Home' Trinidad and Tobago Guardian : April 6th 2014 Contents SBG16 | CASE STUDY
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt APRIL 2014 • WEEK ONE
Thirty-one year-old Shannon R is a single, female
teacher who has taught in a government secondary
school for about seven years, but who is not completely
enthused with her job.
She lives with her parents in a comfortable suburb,
but is quite unhappy about having to live at home.
Her life s ambition is to work for herself but she
has no business experience. Her dream is to own a
company doing something she enjoys and she also
believes that her income would increase at which
point she would be able to purchase her own home.
Based on the 2013 salary of a graduate secondary
school teacher, which is about $12,500, Shannon has
managed to save about $50,000 in a money market
account to which she comfortably adds $3,000 a
month, which is about 30 per cent of her take-home
pay. Even though one day she hopes to get married,
she prefers to enter the marriage with her own assets.
With the pressures at home and on the job, Shannon
wants to get some advice on whether she can rent
an apartment, leave her job and focus all of her energies
starting and growing a new business.
This client has three major concerns:
1. Move out of home and rent
2. Leave job and start a new business
3. Purchase a home.
Each one of these moves could have a negative,
positive or neutral impact on her finances; it all
depends on the sequence, timing and the approach
As it stands, Shannon is doing fairly well saving
$3,000 per month. It means that she could accumulate
$36,000 per year and within three years, her stash
would be over $150,000. Her attitude towards saving
is very good and, as her income increases, she would
increase her nest egg at a faster rate. As her cash
reserves grow, her ability to take advantage of oppor-
tunities also increases and her financial stability is
However, she should be aware that the purchasing
power of her savings in three years time would have
diminished as a result of T&T s inflation.
A back-of-the-envelope calculation, assuming an
inflation rate of 7 per cent, indicates that her $150,000
stash, could be worth $122,000 in three years time.
Let s look at the impact of each of her decisions.
1. Move out of home and rent
This would definitely reduce her daily stresses at
home, but it would also slow down or even halt her
savings; especially if the rent is close to what she sets
aside every month. If she takes this option she may
also have to dip into her savings to furnish an apart-
ment. She also needs to bear in mind that not all
renting situations are peaceful and that some landlords
She should also be prepared to see her rent bill
increase year after year. Maybe the peace of mind of
her living arrangements would allow her to improve
her education or plan for her business, both positive
2. Leave job and start a new business.
It is not uncommon that self-employed people
have significantly more work-related stresses than an
employee as they deal with more variables. Running
a business is more than a full-time job and many
times the romantic feeling of being on your own
quickly fades when bills come in faster than income.
There is a saying: "Proper prior planning prevents
pathetically poor performance."
She should do a thorough business plan before
investing a single dollar. A good plan would determine
how much capital is needed and avoid being a failure
statistic through undercapitalisation.
She could focus her savings to achieve her start-
up capital figure and then make her move. Of course,
there are no guarantees but what she loses through
inexperience she could make for with cash. She should
also stay away from borrowing to start up
a business unless she is certain of her market
and income streams.
A safe approach would be to start a busi-
ness whilst in the teaching service and make
a smoother transition when she is confident
of her income.
Another alternative to dealing with job
stress is simply finding a new job more in
keeping with her career aspirations.
one of the most
stable jobs in the
country and, from my experience, financial
institutions are more than happy to lend to
teachers. Considering what property prices
are currently, a single or unmarried (no sec-
ond income) teacher may find it slightly
more challenging to acquire a decent home.
All is not lost, however, as Shannon is an
excellent saver. If she manages to increase
her income, she can amass a significant
downpayment and not require a large mort-
gage. If she becomes a full- time business
owner, she should be prepared to furnish a
lender with at least three years audited finan-
cial statements or some other proof that her
income is stable and at a level to maintain
Nicholas Dean is a financial coach and
mentor, who writes a financial advice col-
umn for the Catholic News. If you are hav-
ing financial issues, please send your sce-
narios to him at: firstname.lastname@example.org or
call him at 724-6425.
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