Transcript
This is how I became a millionaire by the time I was 31, even though I started out earning a very low salary, then progressed to what is considered upper-medium salary, and even though I made a lot of financial mistakes that I’ve already shared in previous videos, like buying the wrong cars, and also purchasing a house before I was actually ready to purchase a home.
And just to put it into context, I’m talking about a million rand, which is the equivalent of about 55,550 at the current exchange rate. So if you’re watching this from the United States or any country in Africa, or even in Europe, this is just a third of the average net worth in the United States, which is currently sitting at just over 180K.
I’m gonna be sharing with you the four things that I did to actually achieve this milestone, from reading books, from listening to my mentors, and also just watching YouTube videos. I’m quite detail-oriented, that’s why I work in investment management, but when it comes to my money, I only implement simple and lazy strategies to make my money grow.
So if you’re a student, unemployed, or have a nine-to-five, but aspire for financial freedom, then this is your video. My name is Yvonne, and on this channel, we talk about all things personal finance, so get your pen and paper ready, and just write these four things. I’m gonna be sharing with you snippets of my background and my money story as we go through the video, so try not to skip any sections so that you don’t miss a thing.
If you’re watching this video, please hit the like button, it really doesn’t cost you a thing. Let’s get started. So the first thing that I did that was a game changer was max out my employer match. Most of my wealth is actually stuck in an RA.
I was so lucky that some of the companies I worked for had what is called an employer match scheme. Now, how that worked was the company would pay 5% of my basic salary, my gross salary, and put that towards my RA, my retirement annuity. Obviously, if you have an RA, you know that once the money is in there, it’s actually locked up.
Now, with a two-part system, you can have access to some of it, but the bulk of it actually stays locked up until retirement. So if I decided to put in an additional 5% to 10% of my gross…
salary towards my pension into my retirement annuity, the companies would then match that amount. And in my case, I was putting away between 15 and 20 percent, including the employer’s match, towards my retirement annuity. And in South Africa, the maximum you can actually contribute per annum towards your pension is 27.5 percent of your income, with a maximum of 350k.
And so in my case, the minimum that I ever contributed towards my retirement savings, including the employer match, was 12,000 rand and the maximum was 16,250. As you can see, I was very aggressive when it comes to retirement savings because of the tax benefit of saving from your gross income.
Let me know if you’ve been doing the same and if you’re past the 500,000 mark when it comes to your retirement savings, or you’re actually above the million mark. Hit the like button if you have retirement savings of above 250,000 sitting in your pension fund or your retirement annuity, and how much time it actually took you to get there, and if you took advantage of your company’s employer match scheme.
If you don’t know what I’m talking about, just ask your HR and they’ll guide you. The second thing that I did was I increased my opportunity gap. Now the opportunity gap is just the difference between how much income I was bringing in and the expenses that I had.
If you’ve watched my previous videos, you know that I had a very high cost base because I bought a house before I was ready, because I was just following the Joneses and I was in a lot of debt, so my expense base was very high. The only thing that I could do was not cut expenses because there was nowhere to cut, but actually increase my income.
I started side businesses. I’ve talked about tutoring, consulting. I’ve been consulting since I started working. Increasing my opportunity gap helped me pay off my car quicker and also helped me put additional payments towards my first apartment.
I’d really encourage you to start a side hustle or side business that can help you increase your income and widen that opportunity gap. Once you have that additional money, you can either use it to pay down your existing debt or even actually start investing. If you haven’t watched any of my side hustle videos, please check them out at the end of
this video. They’ll really help you to get started and if you need any help just leave a comment in the comment section and I’ll be sure to respond to you. The third thing is actually related to investing. Firstly my property became an investment property because I moved out and I actually moved into another apartment.
In that apartment I initially had a rent-to-buy situation which didn’t really work out at the end but was definitely much cheaper than where I was living and so I actually cut down my expenses. The interest rates at the time were really good and so the house just about broke even on its own and I didn’t have to put anything into it except for unexpected maintenance costs which didn’t happen often.
And that’s how I started investing in properties. In addition to that I opened a tax-free savings account and I started investing in ETFs. The next few videos are actually about investing in more detail but how I did it was max out my tax-free savings every single year. Yes in addition to the retirement savings I was paying I was also maxing out my tax-free savings and investing in a diversified ETF portfolio which I’ll share in other videos.
I also increased my exposure to property investing by investing in REITs. I’m now using an alternative platform to easy equities which I’ll talk about in my next video but that’s how I got the ball rolling. Because of the poor financial decisions that I made I had a telecom account, an F&B credit card, like clothing accounts that needed to be closed.
So that was my first focus. All the money that I was making in additional income from side businesses was going towards reducing my debt. Now a lot of people ask me should you pay off debt and then save? I actually did both.
So I was building up my tax-free savings and also a small emergency fund while I was paying down my debt. And then the last thing that I did was I changed jobs frequently. Some of you would call that job hopping. It used to be a bad thing but the truth is things are moving very quickly.
If you spend more than two years at a company according to recent research, you actually earn less than 50% compared to your peers. So it’s really important to make calculated job moves that will help you increase your income. With more income, I had more money to contribute.
towards my retirement savings, more money to build my emergency fund and to invest, which ultimately helped me become a millionaire by the time I was 31, even though I started on a low salary. And by low salary, I’m really talking low salary. My first ever job, and here I wasn’t even contributing to retirement savings because it was really little, was 4,000 rand per month.
So I came from a place where I was earning 4,000 rand to a place where I was earning almost 100,000 rand by the time I was 31. And so that was a huge jump in my income, also backed by income from my side businesses. Now that I’ve shared with you the four strategies, I need to share with you three things that kept me on track.
And the first one was preying over my paycheck, because as a person who really struggled with their personal finances and really didn’t have the tools, purely because of my background, I come from a working class family, and to be honest, we were not rich. I only started learning some of the tools that I’m using now, like investing, savings products, only when I was an adult.
So I made it a point then, and I’ve continued to make it a point, to prey over my finances so that they go to the right places. The second thing was using a budget. I’ve been using the same budget template from the time I was 25. I’ve changed it a little bit, so if you’d like to use the same budgeting tool that I use, just comment budget in the comment section and I’ll send you a link.
This really helped me track all my income and where my money was going, but also my savings, my debt, and my investments. The third thing, which was probably the most powerful thing that I did, was staying true to myself. Figuring out what I like, figuring out where I wanted my money to go, and not just following what my friends were doing.
It’s so easy to stay trapped in other people’s dreams and to actually lose focus and stay broke because you’re trying to keep up a lifestyle that was never yours to begin with. So in addition to the four things that I mentioned, I made it a point to live life according to my own terms.
And that’s one thing, if you’re in your 20s, your 30s or even if you’re in your 40s, 50s, ask yourself this one question. Apart from telling myself that I don’t have enough income, am I spending…
income on the things that I truly enjoy or am I spending it on other people’s dreams? Let me know what you think about that in the comment section below. I’m based in South Africa and so if you’re watching this from anywhere else in the world, our context is different.
But I hope you can pick one or two things that you can actually apply to your own life. I hope this has been useful and has encouraged at least one of you. If it has, please hit the like button. It really helps out the channel.
It doesn’t cost you a thing. And if you have any questions and you’ve been enlightened in any way, please leave a comment in the comment section. If you haven’t joined the free squad, please subscribe now. Thank you so much for watching.
If you’ve liked this video, then you might like some of the videos that I’ve done on this channel. I’ll link them somewhere up here. I’ll see you there or I’ll see you in my next one. Take care.