How to be a millionaire by the time you are 30

Simon asks: I am in my final year of study and will start working next year. Based on job offers I expect to earn between R10 000 and R15 000 a month. I’m anxious to pay off my student loan as soon as possible in the most cost-effective way, while simultaneously setting up a savings regime that I adhere to on a monthly basis.

– I recently inherited R100 000

– I have a student loan of R20 000 at a fixed interest of 8%. Should I pay the loan off in a lump sum out of my inheritance or to pay in monthly instalments?

– My car is fully paid off and my total expenses should come to R5000 per month.

Maya replies: You are taking a conservative approach to your finances and not planning on splurging once you start earning a salary. This will set you up extremely well for the future.


A while ago I interviewed a man who had managed to save R1 million by the time he was 30 years old. He had a dead normal job, he had simply just started saving from the first cent he earned and continued to save. His approach was to pay himself a ‘salary” for his monthly expenses and invest the rest. His goal is to be able to have the option not to have to work for a salary by the time he is 50. Financial freedom later in life was more important to him than a flashy car or extravagant lifestyle.

It is very possible for you to save R1 million within the next ten years. If you are able to invest R5000 a month in an equity-linked investment like a unit trust or exchange traded fund which should reasonably provide an average return of at least 10% a year – it would be worth R1 million within ten years.

By that time you will possibly take on more financial obligations like buying a house and starting a family and this will impact how much you can save. But the R1 million nest-egg will have set you on a very solid financial footing.

What to consider:
Your budget: Draw up a proper budget so that you know exactly what your monthly expenses are and how much you can invest each month

The student loan: Although 8% is a relatively low interest rate, it is better to pay off the debt using your inheritance. This would effectively give you an 8% return because you would be saving on the interest paid on the loan.

In your email you mentioned that you may consider doing freelance work; not having debt will make you more financially secure in an environment where your income could fluctuate. Some may argue that an investment in the stock market could return higher than 8% – but these are uncertain times and it is an unnecessary risk to take. The money you would have paid monthly towards your student loan can be added to your monthly savings plan.

Inheritance: This is a great start to your savings plan. You need to sit with a financial advisor and identify your savings goals. You may want to set aside some money as an emergency fund and invest the rest for longer-term goals such as a deposit on a home or your retirement.

A money market fund or the Capitec savings account would be a good place for your emergency money. You should consider an equity unit trust or exchange traded fund (see related articles) for longer-term goals. However the markets are quite volatile at the moment so it is advisable to phase the money into the market over several months.

Savings plan: The best way to implement a savings regime that you will adhere to is to set up a debit order that goes off your account before you start spending. You can’t spend money you don’t have.

You need to have a balance between retirement savings and discretionary savings. Retirement savings would be through a company pension fund or a retirement annuity and is very tax effective, but make sure you understand the costs if you opt for an RA. Unit trust RA’s tend to be more cost effective and have greater flexibility.

Your discretionary savings are those savings outside of a retirement structure. These savings can be used for medium-term goals such as a home or children’s education. But it is also important to keep a portion of these discretionary savings for your retirement as they will boost your retirement income and provide for luxuries. It also gives you flexibility if you want to take early semi-retirement for example.

Keep saving: The key to a successful retirement is to keep increasing your savings in line with your salary increase. For example if you get a 10% salary increase, immediately increase your savings by 10%.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information.

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Maya Fisher French
Guest Author

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