I kinda paid off all my educational debt.
I’m kinda excited about this.
This is going to be a very long post, so feel free to skip if for the fluffier stuff about food.
At the start of my internship I had a very specific set of goals. Some were personal, some were professional, some were financial.
The financial goals were the product of multiple factors. Firstly, my innate predisposition towards not having debt (which itself was informed by a childhood of near-misses with a less financially secure, heavily indebted single parent and spendthrift siblings, contrasted by better examples of “poorer” relatives who lived comfortably within their means). Secondly, a traumatising graduation experience that included months of sweating that my debt would keep me from being able to participate in final exams and graduation, and culminating with me walking the stage to receive a tube containing not my degree, but rather a fees-owed statement that really made the entire day less joyful than it could have been. Thirdly, a month-long post-graduation personal finance pilgrimage (in the comfort of my home of course, but made international by the power of the internet) which led me to devouring a lot of local and international information from several sources (I’ll do a post on that in future) specific to my circumstances.
I gleaned a lot of useful information that made me quite adamant to be intentional about my finances. Before, I never realised that money was in fact a very big driver of how we spend our time. People spend as much time at work as they (should) do sleeping, leaving just under a third of the day to the other more meaningful parts of life and living. Life experiences are sacrificed on the alter of “leave approval” and the fear of lost income should you take the unpaid options. We stay where we know we are disrespected and underappreciated because someone has to pay the bills (and fund the lifestyle.)
That’s not to say work in and of itself is meaningless. Especially in the field of healthcare, it’s easier to see the inherent value added to communities and society at large despite long hours and sleep deprivation that medical interns specifically have to endure. The time you take as an intern to really explain the conditions to patients, to thoroughly examine them, to say more than just “Mama, sign here for the operation“; all of this because interns start off fresher, more enthusiastic and generally less jaded than MO’s and other senior personnel. I know the work is meaningful when a previously non-compliant patient comes in with serially controlled HGTs because now they understand why they need to take their medication regularly, and I know I played a role in that. I know that what we do adds value when it’s packed in casualty and yet we still manage to stabilise all the MVA patients so that they can get the necessary care and investigations going forward. I know the value of talking to the teenage pre-eclamptic primigravida throughout her caesarian section after administering a successful spinal, allaying her concerns and hopefully planting the seed for a different set of decisions in the future.
But this is value that I’d rather provide on a full night’s sleep with the option to actually eat more than one meal within an eighteen to twenty-four hour period. It’s value that I would like to contribute within the scope of my own mental and physical wellbeing and human rights–such as the basic right to safe working conditions, something the medical profession, particularly in public service, is very selective about who it is afforded to.
Being financially independent means being able to say no to the more ridiculous ways employer’s try to make you earn your salary in exchange for your time. You can focus on the patients, on the medicine, and not be backed into a corner out of fear of losing your income. Ultimately, this is the goal.
Buuuuuut that’s not what this post is about. So let’s get to the juicy financial vouyerism.
My starting place:
I started my internship with six figures in student debt. I may share the specifics in a future post, but for now what I will say is that it was rather modest amount for my degree. This is due to a few factors:
- Bursaries: I qualified at the end of my matric year for a merit bursary that was renewable annually provided I met certain academic requirements. I made sure throughout my degree to meet these requirements with a margin just in case the Terms and Conditions changed at any point. In my fourth year they did, but I was grandfathered into my old bursary terms because I’d managed to maintain good grades throughout. The bursary was worth R40000 p.a. which just about covered what I needed for tuition until the fee hikes started getting out of control.
In my senior year (SI year) I qualified for an additional Senior Merit Bursary. That meant I owed R10000 less by the time I had to square up.
- Familial help: My mother covered the surplus (which was mostly living expenses and non-tuition educational expenses) for about three and a half years. Then the bottom fell out of our familial financial situation and I had to make new plans.
