5 Money rules for when you start earning a salary

Manage your salary

Managing your salary in a smart way is a skill young people entering the work force have to learn. Frank Magwegwe shares the secret to your first R1 million.

5 Money Rules

  1. Start saving early
  2. Contribute the maximum allowed to company retirement fund (and when you change jobs as you will don’t cash these savings)
    • Save as much as you can, as early as you can, for as long as you can with this pre-tax money.
  3. Spend less than you earn
    • Aim to spend at most 85 cents of every Rand you earn.
  4. Pay yourself first
    • As Warren Buffet says “Do not save what is left after spending, but spend what is left after saving”.
  5. You are your greatest asset
    • Pursue personal growth and learning.

Read more on what to not put in your CV.

Let’s illustrate the benefits of starting to save early with the example of one of my mentees, Jen who is 25 and wants to have accumulated R1 million in savings by 50. How much does she need to save to reach this goal? The answer depends on when she starts:

How much does Jen need to save to reach her goal?

Age Jen starts saving for the goal Number of years to save for the goal Required monthly savings*
25 25 R483.65
27 23 R616.30
29 21 R790.97
31 19 R1,023.98
33 17 R1,339.89
35 15 R1,777.08
37 13 R2,398.48
39 11 R3,314.16
40 10 R3,941.27

*Assumes 10% annual return and 6% annual escalation

The sooner Jen starts to save, the less she has to save! By delaying starting to save for her goal by 10 and 15 years, Jen needs to save 3.7 and 8 times more respectively! By saving more, Jen can reach her goal sooner.

The above math is underpinned by the power of compound interest. To harness the power of compound interest, save as much as you can, as early as you can, for as long as you can.

Are you ready to start saving?

Read about how you can get out of debt.


Frank Magwegwe

Certified Financial Planner, Founder & Managing Director of Thrive Financial Wellness

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