Budgeting 101 - Part III: Your Finances - and you

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 Isla