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I live in South Africa and I just started working this year. I would like to do what is the best thing for me to do with leftover money each month, instead of just spending it.

When I say leftover money I am talking of about $90 per month. I am a coder and get around $1100 per month. (converted from South African Rands to USD)

I would just like to learn how to use money better, but there are so many scams out there that googling for money advice is almost pointless. I was hoping this site might help.

I don't have any specific goals to be saving towards. I would just like to do something with the money to make it do something, rather than just lie in the bank and do nothing.

  • South Africa doesn't use dollars. Do you mean rands, or are you converting your numbers to dollars, and if so then are they US dollars, Canadian dollars, Australian dollars or one of the other twenty-odd dollar currencies? – Mike Scott Jun 18 '18 at 12:17
  • @MikeScott Sorry should've been more clear here! Check my edit :) – Frank Jun 18 '18 at 12:27
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    This looks very much like this question and it has the same shortcoming: what do you think you want to do with the money later (and when)?. Please edit your question, without goals it is too broad. – user71981 Jun 18 '18 at 13:13
  • @JanDoggen I really don't have many goals in my life at the moment. I would just like to have the money do something, rather than just lie in the bank – Frank Jun 18 '18 at 18:24
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    Step 1: Get some goals. You need this to decide a course of action. – Pete B. Jun 19 '18 at 11:44
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First of all, Frank, bravo to you for looking at excess income and asking the question "How can I use this money well?" The fact that you are coming here and looking for advice from financially-minded people from around the world speaks well to your sincerity.

To answer your question directly, I would recommend that you seek out a decent bank and start a savings account (perhaps which offers a higher-interest rate CD or Money Market style account), and continue until you have a *decent emergency fund (more on the that below) set aside. Once you have a backup which can protect you from unforeseen expenses (medical, transportation, natural disasters, etc), which you do not touch except in those emergency situations, you can start to look at stocks and other accounts with a higher return (but also with more risk than a standard bank account).

However, all of that is in the future. At the present, from the information that you provide, I see a number of implicit problems in your question. A decent emergency fund, which I mentioned above, normally amounts to 3-6 months worth of your total expenses. According to your post, out of $1100 income you spend $1010 each month and are left with $90 remaining. This means you spend 92% ($1010/$1100) of your take-home pay, and that your ideal emergency fund would be $3030 on the low end, $6060 on the safer end.

The problem is that with your savings rate of $90 per month, it would take you 34 months (almost 3 years) to save up a small emergency fund, and over 5 1/2 years to save a more standard emergency fund. The likelihood that in the next 3-5 years that you will have at least one major expense is rather large, and when that comes it will wipe out your savings and drive you into debt.

The solution to this sort of problem takes 1 of 2 forms: either increase your income (not always within your control), or decrease your spending (usually within your ability to choose). By doing things such as reducing the number of times you eat out vs eating at home / bringing food from home, or adjusting your living situation (such as downgrading your apartment / getting a roommate), you can make the same take-home pay stretch farther, and save more of your income each month. By reviewing your spending and cutting back, you will be able to get an emergency fund created sooner, and be more insulated against problems as they arise in the future.

  • Ah ok. Knowing this answer now I should add that this is my pure excess money. From that $1010 that you mentioned I pay medical, insurance, rent, emergency fund (which is also $90 per month), travel savings, spending money etc...so this $90 I talk about is almost pure "excess" money. But from your answer it seems like building up an emergency fund is still priority number 1, so I should be focusing on that still right? – Frank Jun 19 '18 at 10:10
  • Yes, so whatever your actual monthly expenses are (medical, insurance, rent, food, etc) multiply that value by 6 months and put all of your spare money into an emergency fund until you've saved up that amount. Once you reach that 6 month value, that amount never gets touched except in an actual emergency (unemployment, etc) and you can start to put excess income into investments. There are several answered questions on this site that talk about order of investing, see here and here. – Derek_6424246 Jun 19 '18 at 15:48
  • Thanks a lot for your help Derek! I really appreciate the in depth answers and links. I wish you the best of luck man! THANKS :) – Frank Jun 25 '18 at 6:16

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