by SubiyaCryolite
Backstory & Context
I’m a 27-year-old male who lives in Zambia, a southern African country you probably haven’t heard of and that’s a good thing. I’m a Software Engineer by profession and have been working since the age of 21. During this time, I have been able to complete my master’s degree (2016) and buy my own plot of land for 118,000ZMW/$11,800 (2017). I have zero debt and I’m also the primary breadwinner supporting both my parents (retired with no passive income) and a sibling.
My countries economy is primarily cash based. Most items, including cars and property, must be bought up-front with very little wiggle room. Credit cards are extremely rare and debit cards are the norm. Several banks and institutions do offer mortgages however they are ridiculously expensive, and most individuals don’t bother with them and construct their houses over a period of 2 to 5 years.
My take home salary is around $2,900 per month, it terms of PPP that’s equivalent to netting $7,700 in the USA (salaryconverter.nigelb.me/). Locally, it’s a significant amount of money.
My current net worth is 368,000ZMW/$36,800 or in $98,000 PPP.
Awakening (2017)
Being financially independent or retiring early was a completely foreign concept for me till early 2017. At this point in time I got a job at a bank and it completely changed the way I looked at finances and income in general. For starters, everyone was much older than me (average age of 55 in the IT department, I kid you not) and by extension already planning for (if not already transitioning into) retirement.
In this organization, every other member of staff was either the owner of multiple rental properties or a farmer. Furthermore, working with the Financial Markets department introduced me to government bonds and securities, which were a safe and lucrative form of investment. Being exposed to all of this made me feel like I was sleeping at the wheel and just coasting through life (despite being relatively “successful” for my age).
I have since formulated an “investment roadmap” and created a detailed budget with all projected monthly incomes and expenses laid-out till December 2026 (Age 35).
Step 1 – No Rent and less family expenses (2018 – 2019)
Phase 1 is to get the heck out of my parents’ house and into my own home. Yes, I still live with them which is a drag, but it also allows me to save 70% of my net income >_>. As mentioned earlier, I am the sole bread winner and cover 80% of all family expenses, my mums Cake business tops out the rest. Regardless, I am beginning construction of my house this October and expect to wrap up by Mid-2019. Once complete I will move out and won’t be burdened by rent. The total cost of construction will likely top out at 400,000ZMW ($40,000).
Beyond that, I will help my parents complete a rental property which is currently at roof level. I have already contributed to this project in the past and when all is said and done I would have contributed about $8000 in total. Apart from my parents owning 1 rental property by the end of 2019 they will also begin constructing two more structures once they receive their full retirement benefits in 2020.
Basically, my parents will be able to support themselves and I should be able to continue saving at least 65% of my take home salary in 2019 and beyond (Age 28).
Step 2 – Government Treasury bills (2018 – 2026)
All Government securities have very competitive rates. Basically, the Bank of Zambia has auctions every fortnight for both competitive and non-competitive securities. See, www.boz.zm/2018-treasury-bill-results.htm for details.
In August 2018, Treasury Bills of 91, 182, 273 and 364-day duration netted yields of 12.5%, 15%, 18.5% and 19.0% respectively. I invested 120,000ZMW ($12,000) into a 364-day T-Bill and will receive 142,000 ($14,200) at maturity in August 2019, minus 15% withholding tax on gains. My “grand plan” is to invest an additional 200,000ZMW ($20,000) per year into my principle account till the age of 35.
Assuming the interest rates remain within the historic ranges of (16 to 21%) and inflation stays reasonable I can expect a net income of $30,000 per year, or $2500 per month, by 2026 (Age 35). At that point I will have the option to retire if I wanted to and still maintain a very good quality of life. In terms of PPP, my net monthly income from capital gains alone should be the equivalent of roughly $5,500 in the US.
Assuming things don’t go according to plan I could delay retirement for another 5 to 7 years (lame) and call it quits in my early 40s. Either way, I now have a clear plan to get out of the rat race in at most a decade.
Investment 2- US Company Stocks. (2018 – 2026)
I’m in the process of completing paperwork which will allow me to purchase stocks from several US Based exchanges. As a non-resident “alien” I will not be required to pay any US capital gains tax (yay).
I have done research on a handful of companies which I intend to hold value stocks for relatively long-term gains. This won’t be my primary investment but merely a backup in case my local currency was to go to hell or something crazy happened (#TIA).
I plan on beginning with a modest amount of $3000 in 2018 and based on my performance contribute an additional $2000 to $3000 per year till 2026.
Investment 3 – eCommerce. (2020+??)
Being a software engineer by profession I do intent on transitioning to selling my own products and services soon. While this is merely an idea for now I’m confident in having the bandwidth to peruse this as I gain more financial flexibility and thus free time.
Variables
- A wife and kids could seriously affect my projections. Hopefully she and I will have the same outlook on life and at least a similar income level >_>
- Economy goes to hell
- Country goes to hell
- World goes to hell
Conclusion
I had absolutely no plan for retirement till last year. Honestly, I still cant believe I was operating on autopilot for so long. I now have a clear goal, clear metrics to measure against and a set target date. Sure, things may not go according to plan but at least I’m no longer winging it. Assuming I hit my target I plan to spend my free time investing, volunteering, traveling, occasionally consulting and playing Battlefield.