Become a millionaire. It’s easier than you think

Quey_Quick

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Dec 4, 2007
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2,868
you also need to make sure your property isn't valued too high either if you wanna jump onto the RSA Pension payout each month when you hit 60
If your property is worth more than R1 115 400 (R2 230 800 if married) then you do not qualify for the free R1780 per month from Government

No thanks, I don't trust this government with my retirement.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,199
Investing R4k per month to have a bar in 10 years and 2 in 20, might help with retirement... and is better than just leaving it in the bank.
The second bar comes in about 5 years though, and the enxt one even faster. By 20 years you're alt almost 5 bar.

The average South African also aren't financial savvy and can blow a million pretty quickly.
This is the sad thing. South Africans as as great at hustling as they are at finding something to spend their money on. On a recent trip to SA I realised that almost no one I know is even thinking about how they're going to afford to retire, let alone become financially secure before then. If they are saving at all, it's for the next thing, or the next holiday. Among all my friends, and all my family, I know of four who are either able to retire comfortably (one just did) or working towards it.

What's worse is, for all of SA's problems, SA has possibly one of the best complement of financial products for the average person to build wealth. Fixed deposits return well above inflation - this is unheard of in most countries. Financial regulation is very tight and very much favours the consumer. The addition of TFSA is a cherry on the top.
 

Urist

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Mar 20, 2015
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3,341
This is the sad thing. South Africans as as great at hustling as they are at finding something to spend their money on. On a recent trip to SA I realised that almost no one I know is even thinking about how they're going to afford to retire, let alone become financially secure before then. If they are saving at all, it's for the next thing, or the next holiday. Among all my friends, and all my family, I know of four who are either able to retire comfortably (one just did) or working towards it.

What's worse is, for all of SA's problems, SA has possibly one of the best complement of financial products for the average person to build wealth. Fixed deposits return well above inflation - this is unheard of in most countries. Financial regulation is very tight and very much favours the consumer. The addition of TFSA is a cherry on the top.
Think many of those saffas who can afford to put something away are too afflicted by weltschmerz to plan far ahead.... it's like "what's the use?" everything is going to **** anyway, Might as well spend recklessly and try to enjoy the ride.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,199
Quick summary of what's possible with an ordinary bank account. Taking urist's 4k per month, but going with the best interest rate I can find on a fixed deposit (thanks Africa Bank). They offer 10.75 pa on 60 months, but lets round that down to make it wasy with whole numbers.

So 4k per month at 10% pa, paid monthly (nominal rate). Last column is total interest accrued.

YearPer monthSavedBalanceInterest accrNotes
14,00048,00050,5622,562
24,00096,000106,18010,180
34,000144,000167,36023,360
44,000192,000234,65842,658
54,000240,000308,68668,686
64,000288,000390,177102,117
74,000336,000479,691143,691
84,000384,000578,223194,223
94,000432,000686,607254,607
104,000480,000805,830325,830
114,000528,000936,975408,975
124,000576,0001,081,235505,235First million!
134,000624,0001,239,920615,920
144,000672,0001,414,475742,475Doubled your money!
154,000720,0001,606,484886,484
164,000768,0001,817,6951,049,6951st mil in interest
174,000816,0002,050,0271,234,027Second million!
184,000864,0002,305,5921,441,592
194,000912,0002,586,7131,674,713
204,000960,0002,895,9461,935,946
214,0001,008,0003,236,1032,228,1033rd million
2nd mil in interest
224,0001,056,0003,610,2762,554,276
234,0001,104,0004,021,8662,917,8664th million
244,0001,152,0004,474,6143,322,6143rd mil in interest
254,0001,200,0004,972,6383,772,638
264,0001,248,0005,520,4644,272,4645th million
4th mil in interest
274,0001,296,0006,123,0734,827,0736th million
284,0001,344,0006,785,9425,441,9425th mil in interest
294,0001,392,0007,515,0986,123,0987th million
6th mil in interest
304,0001,440,0008,317,1706,877,1708th million

The point of this is compounding. 10% interest might not sound like much when you're looking at R4000 over a year. But if you put that R4000 away consistently year after year, it starts adding up, and pretty soon the bank is throwing money at you.

The first million took 139 months
The 2nd million took 64 months
The 3rd million took 42 months
The 4th million took 23 months
The 5th million took 25 months
The 6th million took 21 months
The 7th million took 18 months
The 8th million took 16 months
The 9th million took 14 months
The 10th million took 12 months

That's right. At that point you're minting a million a year. The growth is even more staggering if you increase the R4000 every year by even just 10% (so 4040, etc) - a whole million more at the end.

