The ultimate financial guide for South African graduates!
If you are not planning to get married anytime soon and If your rent contribution is anywhere near R2000, you can continue to live happily with your parents. Not only that, but you certainly do not need to move to a fancy apartment that will cost you a fortune in rent. This will keep your parents happy and will save you money. But wait! What about that GTi or any other fancy car you were planning to buy. How can you afford to purchase your dream car when you don’t even own a house anyway? With a luxury apartment and a fancy car, you will soon need to cover other luxury expenses such as fine clothing and extravagant outings to fit the image. It will soon come down to your credit cards and you will end up being indebted in this shortfall.
These are some of the most unfortunate realities of most young South Africans and they end up being in debt at a very early stage of their life. 40% of the South Africans that are in debt, are behind with their repayments because they make these small mistakes, miscalculations and unwise decisions.
Here are some calculations for you that will help you see things through.
An average South African graduate earns somewhere between R20,000 to R40,000 during their first job. However, this income solely depends on their field of profession.
If we suppose that you are making R20,000, the net income after tax, medical and pension deductions will be around R15000.
If you do not mind continuing living like a student for another 4 years while earning this income, then your expenses should look somewhat like this:
Net Income: R15000
Less Basic Expenses:
Study loan repayment – R1500 (This repayment usually begins with your first job)
Rent contribution – R2000 (You can always negotiate this with your parents because they are the easiest landlords)
Food Contribution – R1000
Toiletries – R200
Clothing – R300 (But if you only use it when necessary)
Travelling to Work: R500 (But if you commute the way you did it for campus)
Your total Expenses should be around R5500
You will be left with R9500
If you consider saving at least R8500 per month and the balance of R1000 can be spend on wants.
Then after 4 years, you will at least have around R450000 depending on your choice of investment. If you did not have a student loan, your savings should be around R550000 after 4 years and if you controlled all your wants, you could have an enormous sum of R600,000 at your disposal. This sum of money is enough for you to own your first property, which is fully paid off before you even reach the age of 30. You can still continue to live with your parents by renting out this newly purchased property. Or you can enjoy free living, it is all up to you.
On the other hand, the following is how our young professionals are spending their hard-earned cash.
Gross Income R20000
Net income R15000
Apartment rent – R6000 (this is what they would qualify for)
Car repayment – R5000 (Bank will approve 20% of your gross as an installment)
Petrol – R1500 (some may spend up to R2000 on petrol)
Food – R2000 (Mostly spent on fast foods because they can’t cook)
Clothing – R2000 (In order to keep up with their social image)
Outings – R3000 (This is where credit card comes in)
4 years later……………. They are badly looking for a debt counselor.
The greatest risk in this second scenario will obviously cause you to fall behind with your rent and car repayments. This will not only get you end up in an indebted situation but will also lead you to an eviction and lose car.
Therefore, it is very important to spend money wisely at this point in your life in order to live a peaceful life in the years to come.
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