- Honesty: I never qualified for financial aid. Institutions take your household income into account and don’t really care if that income is being decimated by debt. I was never willing to lie for the needs assessment (e.g. although I lived many years with my pensioner grandmother, I never made her primary breadwinner because it simply wasn’t true) and I still don’t regret this. There probably was someone who needed NSFAS or certain needs-based scholarships more desperately than I did, and I didn’t want to be yet another person locking them out of the system out of greed. In the end this was probably a good thing because I may have lived way outside of my means if I had a monthly stipend that was “tomorrow’s problem” to pay back. I also might not have the freedom I do now to ‘decide’ where I want to work after internship…
- Part-time work: I worked several jobs for the university to earn (very little) part-time income. This mainly went to the ridiculous costs of medical equipment (stethoscope, dissection kit, labcoats, ENT kit) and a little towards textbooks.
- Cutting expenses: I stopped buying textbooks when I stopped being able to ‘afford them’. When money at home started drying out, I borrowed textbooks from senior friends and occasionally classmates. I also studied in groups which gave me access to some printed material and extra resources that I would not have been able to afford. It was inconvenient and frustrating at times (think exams) but doable.
I also never considered my student card to be a credit card to fund my lifestyle. On really tight months I may have charged a few meals at the student center to it, but I generally used that thing to access the hospital and library and nothing more. If I’d swiped it freely I may not have ever been to crush the debt quite so swiftly. Not considering living exoenses as part of my “educational expenses” played a major part in minimizing my personal debt load.
My Financial Priorities
So while I mainly want to celebrate paying off my debt, I do want to draw some attention to other aspects of my broader financial plan for my first year of internship. I do this because maybe there is a final year medical student reading my blog trying to be proactive about how they’ll manage going from zero to relative hero in a few months’ time. The loudest examples are the instagram doctors with their fashionable wardrobes, multiple cars, multiple homes and vacations. What we don’t see is how (or if) they planned and saved for these things, how their side-hustles and/or generation wealth finance a huge portion of their lifestyles (nothing is wrong with either, by the way!) and how beginners could end up in serious debt trying to replicate these posters with the starting salary we get, especially with high interest debt on board. So here is a look at a different way of prioritising that intern paycheck looking at the commitments I set for myself:
- I committed to getting into the habit of saving from day one.
The minimum that I set for myself for the first two to three months was 20%. Well, that’s not entirely true. I just picked a random Rand amount that made sense considering points 2, 4 and 5 below and realised it eventually amounted to just over that much in hindsight. In fact, writing this post and looking back over my records (more on that later) is what made me calculate the actual percentage of money saved those first few months. But it wasn’t the exact figure that mattered. It was the principle. By paying myself first (technically not first considering other set percentages come off before I even think of my money as my own, but first for the purpose of Personal Finance speak), I never factored that money into “money I had”. I stashed it away and then worked with what was left. Later on, as I started setting goals, I realised it was actually too little (I wasn’t saving for retirement yet, for example), but because I was already in the habit it was easier for me to start making adjustments. (Point 5 was also a huge help!)
Six months later, I’m saving over half of my gross salary each month.
- I committed to getting out of debt.
I remember meeting with financial advisers throughout my final year and sharing my goal to be debt free within a year of graduating. Most of them scoffed at me (politely) and pointed out that it would take a while for me to adjust to my first salary and it would be better to space it out over three years if I really wanted to be ambitious. Until I got my first salary in my bank account, that was my plan. But then I did the math, saw how much interest I was paying, and decided that no amount of lifestyle inflation would justify keeping that debt longer than I had to. So I ramped it up from the smaller payments to nearly triple the amount monthly, and made two large lump sum payments from my savings whenever I felt I had too much sitting in cash getting minimal interest, which was an effective guaranteed return at my balance’s interest rate. The first lump sum gave me palpitations; the second gave me freedom.
Six months later, I’m finally DEBT FREE. (And waiting for my degree in the mail)
- I committed to maxing out the SARS Retirement Allowance.
This particular one came with multiple fails. I didn’t start saving/investing for retirement from my first paycheck (or second…or third…or…) due to some analysis paralysis. I didn’t take the GEPF with the double match (which would have filled about a third of the allowance total) because I was convinced by less savvy seniors that it wasn’t a safe/sound option–and I’m loathe to correct that before the next tax year/cycle because our HR department is the stuff of nightmares and future tax headaches, but that’s a whole different post entirely. I didn’t factor the cost-of-living increase civil servants got in March/April into my calculations (because, again, our HR department sucks) and so my monthly contributions are set to slightly below the planned amount.