The three thing I wish someone told me when I was young:

1) Live as cheaply as possible - lifestyle inflation is the enemy
2) Stay out of dept. These days I'm not even convinced a mortgage is justified.
3) Save as much as possible and let the money make money babies.
 

newby_investor

Expert Member
Joined
Aug 8, 2018
Messages
2,210
Quick summary of what's possible with an ordinary bank account. Taking urist's 4k per month, but going with the best interest rate I can find on a fixed deposit (thanks Africa Bank). They offer 10.75 pa on 60 months, but lets round that down to make it wasy with whole numbers.

So 4k per month at 10% pa, paid monthly (nominal rate). Last column is total interest accrued.

YearPer monthSavedBalanceInterest accrNotes
14,00048,00050,5622,562
24,00096,000106,18010,180
34,000144,000167,36023,360
44,000192,000234,65842,658
54,000240,000308,68668,686
64,000288,000390,177102,117
74,000336,000479,691143,691
84,000384,000578,223194,223
94,000432,000686,607254,607
104,000480,000805,830325,830
114,000528,000936,975408,975
124,000576,0001,081,235505,235First million!
134,000624,0001,239,920615,920
144,000672,0001,414,475742,475Doubled your money!
154,000720,0001,606,484886,484
164,000768,0001,817,6951,049,6951st mil in interest
174,000816,0002,050,0271,234,027Second million!
184,000864,0002,305,5921,441,592
194,000912,0002,586,7131,674,713
204,000960,0002,895,9461,935,946
214,0001,008,0003,236,1032,228,1033rd million
2nd mil in interest
224,0001,056,0003,610,2762,554,276
234,0001,104,0004,021,8662,917,8664th million
244,0001,152,0004,474,6143,322,6143rd mil in interest
254,0001,200,0004,972,6383,772,638
264,0001,248,0005,520,4644,272,4645th million
4th mil in interest
274,0001,296,0006,123,0734,827,0736th million
284,0001,344,0006,785,9425,441,9425th mil in interest
294,0001,392,0007,515,0986,123,0987th million
6th mil in interest
304,0001,440,0008,317,1706,877,1708th million

The point of this is compounding. 10% interest might not sound like much when you're looking at R4000 over a year. But if you put that R4000 away consistently year after year, it starts adding up, and pretty soon the bank is throwing money at you.

The first million took 139 months
The 2nd million took 64 months
The 3rd million took 42 months
The 4th million took 23 months
The 5th million took 25 months
The 6th million took 21 months
The 7th million took 18 months
The 8th million took 16 months
The 9th million took 14 months
The 10th million took 12 months

That's right. At that point you're minting a million a year. The growth is even more staggering if you increase the R4000 every year by even just 10% (so 4040, etc) - a whole million more at the end.

The three thing I wish someone told me when I was young:

1) Live as cheaply as possible - lifestyle inflation is the enemy
2) Stay out of dept. These days I'm not even convinced a mortgage is justified.
3) Save as much as possible and let the money make money babies.
10% on cash is ... uncommon. Normal money-market accounts are usually 7%.

The caveat to fixed deposits is that to get the high interest rates you usually have to have a fairly substantial sum already (OK it seems this isn't the case with African Bank), and you can't add more money after the fact. See their terms: https://africanbank.co.za/en/home/product-fixed-deposit-investment/
This particular product pays the interest out to your cheque account, it doesn't re-invest. It's more useful for a retiree with a large amount of capital that they need an income from.

(I think some like FNB offer a "flexi" fixed deposit which you can "top up" during the course of the term, but the interest rates are usually rubbish.)

You could work something like this by putting your money in a normal savings account for the whole year, then every 12 months starting a new 60-month fixed deposit. I have extended family in Eastern Europe who, in the absence of proper options for retirement annuities etc. resort to stuff like this to build up capital.

Having said all that, you do also need to take inflation into account. So in short, this effort is an interesting demonstrator of the power of compound interest, but it's not really realistic. With inflation being around 5% (let's be generous here), the actual purchasing power of your R8M-odd amount at the end is substantially lower. It would be equivalent to roughly R3M of today's money. This is one of the reasons that most RAs are invested highly into equities, which in the long-term can provide higher returns than cash (though more unpredictable). The problem with this is that we have no way to model that - straightforward finance formulas don't work when your rate of return varies with time.

All that being said - spend less than you earn! Save the difference! In the long term you will be grateful.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,199
10% on cash is ... uncommon. Normal money-market accounts are usually 7%.

The caveat to fixed deposits is that to get the high interest rates you usually have to have a fairly substantial sum already (OK it seems this isn't the case with African Bank), and you can't add more money after the fact.
You're right, it's the same with most (when did this start?). Probably a poor example, but I was looking for a round number to demonstrate compounding. I would not advise anyone seriously put all their money in a savings account alone. There are decent well-diversified ETFs that do a much beter job.

