WITH GCT up to 17.5 per cent, a new ad valorem tax of 15 per cent on petroleum and a 10 per cent tax on residential electricity on the way, Jamaicans are being squeezed financially. Not to mention having to contend with a depreciating currency, rising inflation and high lending ratesn which make the prospects for advancement even gloomier. This week’s Sunday Finance looks at the finances of a regular ambitous Joe in Jamaica and offers some advice on how he can navigate his way through these difficult times.

Name: Joe Tax

Age: 30

Occupation: Graphic Artist

Income: $1,200,000

Status: Single parent with a three-year-old daughter

Working out his disposable income

Statutory Deductions

National Insurance Scheme (NIS) — 2.5 per cent of gross salary (Wage ceiling on which NIS is deducted is $500,000)

Education Tax — Two per cent of Gross Salary less NIS deduction

National Housing Trust contribution — Two per cent of Gross Salary

Income Tax: 25 per cent of Taxable Income less NIS

Income Tax

$0 – $441,168 Nil

$441,169 – $5,000,000 25 per cent

Joe’s monthly gross salary: $100,000

less

Statutory Deductions: $20, 569

Monthly income tax: $15,548.59 (Taxable monthly income = $63,236)

Monthly NIS: $1041.66

Monthly Education Tax: $1979.17

Monthly NHT contribution: $2000

= Net Pay: 79,430.58

Monthly Expenses

Rent: $15,000

Fuel (for his 15 year-old Toyota Corolla 1500cc motocar) : $10,000

Child Day Care: $12,000

Groceries: $20,000

Utilities (Electricity, Water, Phone, Internet, Cable): $10,000

Miscellenous: $10,000

Total Monthly Expenses: $77,000

Monthly Savings: $2, 430

Joe dreams about, among other things, one day owning a home, driving a decent car and ensuring that his/her child has the best education money can buy. But at this rate, it’s clear that Joe, who is struggling to make ends meet, will find it difficult to achieve the financial goals needed to realise many of his personal dreams. What must he/she do? Firstly, Joe has to cut costs by ensuring that he/she is not overpaying for the essentials of life. Sunday Finance compiled some cost-cutting tips to help Joe with this critical first step.

Wholesale grocery shopping

Buying groceries in bulk can save Joe a lot of money. Not only will he save on the per unit price of goods, but purchasing items at today’s prices for the medium term can offer tremendous savings in a high inflationary environment such as Jamaica — with overhead costs for businesses set to increase due to the new tax measures, you can bet there will be price increases. Joe is spoilt for choices of wholesalers to buy groceries from, especially in downtown Kingston.

Cutting utility costs

Electricity cost normally accounts for the brunt of utility expenses for Jamaicans. Residential electricity prices are expected to rise this year as oil price is widely expected to go up to at least US$90 a barrell by year-end. Save on electricity bills by installing energy saving lightbulbs — found at most major supermarkets — and unplugging energy-sucking electronic appliances such as cellphone chargers and microwaves.

Save money by saving water — save both by not leaving the tap running while taking a shower, brushing teeth or washing dishes. And be sure to be aware of drips and leaks. Research has revealed that a dripping tap which loses one drop of water per second will waste 15 litres of water a day, and a leaking toilet can waste some 200 gallons of water in the same period.

Drive only when neccessary

As highlighted by the Sunday Finance poll results, the price of gas is very burdensome. With per-litre gas prices fast moving towards tripple digits, the average Joe with the weak wallet needs to do something about his fuel consumption fast. The easiest way to achieve this is to avoid driving as much as possible. Walk, take the bus, carpool or ride a bicycle when convenient.

Buy baby food in bulk

Quite frankly, other than quitting his job or begging a family member to watch his daughter for free, there isn’t much that Joe can do to significantly reduce child-care expenses. But he can shave costs by buying baby food in bulk. “If you can pool with somebody to buy wholesale, it can save you alot of money,” advises Michelle Murray, operator of the Observer creche on Beechwood Avenue.

Share living expenses

Find a roomate or move in with family. While inconvenient for some, this can create tremendous savings and allow you to get your finances in order. Temporary inconvenience is better than a lifetime of financial stress.

After realising more savings by employing these cost-cutting measures, Joe can now increase his earning power by investing his monthly savings. Joe should now consult with a financial planner who will give him numerous investment options to choose from — such as certificate of deposits, bonds or stocks to name a few — depending on his/her risk appetite and expectation of returns.