Home' Trinidad and Tobago Guardian : January 25th 2015 Contents JANUARY 25 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
FINANCIAL ROAD MAP | SBG7
Julia, 26, recently purchased a
new car and the first payment
of $3,500 is on the January 28.
Prior to the purchase she has
been saving $1,500 monthly,
which is what she used to make
her downpayment and the car
insurance premium. Julia is happy with the
car but she really did not budget to see the
impact of all the related expenses which now
include: gas: $800 (previously taxi fares $400),
car insurance $9,000 annually and car service
every three months of $1,500.
Up until now Julia s major expenses have
been: rent: $3,000, groceries: $1,500, purchased
meals: $1,200, weekend entertainment: $1,600,
life Insurance premiums: $600 and other mis-
cellaneous expenses such as: utilities, clothing,
gym and spa treatments: $2,200.
Julia is concerned that she might not be in
a position to save for the next seven years,
which is the time it will take to repay the car
loan and wants to know what strategies she
can employ to strike a healthy balance between
her current lifestyle and saving for the future.
Nick's assessment & advice
It is not uncommon for someone under-
taking a major purchase as a car or house to
overlook the financial impact after signing on
the dotted line.
Sometimes the entire process of seeking
approval for financing is stressful and uncertain
and there is often the tendency to go for broke
just to make it happen. If the individual is not
careful, broke is actually what could happen.
These big-ticket items not only impact our
monthly cash flows but also significantly
deplete cash reserves. Julia s situation is no
exception as evidenced by the numbers she
Whist we were not provided with her salary,
we could safely assume that all of her paycheck
was accounted for.
In Table 1 her total monthly expenses prior
to the purchase was $12,000; afterwards it
was $15,650 (excluding savings), translating
to a deficit of $3,650 ($12,000 to $15,650).
After she pays her fixed obligations of rent
and car loan ($3,000 + $3,500 = $6,500) she
will have $5,500 to meet not only her regular
monthly bills but also non-monthly expenses
such as car insurance and servicing: $750 and
$500 per month respectively. If she doesn t
set aside for these she may be forced to draw
down on savings, borrow or sacrifice most of
her paycheck when these periodic expenses
Julia s first task is to balance her budget to
get her expenses equal to her income. She will
need to make some hard choices. She has to
be creative to in order to be solvent and, at
the same time, not deprive herself of the simple
pleasures. She needs to look at what is impor-
tant and what is not in order to live within
her means. It requires not only making an
adjustment in the numbers on paper but also
deciding how she will practically conduct her
lifestyle moving forward.
Some areas that could be considered for
adjustment are her food bill, entertainment
Table 2 shows possible amendments to her
expenses to achieve a balanced budget.
Purchased Meals may be considered a luxury
or unnecessary as she is already spending
$1,500 in groceries. Food is often the area that
the biggest savings could be achieved. All it
requires is taking some extra time to prepare
Julia can draft up a list of her favourite dishes
and then shop according to the ingredients
she needs. She should also try to find eco-
nomical ways to manage her supplies and
make them last longer. Wastage and spoilage
are often the largest black holes in a household s
food bill and controlling these could redound
to money in the bank. The more Julia steers
clear of ready-to-cook or ready-to-eat meals,
the more likely she is to stay in the black.
It is not difficult to blow $300 in a night
out on the town. Parties, fine dining and
alcohol are not cheap these days. One glass
of wine at a decent restaurant could set Julia
back by at least $60 and there is hardly a
decent main course at a restaurant that under
$150. Julia has to be creative to keep this cost
down and still have a good time. It just means
paring down some areas or adjusting the fre-
quency of her outings. A good trick is to have
something to eat before going out and order
An added benefit of going out less is saving
on the expense of dressing up in new clothes.
She could spread out her trips to the spa and,
from time to time, do her own treatments.
Quite often people maintain a gym membership
and seldom use the facilities in cases like this
might be better to pay on the day and consider
doing some activities at home or outdoors.
Julia can also observe and control her usage
of electricity and the telephone.
Increments & windfalls
Whilst the suggested adjustments to Julia s
budget did not allow for savings, over the next
seven years she may see increases in her salary
and may come into funds such as bonuses or
back pay. If she has gotten accustomed to
living within her means she should be able to
stash the cash when the wind blows it in.
Nicholas Dean (Cer-Fa) is a financial coach and
mentor who is the managing director of the Financial
Coaching Centre. He can be contacted at:
If you have any further questions or need advice
on today's subject please email me at:
NickAdvice@gmail.com or web me at: www.Finan-
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