Jamaica Gleaner
Published: Sunday | April 5, 2009
Home : Business
Investment advice - How to save on a $44,000 salary
I am a big fan of your column. I am 23 years old and I have a job as a processing clerk (on contract). I have so many goals to achieve but I just don't know where to start. My goals are:

Getting my driver's licence

Opening an investment policy

Saving for my pension

Going back to school for my master's

Getting an insurance policy.

My pay per month is $44,000. My responsibilities are:

Rent - $5,000; Partner - $4,000; My brothers' lunch money (my father is unemployed) -$10,000; Weekend spending (boyfriend) - $3,000; Miscellaneous -$5,000.

So far, I have saved/acquired $350,000. How can I go about achieving these goals with the amount I have each month?

- Teri

It is good that you have set goals for yourself and have sought help to achieve them. If you are focused and patient, you should achieve them.

To begin, having determined what you want to achieve, set priorities. Rank your goals in order of importance and set a time for achieving each. Estimate how much each costs now and project what it will cost at the time it is to be realised.

Determine what financial re-sources you have now and estimate how much more you need to realise each goal. Determine what strategies you will employ to generate the financial resources you will require and establish a programme for assessing the progress you are making towards the realisation of your goals.

You have not said if the $44,000 is what you earn before or after deductions. I am, therefore, not in a position to determine what your cash flow is. Moreover, it seems that you have omitted some of your expenses. Remember to include all of your income and expenses in your budget.

Reliable savings programme

The key to achieving your goals is a reliable savings programme. It gives you the resources you require for investment purposes. From what you have given of your personal and financial situation, it seems you should be able to increase your savings.

Do you have a specific plan for the money you are saving in your partner plan? How much do you save now? Is there a more economical way to provide lunch for your brother, such as preparing lunch at home?

There are other expenditures you may want to take a closer look at. That miscellaneous figure seems high for a budget the size of yours. Treat that weekend spending as the next-most discretionary item in your budget.

You have a base of $350,000 with which to work. Do you have it in a form that is earning reasonable income for you? Even if most of that was 'acquired' rather than saved, handle it with care and do not cheat yourself by being too conservative.

If getting a driver's licence is sufficiently important to you, make it a short-term goal. It should not cost much. Arrange your lessons in a way that will not impair your longer-term savings and investment programme.

The younger you get insured, the lower the premium. Risks to your insurability increase with age. Your need for insurance increases as your family responsibilities increase.

As a breadwinner in your family, I am not surprised you would want to have some coverage. Make that a short-term goal. You do not have to buy expensive insurance now considering your relatively limited resources.

If you are using "opening an investment policy" to mean starting an investment programme, I would encourage you to go ahead.

You do not have to start big. Just be consistent. The major challenge is the current unfriendly economic and financial climate. Seek good professional advice before you begin.

Education investment

Your master's degree should make you more marketable and is therefore a good investment, but it will be costly. You need to build resources to achieve that goal and may even find it necessary to borrow to do so.

Retirement is the classic long-term goal. When you begin your savings/investment programme early, it makes it easier to realise your goal.

Nonetheless, because you are quite young, it is not likely that you would do serious harm to your life in retirement if you are not able to begin that programme now. Consider also that setting aside funds for retirement does not necessarily mean you need a dedicated retirement fund.

To educate yourself on financial matters, follow financial programmes in the media, read financial magazines and journals, and seek help from persons who can help you. Then, you and your parents will be able to give advice to one another.

You will have other goals over time. Write them down and stick to your plan to achieve them.

For free money management advice and counsel, email: finviser.jm@gmail.com.

Home | Lead Stories | News | Business | Sport | Commentary | Letters | Entertainment | Arts &Leisure | Outlook | In Focus | Auto |