Today we explore how to become a millionaire on an average salary of R27,000! No way! Are you serious!? I don’t believe you! I need to phone a friend!
“Who wants to be a Millionaire?” is a popular TV game show franchise that has entertained South Africans for many years.
What if I told you there was a better way to become a millionaire than trying your luck on a game show?
The game show relies on contestants having great general knowledge, luck, and little help from their friends. As we have seen, very few contestants make it onto the show, and even fewer get the million Rand.
The average salary according to the most recent Stats SA data (Nov-23) is R27,000. The basic amount after PAYE and UIF is about R23,000.
So, is it really possible to become a millionaire on this salary? The short answer is yes and it is easier than chancing it on the “Who wants to be a Millionaire” way, but it will take commitment, consistency, and being intentional! You will need to exercise money mindfulness to achieve this and play the long game, but yes, it is totally possible!!
To become a millionaire, it takes saving R6000 a month with an after-tax return of 8%. If you do this consistently over 10 years you WILL be a millionaire. Oh, and you need to really avoid taking out credit, unless it provides you with an asset, like a house, for instance, or education which can help you grow your wealth. Easy credit destroys your ability to generate wealth by taking away your ability to save for yourself and instead, you end up spending your savings with credit providers.
R6000 on a gross salary of R27,000 is 22%. That may be a challenge, but it is doable. Traditionally, companies have assisted employees by putting 10% - 12.5% of their income into a pension saving fund, however this does not stop you saving more than this. If 22% is too much of a challenge, as your income increases with annual adjustments or promotions keep increasing your saving contributions a little each time. Do this, rather than increasing your expenses, and you will succeed.
Saving more than 10% should be your aim. We have experienced a severe loss of earnings power in recent years due to the impact of high inflation. Since 2019 the compound effect of inflation has meant that our expenses cost 25% more than they did five years ago. This has degraded the real value of our savings, and we need to save more to offset this effect.
Two great solutions are available to maximise your savings; retirement annuities and tax-free savings accounts. You can invest up to 27.5% of your gross income into a retirement annuity. This will significantly reduce the PAYE tax that you would have to pay!
Money you save in a tax-free savings account is not deductible against your PAYE but the interest you earn on what you save is tax-free. If you are saving but not saving into a tax-free savings account currently, you may be missing out. You can save in bank deposits or save into unit trusts that have exposure to equities, also called shares.
Investments in equities probably provide you with a better chance of achieving the 8% returns necessary to get to your goal of being a millionaire in 10 years.
So, there is a clear path to becoming a millionaire. There are great investment tools to help you get there. Relook at your current expenses and rearrange your finances to put away that R6000 per month. Go on, make the changes necessary to increase your investment in your future life.
Don’t be a millionaire in training but rather a millionaire in saving. Begin today!
Reach out to one of our independent and professional financial advisors on 087 183 5012 or email info@zenmunni.co.za for more information on how to invest and start your journey of becoming a millionaire.
*This article aims to provide financial education and does not constitute financial advice.
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