Some Debt is Good For You: April Money Indaba

Phumelele Ndumo
Phumelele Ndumo

Have you met Thabo?

Thabo is a young 24 year old accountant- in- training. He has just bought his first car. I looked at the contract terms – he has to pay for it over the next five years and his monthly installments are R2 800 and insurance on the car is R1 200 per month. Add to this petrol and service fees and incidental fees like buying new tyres. I had advised Thabo not to buy the car but rather to buy a flat first and rent it out seeing he is still staying with his parents. Like most young people, he loves cars so he wouldn’t take my advice. I still advised him to do his best to pay off the car in the next year or 2 years at most. I also warned him against chasing the latest car models.

Let’s travel through time with Thabo

Thabo at the age of 30

He has furthered his studies and is now an accountant. His first car is not worth much and he would be lucky to get R30 000 if he sells it – hence we call buying a car on credit bad debt. With a bigger salary, he has decided to buy himself a bigger car this time around

Thabo at 40 years of age

He is at the top of his career with a good salary. He got married a few years earlier and is now living with his wife in a beautiful home. As his salary grows, his car gets bigger and his debts grow bigger too. He has also just found out how expensive it is to give children a good education

Thabo at 50 years of age

He feels lucky that he has been safe from a number of retrenchments. He doesn’t really like his job but he is no longer able to job hop as much as he used to. He would like to start his own business but cannot afford to be without a salary, he is too heavily indebted to risk being without his salary check. He cannot wait to retire so he can have his hands on his pension money. Just maybe he can clear all his debts and live a life free of debt. Given that he has been job hopping and cashing his pension every time he changes jobs, his pension will not be enough to live on so he has no choice but to continue working when he reaches retirement age. He hopes his kids would be kind enough to support him financially in his old age

Questions: Does this sound familiar? Are you a Thabo? Do you know some Thabos in your family or circle of friends and colleagues? Do you know where you are going to? Do you like what the future has in store for you?


Sbo is a young 25 year old accountant- in- training. Unlike Thabo, she decided to buy a flat before buying a car. She got herself a 2-bedroom flat and got a colleague to rent the 2nd bedroom from her. She is using the rent to top up on her monthly home loan repayments.

Sbo at the age of 30

Sbo is now an accountant and she finally managed to buy her first car 3 years ago. She couldn’t buy a smart car because she has a flat to pay for. It is really a small starter car. She is happy though because the value of her flat is increasing – hence we call a home good debt. If she were to sell her flat today, she would make a nice profit which she could use as a deposit for her new bigger flat or townhouse. She doesn’t want to sell her flat though. She has decided to use her annual salary increases to increase her home loan repayments so that she can pay it off sooner. She wants to rent it out and earn passive income from it one day.

Sbo at the age of 40

Sbo is now married, out of community of property of course. She and her husband bought themselves a new home. They are planning to pay off their home in 10 years time. They increase the bond repayments annually as their salaries increase. As her salary grows, her debts decrease and her assets grow. Sbo wants to be debt free so she can follow her passion and start her own business. She is happy she still has her first flat as she can use this as collateral should she need a loan to finance her business

Sbo at age 50

She now owns 2 properties debt free and she has just bought a third one that she is still paying for. She also started her own business a few years ago. She loves the freedom of dictating what she does with her time. Her income is determined by the amount of effort she puts in her business.

Morale of the story

• Don’t let the car you drive, drive your destiny!

• To grow rich, you need good debt

• To accomplish your goals, you might have to give up what you want now to get what you want later

• It takes guts to be a Sbo but you too can choose to be a Sbo

• Over 90% of us are Thabos. Swim against the tide and become one of the few that will retire young and rich

• You need financial discipline to become rich

• Are you in your 30s, 40s or even 50s and still don’t own your own home? You cannot change the past but you can change your future. Better late than never. Buy that home now while it is still the buyers’ market

• The future happens one day at a time, one decision at time – I hope you will make wise decisions going forward

When you are ready to buy a home, please remember to call our call centre on 086 5133 477

Article written by Phumelele Ndumo; author of the book, 7 Secrets why the rich own their homes and founding MD of ThuthukaSA. Remember to visit our website for more money tips.

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