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Remember Part II and how we divided our pay? Keep that in mind as we go through this section.
Your loans
Loans, while amazing in the short term, are an absolute PAIN in the A-double snakes in the long run!
Here in the Pacific, I’ve found contradictory outlooks on loans.
Overall, most of my peers don’t talk about their financial situations, much less loans they have with the bank, and unless you are a close confidant, they aren’t traditionally spoken about in everyday conversations.
Now throw into that, minimal to no formative financial literacy training and a high dependency on borrowing money from (without a better term for it) ‘loan sharks’ to get to their next fortnight – and it makes for quite a volatile mix (and hard habits to break).
Dave Ramsey speaks of using the snowball method to tackle this, i.e. every saving you make to put towards your debts, instead of making unnecessary purchases.
“How does $10 + $15 + $5 + $20 etc. at Lel equal $350?” Mhmn! Girl, you know what I’m talking about.
Now that 60% of your pay that you calculated? That amount is what you should budget to last you until your next pay check.
If you have an existing loan (or loans), calculate what percentage it is/they are, of your current salary. Can you afford to cut down on your daily expenses and put it towards your existing debt? If not, you need to make cuts somewhere else (Fire Extinguisher, Mojo, Smile, Splurge) so you can pay off your debts as quickly as possible.
Note: Please don’t throw all your money at your debt every fortnight. If COVID-19 has taught us ANYTHING at all, it is that emergencies are sometimes lengthy and brutal – and without an emergency fund to cover you when you need quick access to a couple hundred (or thousand), there is a high probability of undue stress undermining your mental health. So while you are paying off your debt, please ALSO remember to save too.
Superannuation
In Solomon Islands, we have one superannuation fund: the Solomon Island National Provident Fund, or SINPF, and NPF for short.
According to The Barefoot Investor, ‘your super fund should be charging you less than 0.85% a year in fees – total. If it is higher than that, you should seriously consider switching to a cheaper fund’.
Now I googled “SINPF + PDS” to find their fees and charges section if NPF have a product disclosure statement and couldn’t find anything, so I need a local economist or financial analyst cognizant of Solomon Island’s context to weigh in here, as I have no idea what fees they charge – but we should know (even if NPF is our only choice) because we MUST know what we pay for as a consumer.
*If you are working*, your employer is obligated to pay your superannuation and contribute the obligatory 7.5% share employers pay. For you as an employee, this next part is totally your choice. Personally, I maxed my NPF contribution (thanks for the pro tip, parentals!). Being in my late 20’s, retirement isn’t something I think of every day – but I should. The money in my NPF is for my future – and I don’t play around with mine (and by extension, my child’s) future.
*If you are not working* NPF has a scheme called IuSave (Pidjin for 'You Save'). In short, this is for those who aren't in formal employment but want to save. Read more about that here and here or call NPF on 21659 and ask to speak to someone on the YouSave team today.
Personal Savings
Speaking of savings, this brings me to the MOJO account we spoke of earlier. Dave Ramsey and The Barefoot Investor both speak of saving up at least three (to six) months’ worth of expenses.
Now you calculated your expenses in Part II. That was the 60% left in your Blow account. If you get paid fortnightly, multiply that figure by two. That gives you a rough estimate of the maximum amount you are willing to spend on expenses, per month. Now multiply by three, to calculate your three months of expenses.
This figure is your goal to save in your MOJO account.
I’ll say this.
We did not have that figure in our joint account when E left for London, but after a year of him being away and learning to do Life with my little without him, I’ve found that having an actual monthly figure in my mind for how much we spend on expenses is incredibly powerful.
It is my red line deal breaker, and if I’ve calculated my finances and realized I’m nearing half that figure the week before my fortnight, I’ve learnt to cull any and all unnecessary expenses. Ruthlessly.
It took a lot to get to that point though - read about my initial burn-out here.
Savings for your child/children
This may be less of a priority to Dave Ramsey and The Barefoot Investor, but this is one of the most important parts of the savings process for me.
Notice how both did not place saving for your children, before saving for yourself though? Pacific parents – I am absolutely talking to you right now. Your children are blessings - I absolutely and unequivocally agree on this – but you must invest in yourselves FIRST. Your child, SECOND.
As a young millennial here in Solomon Islands, saving for my child’s future is of paramount importance to me. In a world with limitless potential, there are actually limited options for our children the higher they go in education here in our country. There are a limited number of schools, limited places at those schools, and limited scholarships and opportunities available when they seek further studies or work after high school.
So I set up a Pikinini Savings account for my little with POB bank. Well, E did the hard work on this. I just set up a standing order to the account to save towards his school fees. Automating my transactions make it one less thing to think about. You can also do the same (if you haven't already) by calling 27762 or visiting the POB team at Hyundai Mall or Panatina Plaza.
Ensuring you have personal savings and securing your child’s future by investing in savings for their own education, is a step closer to financial stability and peace of mind.
Financial stability is freedom - but it’s not easily reached – and Life has a horrid knack of getting in the way of your goals. Keep at it though. Consistency, I’ve found, is key.
It's all about growth!
And that brings me to the end of this three part series. This was incredibly therapeutic to formulate and write. Let me know what you think – and whether this was helpful to you or not. I would love to hear from you!