Having said all that, you do also need to take inflation into account. So in short, this effort is an interesting demonstrator of the power of compound interest, but it's not really realistic. With inflation being around 5% (let's be generous here), the actual purchasing power of your R8M-odd amount at the end is substantially lower. It would be equivalent to roughly R3M of today's money
Of course, but you'll notice R3m is still more than double the total amount saved in this example. If a person consistently saves and increases their savings in line with inflation, they'll be way ahead of inflation by the time they retire.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,199
I believe interest is added to your income, so it depends on your top tax bracket.

In a TFSA, nada.
 

cguy

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Joined
Jan 2, 2013
Messages
5,730
You're right, it's the same with most (when did this start?). Probably a poor example, but I was looking for a round number to demonstrate compounding. I would not advise anyone seriously put all their money in a savings account alone. There are decent well-diversified ETFs that do a much beter job.



Of course, but you'll notice R3m is still more than double the total amount saved in this example. If a person consistently saves and increases their savings in line with inflation, they'll be way ahead of inflation by the time they retire.
You left out taxation from your computation.
 

cguy

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Jan 2, 2013
Messages
5,730
I believe interest is added to your income, so it depends on your top tax bracket.

In a TFSA, nada.
The amount you are putting in there exceeds the TFSA max contribution by a bit.

Also, the real inflation rate is definitely higher than advertised. I could buy 3 houses like the one I have in Cape Town for R1m a bit over 20 years ago (when I bought it), today R1m could only buy 1/3rd of the house. Closer to 12% in that market.
 

koffiejunkie

Executive Member
Joined
Aug 23, 2004
Messages
9,199
You left out taxation from your computation.
The amount you are putting in there exceeds the TFSA max contribution by a bit.
Hey, did you not understand the bit about this being a demonstration of compounding? You realise you can put some of the money in a TFSA and the rest in a regular account and add them totals together, right?

Also, the real inflation rate is definitely higher than advertised. I could buy 3 houses like the one I have in Cape Town for R1m a bit over 20 years ago (when I bought it), today R1m could only buy 1/3rd of the house. Closer to 12% in that market.
Property in high-demand areas is not a measure of inflation in general. It is only a measure inflation for property in high-demand areas. Let's not forget what the I in CPI stands for. Some things are going to be getting more expensive at a rate higher than inflation, and some things are going to be under that.

I'd hazard a guess that the demographic most likely to spend time nitpicking over tax implications on a forum like this, is probably going to be more likely to buy the kind of items that have increased beyond inflation.
 

Moto Guzzi

Senior Member
Joined
Apr 24, 2004
Messages
930
Quick summary of what's possible with an ordinary bank account. Taking urist's 4k per month, but going with the best interest rate I can find on a fixed deposit (thanks Africa Bank). They offer 10.75 pa on 60 months, but lets round that down to make it wasy with whole numbers.

So 4k per month at 10% pa, paid monthly (nominal rate). Last column is total interest accrued.

YearPer monthSavedBalanceInterest accrNotes
14,00048,00050,5622,562
24,00096,000106,18010,180
34,000144,000167,36023,360
44,000192,000234,65842,658
54,000240,000308,68668,686
64,000288,000390,177102,117
74,000336,000479,691143,691
84,000384,000578,223194,223
94,000432,000686,607254,607
104,000480,000805,830325,830
114,000528,000936,975408,975
124,000576,0001,081,235505,235First million!
134,000624,0001,239,920615,920
144,000672,0001,414,475742,475Doubled your money!
154,000720,0001,606,484886,484
164,000768,0001,817,6951,049,6951st mil in interest
174,000816,0002,050,0271,234,027Second million!
184,000864,0002,305,5921,441,592
194,000912,0002,586,7131,674,713
204,000960,0002,895,9461,935,946
214,0001,008,0003,236,1032,228,1033rd million
2nd mil in interest
224,0001,056,0003,610,2762,554,276
234,0001,104,0004,021,8662,917,8664th million
244,0001,152,0004,474,6143,322,6143rd mil in interest
254,0001,200,0004,972,6383,772,638
264,0001,248,0005,520,4644,272,4645th million
4th mil in interest
274,0001,296,0006,123,0734,827,0736th million
284,0001,344,0006,785,9425,441,9425th mil in interest
294,0001,392,0007,515,0986,123,0987th million
6th mil in interest
304,0001,440,0008,317,1706,877,1708th million

The point of this is compounding. 10% interest might not sound like much when you're looking at R4000 over a year. But if you put that R4000 away consistently year after year, it starts adding up, and pretty soon the bank is throwing money at you.

