By Dennise Williams, Staff Reporter
Dear Stretch Your Dollar:
GOOD DAY, I am really, really desperate for your help.
I am 23 years old. I live with my mom and baby sister. I do not pay rent. The only bill I pay is a phone bill and this runs up to about $3,500 sometimes.
I am working and currently going to school. My school fee is $26,000 in all but I am paying it on a payment plan basis where I pay $8,000 down and $3,000 for 7 months.
I am also in two partners, one where I pay $5,000 every month which will finish November and another where I pay $1,000 per week and this finishes in February.
I have a bank book but no money in it.
I make $22,669 per month. I do not know how to save. My problem is I just hate living this way, hand to mouth. Please advice me of some ways that I can manage my money better. As you can see I don't have a lot of responsibility so you must be wondering why I can't save. So you see I am really need of help.
MY FINANCIAL PICTURE -
Salary $22,669
Phone bill $3,500 (max)
Partner (1) $5,000/month
Partner (2) $1,000/week
School $3,000/month
Yours truly,
Camrin Lopez
RECOMMENDATION BY JMMB
Looking at your financial picture, I will assume that $22,669 is your net salary. After deducting the listed expenses, you are left with $6,000-$7,000. However, you have not indicated other
normal living expenses such as travelling, meals, clothing, and personal care, which could account for the rest of your salary.
You are currently putting aside over 40 per cent of your earnings into partner plans, but have no savings to show for it. I assume that you have used your partner draws for consumer spending, rather than for creating assets for yourself.
You have actually shown considerable discipline in maintaining two partner plans. What you need to do now is continue that disciplined attitude into setting up a 'Save & Invest' Plan for yourself. Here is a 3-step guide to start you on the road to improving your financial future:
STEP 1
Write down your budget on paper. Redo your expense list to reflect all of the things you spend your money on. It is crucial to account for every dollar that is spent, as it will point out where your consumption can be reduced.
For example, if you cut down on telephone talk time, you could find another $500-$1,000 to invest. Set yearly target amounts for spending on items like personal care, gifts and entertainment, and then divide that amount by 12.
This will be the monthly amount that you allow yourself to spend on that expense. For example, if your budgeted amount for entertainment for the year is $6,000, then you can spend $500 per month.
If however, you blew that budget within 3 months, then you would either spend no more on entertainment for the rest of the year, or cut back on another expense item.
This step requires a lot of discipline in keeping a written track of your actual expenses every month.
STEP 2
Identify an amount that you will commit to saving monthly. The rule of thumb is to save at least 10 per cent of your salary. Creating wealth is not really dependent on how much you earn, but on how much you can save.
I would suggest that at the end of your partner plan in February, you re-deploy the $1,000 per week into an investment account that can give you higher returns than a commercial bank savings account.
Your net worth can go from $0-$100,000 in less than 2 years by investing $4,000 per month in a JMMB Save Smart account with an average after-tax return of 8 per cent.
When you receive your partner draw for the November plan, commit a large portion of the lump sum to building up your investment account.
If your school course is finished this year, continue to save the $3,000 per month. Do not spend this money, because you are now able to survive without it as part of your disposable income.
STEP 3
Set financial goals for yourself. It is easier to commit to a savings & investment plan if you have a target that you want to achieve within a specific period. When you are not saving for anything in particular, the temptation to spend is much greater.
Your primary investment goal should be to establish a 'rainy day' account, which would act as a financial cushion in the event of any emergency like illness or loss of employment. The target for this account should be to save six times your normal monthly expenses.
It may just be a vague dream now to own a car or house. However, if you set a definite investment target of purchasing your own home by age 30, then the commitment to put aside the necessary funds for the down payment is much stronger. You can receive free advice at several financial institutions island-wide, including JMMB.
Cherryl Hanson Simpson
Haughton Terrace Branch
Tel: 876-920-5039 ext 361