But I’ve started now and that’s what matters. I’m saving up the 0.5% shortfall and enough to make up for the months I wasn’t contributing to my RA so that I can lump sum it around year end (hopefully) to ensure I save exactly 27.5% of the tax-deductibe retirement savings allowance given by SARS before the tax year ends. This one’s a work in progress, but something is better than nothing.
Six months later, I’m on track to saving 27.5% of my gross salary (the maximum tax-deductible allowance), which is included in my overall savings rate.
- I committed to being generous.
This particular one was a painful growing process. A big motivator for me throughout school was the guilt that I felt at the amount of debt my family was drowning in to fund my siblings’ and my education. I always would tell my mother that my first salary I would take her on a trip or something equally fluffy. I promised to help her get back on her feet. I didn’t realise that, towards the end of my degree, everyone stopped trying. People stopped paying their debts. Different family members stopped managing their living expenses. Then my salary came in and the phone started ringing.
At first, I was more than happy to help. We had a plan. We would fight the debt and get control of our lives again. But then I realised that the biggest (and sometimes only) part of the war plan involved me sacrificing up to a third of my salary. Monthly. Indefinitely. There was no end-game. Nobody wanted to get rid of assets that had become liabilities and cash-flow drains. I was just expected to pour cash into a never ending pit while nothing changed. I decided that, guilt or no guilt, that wasn’t going to be a habit I would let people get into.
Being assertive with family was (and still is) one of the hardest things for me to do. Because I feel so many layers of guilt (including a bizarre form of survivor’s guilt) I often just want to say yes to everything. I’m not perfect. Last month I agreed to something I’d promised myself I wouldn’t cave to. Two months ago I was basically receiving phone calls that made me feel like I was considered an alternative to an actual Emergency Fund! But I know that it’s important to operate from a place of love instead of guilt–and if you love people you don’t want to enable them with your acts of generosity. You want to empower them. You want to equip them. You want to be honest with them. And you want them to have the autonomy that comes with not having to answer to you or anyone else for how they choose to spend their money. That starts with them actually spending, well, their money.
Six months later and I’m still a work in progress. I never want to be stingy, but I never want to become a crutch. Pray for me bazalwane.
- I committed to living within my means.
This one is controversial. Just a few days ago a colleague practically grabbed my shoulders and shook me trying to convince me to “go shopping! Spend your money!“. It was irrelevant to this person that I have no interest in shopping–or, better stated, that shopping is not important to me. The only time I enjoy shopping centres is when I’m filling up on groceries. I like food, but you can’t wear food and you can’t see food so to most people it doesn’t count.
This colleague didn’t care that I was focused on specific goals (debt repayment, retirement savings, Emergency Fund savings and saving for future expenses like a holiday away.) They didn’t care that when I actually want something, I get it. (Hello Lemonade: The Visual Album. Hello impromptu road-tripping with friends. Goodbye Mariah Carey’s first concert in South Africa–I wanted you, but your prices were too ridiculous beloved.)
What mattered to them was that I start spending my money how they spent theirs. They were uncomfortable with my spending and savings philosophies because my priorities aren’t in line with theirs. This person and I make roughly the same amount of money, but because I don’t live month to month I’m “wasting [my] twenties!” When I was meeting with those aforementioned financial advisors, I had to work through mock budgets with them that included preset items like entertainment and credit card payments! As if you have to spend money on these things monthly or you’ve misunderstood the meaning of life.
Don’t get me wrong, I do spend on entertainment and I do buy stuff. But I mostly operate from a position of planning not to spend thousands on certain things, so that it’s a pleasant surprise if I do. Because of this, and my quest to avoid debt as far as is reasonable and avoid most fixed recurring charges, I’ve been living on a very small portion of my gross income. This means I can save more. It also means I can give more. I could do better, but I could certainly be doing a lot worse.
Six months later, I live on less than a quarter of my gross income.
- I committed to maximising my tax return.
Tax is an expense. And just like I don’t like paying unnecessary bank fees, I hate the idea of paying more tax than SARS requires. If they are willing to give me a tax break, I’ll take it. Right now, my retirement contributions are the cornerstone of this commitment. As the years go by, it may need a bit more polishing.
If all goes according to plan, I should get at least two months’ worth of (take home) pay as a refund next year. But this is only because I’m planning to this effect. And what will I do with this windfall? Obviously, I’ll be investing most of it. I have plans, people. Big dreams and big plans. Paying off debt and saving for retirement are only the beginning.