The first million took 139 months
The 2nd million took 64 months
The 3rd million took 42 months
The 4th million took 23 months
The 5th million took 25 months
The 6th million took 21 months
The 7th million took 18 months
The 8th million took 16 months
The 9th million took 14 months
The 10th million took 12 months

That's right. At that point you're minting a million a year. The growth is even more staggering if you increase the R4000 every year by even just 10% (so 4040, etc) - a whole million more at the end.

The three thing I wish someone told me when I was young:

1) Live as cheaply as possible - lifestyle inflation is the enemy
2) Stay out of dept. These days I'm not even convinced a mortgage is justified.
3) Save as much as possible and let the money make money babies.
In practical theory never tested before:
How would your calculation realise if EVERY INDIVIDUAL in a monetary system follow this advice and do this with no exception-?
 

3WA

Executive Member
Joined
Sep 25, 2012
Messages
8,458
In practical theory never tested before:
How would your calculation realise if EVERY INDIVIDUAL in a monetary system follow this advice and do this with no exception-?
If that were to happen, I would immediately move my money into shares for the holding companies for Tymebank and African Bank, and try to escape before that bubble pops.
 

Moto Guzzi

Senior Member
Joined
Apr 24, 2004
Messages
930
If that were to happen, I would immediately move my money into shares for the holding companies for Tymebank and African Bank, and try to escape before that bubble pops.
I tend to agree with you, in my opinion the "Success of Investment" is based on the fact that most wont do it, and those that do do it in staggered stages relative to each other, and needs to use it in staggered requests also.
So a lot plays out in your head as a PROMISE over time, rather that a real payout cash in your hand.

If for arguments sake this do happen for each individual, I would expect slow predictable cycles, and children leaving school actually seeing a future, the world would be a marvelous sustainable place to live,....till capitalism is abandoned.
 
Last edited:

cguy

Executive Member
Joined
Jan 2, 2013
Messages
5,730
Hey, did you not understand the bit about this being a demonstration of compounding? You realise you can put some of the money in a TFSA and the rest in a regular account and add them totals together, right?
Yes, but then the index for the compounding is effectively lower than you made it out to be.

Property in high-demand areas is not a measure of inflation in general. It is only a measure inflation for property in high-demand areas. Let's not forget what the I in CPI stands for. Some things are going to be getting more expensive at a rate higher than inflation, and some things are going to be under that.
This is not a particularly high demand area. Unless, as someone who can save R48k/y, you spend a surprisingly large percentage of your earnings on bread and meat, you should probably scale the CPI up some.

The purpose of my post: Yes, this is yet *another* of 100 "demonstrations of compounding" interest that have been shown on this forum and others. It is presented as a magical way to make money (you said "throwing money at you"), when in reality, the vast majority of these demonstrations disingenuously use unlikely high annual returns, ignore inflation and the fact that inflation also compounds, ignores taxation, and in the case when there are actual high annual returns, ignores the fact that this is a product of both currency risk and inflation.

There is no free lunch.

I'd hazard a guess that the demographic most likely to spend time nitpicking over tax implications on a forum like this, is probably going to be more likely to buy the kind of items that have increased beyond inflation.
I'd hazard a guess that those who don't, inevitably spiral downwards into a financial void constructed from their own numeric inadequacy.
 
Last edited:

bratwurst

Expert Member
Joined
Oct 15, 2008
Messages
4,152
Something most people are brainwashed with.

Make big student loans
Save 10-20% of your income
Buy cheap cars
Cancel all luxury treats
Don't buy expensive food and drinks
Save and penny pinch your life way
Trust in pensions, stock markets until you what, 60/65 so you can retire "rich"? Also called wealth in a wheelchair :)

Just no. You have been hoodwinked by financial gurus. You're not in control of your wealth by investing in unpredictable and uncontrollable markets.
 

newby_investor

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Joined
Aug 8, 2018
Messages
2,210
Something most people are brainwashed with.

Make big student loans
Save 10-20% of your income
Buy cheap cars
Cancel all luxury treats
Don't buy expensive food and drinks
Save and penny pinch your life way
Trust in pensions, stock markets until you what, 60/65 so you can retire "rich"? Also called wealth in a wheelchair :)

Just no. You have been hoodwinked by financial gurus. You're not in control of your wealth by investing in unpredictable and uncontrollable markets.
And so the smart alternative is... ?
 

bratwurst

Expert Member
Joined
Oct 15, 2008
Messages
4,152
And so the smart alternative is... ?
Someone above posted a calculation if you were to save 4000 for 374 months you'd mint a million from it yearly. That's after 30 years. Wow.

Start your own business. Start another. Hustle for a few years and you could net far more. You control your wealth.

By all means, diversify. Don't keep all your eggs in one basket. Telling young people to just save and invest to supposedly be "rich" when they are in a wheelchair is just pure hogwash.
 
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