Some 24 years after graduating from university, Sue Torr, Director at Crue Invest, looks back at her 22-year-old self and offers some retrospective financial advice.
“I was standing on the precipice of a legal career, the proud beneficiary of a sizeable student loan and earning a pittance as an articled clerk. Looking back, I might have made some different financial decisions. Nothing beats experience when it comes to managing our money but there are some truths that my 22-year-old self could have benefitted from.”
- Live frugally while you are still used to it
Wealth is built slowly and deliberately, and is so much more than your first pay cheque. Be patient for financial success. As a recent graduate, you are used to living a frugal lifestyle, being creative with your budget and living well within your means. Continue living frugally, even after your first proper paycheque.
- Start saving with your first paycheque
More important than the amount, is the habit of having a debit order come off your account every month. The debit order from your first salary means you won’t miss what you never had. Learn early on the satisfaction of denying yourself short-term pleasures in return for a little lump sum of cash.
- Attack debt aggressively
The cost of tertiary education is sizeable and you probably have some student debt, as you embark on your career. Settle this as quickly as possible by ramping up your re-payments. Your credit rating will be an influencing factor every time you apply for financing, loans or credit, and it is vital that you keep your credit image untainted. Any negative rating is a red flag to a financial institution and will impact your borrowing and the price of debt.
- Buying a car
Although debt should be avoided, as a young professional, you need to be reliably and cost-effectively mobile. A second-hand car still under motorplan is a good option. Beware of how your vehicle financing agreement is structured, stay away from balloon payments and negotiate.
- Negotiate everything
Negotiate everything from your salary package to your property purchase, and enter negotiations armed with knowledge. When negotiating your remuneration, make sure you understand the market value of your skills, qualifications and experience. When purchasing property, research what other properties have been sold for in the area and negotiate from a position of knowledge. Negotiate the attorneys’ fees, bank charges and interest rates.
- Stay on the right side of SARS
Understand how your taxes work and pay your taxes on time, every time. Make sure you take full advantage of the tax deductions, such as the contributions to your retirement fund. Register with SARS e-Filing and learn to submit your own tax returns.
- Friends don’t let friends borrow money
As a young professional earning a good income, friends might ask to borrow money. Lending money can test the limits of any friendship, and the kindest advice for your friendship is to simply avoid it. The anger, resentment and tension that comes hand-in-hand with unpaid debt between friends is rarely worth it.
- Buy quality
When money is tight, it is tempting to settle for cheaper substitutes and buying on-the-cheap can eventually become a habit. Rather buy quality products that are designed to last the distance, even if it means waiting longer.
- Buy experiences
Depending on qualifications and career choices, salaries may range from the entry-level salaries of articled clerks to the generous packages offered to qualified software developers. There is great temptation at this point to jump onto the hamster wheel of working hard, earning money and accumulating material possessions as a measure of wealth. Find the balance between growing your personal wealth and accumulating memories. Invest in experiences.
- Earn while you sleep
If you are selling your time as a means of generating an income, you will always be limited by the number of hours in a day. Earn an annuity income to accelerate your wealth-building. Seek clever ways to monetise your expertise so as to generate ongoing income that is not time-dependent.