How much money do you earn? And how do you spend it?

Nickster said:
This is fantastic. How did you manage to get your NW up so high ? Is this just based on investments that have paid off over time/ compounding?
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I mentioned the effect compounding had on this in the link below.

I had a lot of average years, a few exceptional years, a few low/no-income years. Very high savings rates on the exceptional years (80% of net), average is closer to 50% saving rate the rest of the time, and negative savings on the low years. Then average compounding of roughly 12%-13% a year over two decades does the rest and on a larger balance each year. Compounding is doing most of the growth for past decade, despite being at peak income.

W

Post in thread 'How much money do you earn? And how do you spend it?'

shadow_man said:
That's assuming you pay 0% tax too.

Which is why I can't see it.
You'd need to be at that same pay bracket for a hell of a long time and very early on in your career.

Mid 40's - let's assume 45.

45 - 18 = 27 --> then you'd need to be at that pay level from the start --> maintain it (and hope for good investment growth).
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Here's a thought experiment to help show the importance of compounding and the benefits of capital growth.

Assume a reasonable equity return 12% annual growth rate on investments (CPI+5%). Blend of JSE and offshore indices over past decade would have achieved...
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Wikus_Rikus said:
Here's a thought experiment to help show the importance of compounding and the benefits of capital growth.

Assume a reasonable equity return 12% annual growth rate on investments (CPI+5%). Blend of JSE and offshore indices over past decade would have achieved that, no crypto.
In a 6 year period, an R11.5m balance would have grown to R23m on capital growth alone. No contributions over those 6 years.
Tax rate, since no sales? 0.

Over a 20 year period, the starting balance would've needed to be R2.4m growing at that 12% rate, without any contributions. Obviously I didn't start with R2.4m, but I did lots of contributions. Compounding however made a huge difference and monthly swings can now dwarf any savings. A minor 1.5% swing up or down in a month is more than I can earn...

My point: in the beginning it was from saving hard, keeping expenses low, growing my salary, banking all bonuses, a very slow slog. Minor impact if your investment goes up 10%-20% if it's on R500k, your savings make the bigger impact. The growth is mostly linear with what you can save after tax.

Once it got to a decent net worth (>R5m) the compounding took over (and importantly at close to 0% tax since no sales), and exceeds the amounts I can save, since 12% on R20m+ is now R2.4m increase and very hard to earn after tax. Now the growth is exponential and no longer linear.
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Yeah, for the last two years I've been up R2.5m each year on a cost-of-living of R500k. So, each year has bought me 5 years' worth of expenses or thereabouts.
 
I’m expecting that my investment income will exceed my work income in the next year or two. Should be on track, unless the market crashes, or I get a massive increase (I would prefer the latter…).
 
Juanado said:
My guess is a pretty consistent investment of around R30k to R50k a month, with some bonuses sprinkled in. But that’s only possible when you live below your means.
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This is somewhat in line with what my wife and I save per month. We save on average R40k per month between RA's, TFSA, Multi deposit's and buying shares.
 
whatwhat said:
Tech stocks have been doing exceptional the last 1-2 years. So if you picked right, you are absolutely balling right now.
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Nope - stock picking isn’t the way to build wealth. And looking at the past and saying that’s repeatable doesn’t work either.
 
Juanado said:
Nope - stock picking isn’t the way to build wealth. And looking at the past and saying that’s repeatable doesn’t work either.
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Most of the people I know who have become wealthy from owning specific stocks have done it entirely by accident due to working at the company, getting RSUs at the company, and not having the sense to diversify.
 
Juanado said:
Do you stock pick?
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Yes and no. My TFSA is mainly invested in S&P500, Nasdaq, Eurostox and global etf's etc. My normal shares acc, I buy shares in companies that I trust. I'ts a hit and miss with overs and unders but the combined share portfolio for shares ecluding etf's has been averaging 10-11% growth year on year. Usually when a share = more than 1% of my shares portfolio, I sell some of the shares and move it into something else. I have about 91 different types of shares.
 
8letters said:
Yes and no. My TFSA is mainly invested in S&P500, Nasdaq, Eurostox and global etf's etc. My normal shares acc, I buy shares in companies that I trust. I'ts a hit and miss with overs and unders but the combined share portfolio for shares ecluding etf's has been averaging 10-11% growth year on year. Usually when a share = more than 1% of my shares portfolio, I sell some of the shares and move it into something else. I have about 91 different types of shares.
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Sounds like you’re running on a hamster wheel with far too much activity to underperform the index. Your TFSA alone is invested in too many things. 91 positions is crazy.
 
cguy said:
Most of the people I know who have become wealthy from owning specific stocks have done it entirely by accident due to working at the company, getting RSUs at the company, and not having the sense to diversify.
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Success bias. This is not a sustainable way to build wealth. Having all your eggs in your employer’s basket is so silly.
 
Juanado said:
Yeah, for the last two years I've been up R2.5m each year on a cost-of-living of R500k. So, each year has bought me 5 years' worth of expenses or thereabouts.
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I didn't see where you detail your family unit and associated cost of living.
But the cost-of-living you specify is extremely low for even a small family living a 'middle-class' lifestyle.
On my side, R500k covers school fees, medical aid, and insurances (life, short term etc).
That's before I've paid for a millitre of petrol, a kwh of electricity, rates & taxes, etc.
And long before a grocery shop, an extra-mural, a visit to a medical specialist.
 
hellfire said:
I didn't see where you detail your family unit and associated cost of living.
But the cost-of-living you specify is extremely low for even a small family living a 'middle-class' lifestyle.
On my side, R500k covers school fees, medical aid, and insurances (life, short term etc).
That's before I've paid for a millitre of petrol, a kwh of electricity, rates & taxes, etc.
And long before a grocery shop, an extra-mural, a visit to a medical specialist.
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You can see my previous years’ posts on how I spend… but I’m single with no kids which makes things a lot easier. I don’t intend to have kids either. House is paid off :)
 
Juanado said:
You can see my previous years’ posts on how I spend… but I’m single with no kids which makes things a lot easier. I don’t intend to have kids either. House is paid off :)
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Yeah - family utterly drains disposable income. And responsible use of disposable income is what people can use to save and invest.
 
Juanado said:
Sounds like you’re running on a hamster wheel with far too much activity to underperform the index. Your TFSA alone is invested in too many things. 91 positions is crazy.
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Define normal🤣😆. Hey , atleast I'm diversified. I've not even discussed my crypto portfolio yet... thats an even bigger mess🤣🤣🤣 on paper.
 
8letters said:
Define normal🤣😆. Hey , atleast I'm diversified. I've not even discussed my crypto portfolio yet... thats an even bigger mess🤣🤣🤣 on paper
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I think you’re over engineering and ending up with an actively managed portfolio that’s sub optimal
 
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