Not a lot of us get to have 5 million Rands cash, a lot of people tend to mismanage money that they are not used to handling. 5 million Rands is a lot of money but it can runout very quickly, sometimes within a year if it has been mismanaged, this is a guide on what to do if you have 5 million Rands.
A lot of South Africans get to have R5 million in cash, most people get it as inheritance and some people get it as winnings or pay outs from legal battles. People that are not used to handling this much money often think that it will last forever. R5 million will not last for your entire life if you mismanage it, it’s really not that much. Buying exotic cars and splashing it on luxury is one of the quickest ways to lose it. Here is what to do with R5 million.
1. Pay off your debts
Pay off all the debts that you might have, from credit cards to your car. Debt is one of the things that significantly affects our finances. Get rid of all debt, try to reduce your mortgage if you have a home loan. You can pay off your house completely if it is under R1.5 million.
2. Buy a house
Buy or build a house, a house is an investment, not only for yourself but for your family. You might end up mismanaging the rest of the money, it’s important that you have a house that you don’t owe. As a general rule; you should not spend more than 30% of your income on a house.
This means that you should spend roughly R1.5 million on a house, building the house from scratch is usually cheaper than buying it. All that matters is that you have a house that can house your family.
3. Invest some money
Assuming that you have spent R1.5 million on a house and used some money to pay off some debt (including car), you should have roughly R3.2 million left. You can invest R3 million and spend the remaining R200 000 buying whatever you feel like buying. Investing R3 million with African Bank will earn you R300 000 per year in interest.
You can live your life off interest while not touching the principal amount of R3 million. R300 000 per year translates to R25 000 per month. That’s R25 000 per month of free money, this is money that you have not worked for. If you have a desire to spend money then you can spend this R25 000. You can buy that AMG or dream car from this R25k. This money can also be used to buy furniture and finance much of your needs, all while your R3 million remains protected.
Generally speaking, the more money you invest is the more money you will have to spend. Investing the whole R5 million means that you will receive R500k per year, which translates to R41k per month. You can use this free R41k to pay off your debts, save towards a house and buy yourself a car. All while not touching a cent of your R5 million.
Conclusion
This was a guide on what to do with 5 million Rands. I personally would use R1 million to build a house from scratch and invest the remaining R4 million. Do you have any thoughts or questions? Comment below.
Jeremy Michael Moser
It is not really possible to build/buy a decent house in an area close to my work personally for R1 million.
It is unrealistic to think like that.
In my experience, decent places in my area go from lowest R1.5 million and thats for a small 2 bedroom place. If you had a family you would certainly need more space.
I always consider 1 bedroom in the house/apartment to be a office where work gets done as you need this in todays generation.
I’m sick of older people over-exagerating how cheap property is.
Or people who inheritted their fortunes or have wealthy family to support every move they make.
Property is expensive and people hold on to it!
Once you have it you shouldn’t let it go.
And thats the mindset that has driven property prices to skyrocket!!
I’ve been saving for over 4 years now and I am trying to save enough deposit on a house so that I can afford the bond repayments comfortably without having to sacrifice a hefty amount of freedom in my life.
The sad truth of most young professionals in this generation. 🙁
It’s hard out there guys.
If you don’t have wealthy family or oportunities – I don’t blame you.
Just keep cutting at the tree – it will one-day fall.
And when it does, leave it to your family <3
Hope this comment gave like minded individuals comfort knowing that you are not the only ones out there who is struggling.
admin
Thank you so much Jeremy for your well thought out comment 🙂