Six months later and I’m looking forward to my first tax return (which should amount to about 1x my basic monthly salary) and planning for my second (which should be significantly more).
- I committed to maxing out my TFSA.
Speaking of tax, the South African government has given citizens an incentive to save aftertax money by means of a Tax Free Savings Account. The allowance is R30000 (with a lifetime contribution limit of R500000). All capital gains, dividends, interest etc. are tax free (except, maybe, if you die and the TFSA becomes part of your estate) which means it’s a great long term investment vehicle due to the beauty of tax-free compounding and no tax drag. This is the second tax year the incentive has been in place and I plan to maximise this year’s allowance as soon as I’ve managed to replenish my savings.Then from next year, I’ll invest more slowly in monthly amounts.
Six months later, and I’m about 16% of the way to having enough to max this out. With student debt payments out of the way, I should be able to max this out much faster.
- BONUS: I committed to tracking and simplifying my financial life.
I’m probably going to fire my “financial adviser”. She’s a lovely individual and she was really helpful in calming my nerves going into earning money. But all she’s done so far is sell me insurance products. She’s already gotten the commission on those (I know, I know. Commissioned advisers are red flags. I was young) and has thus seemed to completely relax. She doesn’t understand nor really support my goals (see earlier goal about paying off debt) and she really tried to push me on the path of excessive lifestyle inflation contrary to my values (see the earlier notes on living within my means). Most tellingly, she didn’t help me set up my retirement funds because I wasn’t happy with the costs of her recommendations, and then she tried to scare me out of investing directly with the low-cost passively managed index fund I eventually chose (probably because she didn’t think she’d get a commission on something I’d researched and set up myself.) I don’t think she’ll be too pleased that I’ll be setting up my TFSA and discretionary savings via the same investment firm. She was really dismissive (said she’d never heard of them and that I couldn’t trust them–despite it being a reputable company that’s been heavily featured in the media as an industry disruptor for challenging the status quo of TERs >1% in South Africa! Gee, really? Never heard of them?)
Pity. I liked her.
A more positive way I’m simplifying my finances is via digital platforms. It’s the 21st century and I just don’t see any reason to be keeping separate documents or scribbling out budgets or constantly going to banks. So, aside from making active use of internet and app-based banking, there is also a great app run by Old Mutual called 22seven* that helps you keep track of all your accounts and investments in one place (the images in this post are screengrabs of the app’s web-based platform, under my Student Debt Owed account–which I haven’t deleted because the o.00 makes me giddy) and also set up a budget called a “Spending Plan” so that you can see where you are at any time of the month. You don’t even have to be with Old Mutual to use it, it’s free and open to any and all South Africans. I love this app. I linked my RA’s online platform to it (for completeness sake, but it also can track it as part of your net worth which should be fun when the markets crash again!) and I can see how that is going regularly without logging into that separately.** You can link any investment, too. The online portals of most investment firms are worth logging onto separately just to play with all the tools they give you, but this is the quick and dirty way to always know where you stand and how you’re doing relative to your goals.
I used to have a word document (not even excel! The shame!) that I used to track my monthly expenses on. While I recommend doing that too to begin with, it’s really great to almost go on autopilot and only need to check in to make sure you’re on track every now and then and no funny business is happening on your various accounts.
Six months later, and I finally have a positive (financial) net worth. And I realise my financial adviser has done nothing for me outside of selling products she’s tied to, and even that she did last year. It’s probably time to cut the cord.
But what about FUN????
I’m sure I lost most readers after the 2000 word mark. The rest closed this tab when they saw me say I don’t like to shop. Surely, I just sit in my house and stew in groceries while awaiting the next work day then? What’s the point of money if you don’t spend it all?
Oops. Looks like we’re all out of time. Gotta go have some of that mysterious fun.
*I don’t get anything for dropping this app’s name like it’s hot. I’ve been using it since I started earning and recommending it to all my friends. It’s boss. It’s awesome. It rocks. It has graphs and hints and fun colours. I’ll write a better review someday.
**I don’t recommend never logging onto your accounts individally again. It’s good to keep an eye on things and to regularly change passwords and security settings. Stay smart.