that put you not in competition to hold the top 10% spots in order to do well but to be even at the bottom 20% and do well.
So, at age 27 what can you do? Start with a skills audit. List all your skills and then check what is the highest you can potentially earn with these skills and how that would be possible. Sometimes the skills you have are good, but you might not be using them the best way. Once you do your audit, find a way to top up your skills or add more skills.
My favourite resources are:
This is a platform that has partnered with some of the best universities in the world to offer some great courses. They have a diverse set of courses that cover different fields. However, they are a pricey option and so may not be useful for everyone. And you can also go direct to all the universities to try get better prices.
For less costs, I recommend Coursera because you can easily apply for a scholarship and learn for free. The degree and certification programs are proper and legit, but not all their courses carry weight, so you have to be mindful of this. The trick with a platform like Coursera or EdX is to use it to learn and then get official certification externally. For example, you can learn IT Support Skills/Computer Science and then get certified externally by writing official Professional exams from Microsoft or Google or Amazon and get a professional designation (I am giving away the secrets of how people get ahead in the tech space right now, I could charge you a few thousands for this). It is the same for the finance industry as well, there are a few certifications that can get you ahead and do not need a degree for you to write (plus are cheap).
Basically, my point with all the above is that you need to invest in getting skills that can make you money. Being at home can give you the space to do this and you can have a bit of money to invest as well into this approach. Getting skills won't make you rich immediately but it will make the journey a little softer. So, get researching.
While investing in your skills you can also invest in a few other things...
(Sidenote: Register for a Week;y Class on Easy Equities and master the platform. Each Class cost R99)
Tip #4 - Invest in Financial Assets
This is Money Mondays, so I have to mention financial assets. You have to invest in financial assets like Shares and Property. You can use platforms like Easy Equities and Easy Properties, simply because they are low cost and so you can use them regardless of your financial situation. Build the habit of putting at least 5% of all your income into investments, this will benefit you long-term especially when you want to move into investing in larger assets like using a banks money to invest in property or start a business. (Browse my website or social media for resources on how to do invest properly or buy my mentorship program by clicking here)
Being at home will give you the space and financial saving to start this part of your journey.
Tip #5 - Move out of Home
Strange last point but yes, you have to move out of home again and moving back home will help you move out again, Afterall you cannot move out without first moving back in (hahaha lol) but this time...
Have a clear Plan to Move Out
Your plan should outline the steps you are going to take to move out without financially hurting yourself. The place you choose has to conform to a budget that serves you and not financially destroy you. These are the issues your plan should address at a minimum:
- The monthly rental cost.
- The monthly cost of utilities.
- The monthly cost of food.
- How socially active will I be.
- How will I clean the place.
- The cost of internet.
- The cost of life insurance (don't die in a foreign city away from home without life insurance or funeral cover)
You have to be financially prepared and have at least 3 months of expenses covered upfront. This will give you room to always be ahead of yourself financially. This is the biggest advantage of moving back home, you can create room for yourself to get ahead of yourself financially.
In closing...
So, this is what happened to me... I got into financial difficulty, was stubborn about going home so got my own place, eventually went back home when things got difficult, then I re-planned my life while resetting my finances, paid my debts while saving, I had a great education already but added more skills by investing in myself, invested more into financial assets, created a plan to move out again and then executed...
All of us can do this at any age, it just requires you to swallow your pride a bit and maybe be uncomfortable for a few years...do this right and you will thank yourself.
Happy Investing
- Omega
Remember: Opinions expressed in this article do not and never will constitute financial advice. Every person's financial situation is different, I recommend you speak to a financial adviser about yours.
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