It’s no secret that South Africa is a deeply unequal society. It is evident in our everyday life. Take our health care system, for example. Those who can afford it are lucky enough to be treated in a state-of-the-art hospital if (God forbid) something terrible happens to them. The majority of the country, however, has to queue endlessly for drugs – or wait months in a row for simple procedures.
Our poverty gap is also a telltale sign. As vast as a canyon, more than 35,000 wealthy individuals (HNWI) inhabit South Africa. According to New World Wealth analyst Andrew Amoils, this is more than countries like Portugal and Turkey. Despite this, millions of honest and hardworking South Africans live in abject poverty.
Another indication – albeit subtle – is the massive education divide our country sees. In leafy suburbs and wealthier towns, children have the chance to attend good schools – those formerly known as “Model C” schools or, indeed, wealthy private schools. For most children, this is not the case.
This does not change with regard to higher education. The fees are even more exorbitant, with many parents and children having to go into debt to finance their studies. This is more commonly referred to as student loans.
Graduation is a wonderful feeling. You have ‘unlocked’ another stage in your life, where you use the expertise and knowledge gained in college and apply it to your professional life. Starting this with debt is a stressful burden – but very necessary for some. Many South Africans know how difficult it is to get a job, and it is even more difficult without a degree.
Let’s look at a few ways to tackle this student loan debt. First, sit down and review the loan. What do you really need? Not just the loan amount, but also the interest and fees. Once you know what you are dealing with, the challenge becomes easier.
When you applied for a student loan, the terms would no doubt have been explained to you – what you own, your installments, terms, etc. Not only will this reduce your debt faster, it will encourage you to pay off the debt even faster.
Another idea, implemented by a personal friend of mine, was to pay off the loan as quickly as possible. While she was studying, my rather industrial classmate did the very delicate thing of balancing her studies with a job. Although it was extremely difficult for her, she graduated with minimal student loans to repay. Now she has no more debts. It can be difficult to balance a part-time job with your education, but it will pay off (in terms of work experience and student loans).
If it’s too late for the last idea, a second job or a “ side hustle ” is a good way to earn some extra cash. Try to think outside the box and use your skills to make more money. Volunteer to tutor students or school children in a subject you are proficient in, use a skill to create items that people would like to buy, or even sign up to become an Uber driver / delivery driver on weekends. . Again, this is not for everyone. You just might not have the capacity to do it.
As mentioned last week, cutting your budget is also a great way to save money, and this can be funneled into your student loan. Skipping that weekly dinner with friends could be an extra R300 per month that could reduce your debt. If this interests you, consider looking elsewhere. For example, do you really need Netflix and DSTV?
Finally, take it easy on yourself. If debt is a burden that no one wants, sometimes it is a necessary evil. You didn’t need a loan for a lavish car, frivolous credit card bills, or anything equally tasteless. Education is essential. Quite simply, student loans are an investment in yourself that you will pay off slowly. Just use it wisely.
Rocco van Zyl * of Brenthurst Wealth Management shares his expert advice by providing answers to your investment questions.
I would like to know how I can start a small investment portfolio. But what should I choose? Is there someone I should follow?
Since you haven’t defined your definition of a ‘small investment portfolio’, I can’t provide detailed details – but it’s great news that you want to start investing. There are a lot of factors to consider, however, the main goal when starting a small investment portfolio is to add to it regularly. Ideal if you have a lump sum to start with, but contribute regularly to slowly grow your investment.
Time is a very important factor. The effects of compounding can never be taken for granted, especially when considering a long-term investment. Another important consideration is the costs associated with your investment. You should try to minimize fees as much as possible as they can erode your capital.
Make sure you understand your risk profile. Markets can be volatile at times and you need to know how to deal with volatility. If you want to buy stocks directly, check out platforms like Sharenet or EasyEquities. To spread your risk and gain broader exposure to different companies in different industries, consider starting with low-cost exchange-traded funds (ETFs). These funds offer excellent diversification and generally offer relatively low fees.
Have a question about investing in stocks? Write to me at [email protected].
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