‘Save until it hurts’
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At 80, Margaret Johns (not her real name) doesn’t have to worry about money - she is told she has enough to last her into her second century. But it wasn’t always so. She was 50 before she started saving for retirement and her story is all about a little luck and a lot of determination.
“My background made me
very frugal. Growing up I had sixpence pocket money. My parents were divorced and I only saw my mother once a month, so I used to save a tickey (three pence) to phone her and the other tickey could be spent on gobstoppers or whatever sweets I wanted.
I left home at 17 and was married at 22 - not a great marriage, but it lasted 20 years. My husband was reasonably successful, but he wasn’t very good with money.
For years I saved R5 a month in a building society subscription share and added an extra R30 or so here and there when I had it. It ended up at about R1000. When we were trying to buy a house, my husband said we were short of R1000. So I went to the bedroom and got my subscription share book and gave it to him. He was fed up with me because I had saved it out of my housekeeping without telling him. But we bought the house.
I had two children, now both in their fifties. I would have liked to have been a doctor, but there was no money for studying, so I was determined that my children would have the education I didn’t have. Our divorce left me with very, very little. So 20 years after I’d last worked, I got a part-time job doing administrative work in a financial services company earning R250 a month. It was 1982.
I knew I didn’t want to get married again and I wanted to be self-sufficient, so I took on a night job as well, selling non-stick cookware. My teenage son used to help me process all the orders. It was hard work; I often didn’t get to bed until after midnight. I gave that up when I got a better, full-time job and my salary went up to R650 a month. But I still didn’t get much from my ex-husband.
When computers came in, I must have latched on to them quite quickly, because six years later I was promoted to network manager. Then, in 1989, I was head-hunted by a very successful investment company to take over their network supervision. That was a completely different kettle of fish; my salary went up to R3 000 a month.
That was when I realised I needed to put something aside for my retirement. I was 50 years old. The only thing I did have was a house.
I paid the knockdown price of R83 000 (from an asking price of nearly R100 000) and my employer gave me a home loan with an interest rate of 2%.
So I put as much extra money into the bond as I could, to pay it off as quickly as possible. Apart from that, I had no money put away and I thought I would just have to do the best I could. So I started off with a R500 retirement annuity (RA) with Old Mutual.
I was very lucky that the investment company gave profit-sharing bonuses; I remember the first one seemed a ridiculous amount: R18000. I paid the whole lot into my bond and it was paid off a year later. Then the company gave every staff member R1000 to put into a unit trust fund. I was very fortunate, yes, but I also tried to be sensible. I instructed the company to deduct 16% from my salary every month and pay it into the unit trust fund. That was the recommended percentage of income to save for retirement. And if I had anything left over at the end of the month, it always went into the unit trust fund.
So I built that fund up. I also transferred my RA to the company I worked for, where it performed much better, and continued to pay into that, a little more each year. But I didn’t deny myself everything; I had never owned any jewellery so I bought myself a ring here and there.
Having paid off the house in five years, I sold it a year later for R250000, which allowed me to buy a house off-plan in a new development for cash. I had a company car, but when I decided I needed the independence of owning my own car, I took out a R40000 car loan and paid it off in 18 months .
Then, after 25 years on my own, at the age of 67, I met a man and decided to marry again. He has made some mistakes and has no money of his own, so we do knock heads at times; I’m always in control, because I’ve had to be. And I like things done my way. In the 13 years we’ve been married, we’ve moved a few times and always made a good profit. I paid R1.4 million for one house and sold it for R2.58m. After that, we were able to pay R2.8m for the house we live in now in a retirement village.
My RA and unit trust fund have grown very well. So that’s the story of how I saved and anyone can do it. I tell all the young people I meet: “Start saving now. Even if all you’ve got left is R20, it’s not easy, but put that R20 away as if you never had it. Don’t draw on it for anything at all! unless it’s life-or-death, of course. I tell everyone: “Save until it hurts.”
I haven’t been deprived. Both my children live overseas and I used to visit them every two years. I even went to Buenos Aires to do the Argentinian tango. I used to love ballroom dancing and I had private lessons for a while, which cost R500 a month. My furniture is inherited; the couch you’re sitting on was my mother’s, bought from Joshua Doore decades ago. I’ve re-covered it twice and it’s still serving me very well.
I also worked until I was 74, which makes a big difference. I was not forced to retire at any particular age, so I was very fortunate again. I had a good job in my latter years and I’m grateful for that.
SENSIBLE AND STRATEGIC
MARGARET Johns worked hard and lived frugally, but her story includes two of the most important principles of retirement saving, says Craig Torr, a certified financial planner at Crue Invest in Cape Town.
“Apart from being naturally sensible, she was strategic,” he says.
“Instead of using her bonuses and financial windfalls to upgrade her car or buy new furniture, Margaret denied herself these luxuries and cleverly used the money to pay off her bond and boost her unit trust portfolio... while allowing herself a small extravagance once in a while.
“Then she worked and saved until age 74, thereby significantly prolonging the life of her retirement capital. In fact, for every extra year that Margaret worked, an additional two years were added to the longevity of her capital.
“Add to that the 16 percent of her income that she saved over those nine years, and it turns out that Margaret managed to extend the life of her capital by 22 years.
“If she had retired at age 65 she would have run out of capital by now - age 80. Delaying retirement to age 74 means her capital will now last beyond age 100.”