Freelancing or Starting a Business to Fund Education

Unlike most single people, working in a law firm as a paralegal with a monthly income of Rp 15 million did not stop Nayaka from looking for more ways to generate income.

Unlike most single people, she is raising a teenager.

“I want to focus on saving for my orphan niece, because she will go to college next year,” she tells LiveOlive.

Find out how she manages her finances and if she is on the right track to fulfill her goal.

kerja sambilan sebagai MCWhile regularly setting aside at least Rp 1.5 million a month, this 37-year-old career woman moonlights as master of ceremonies for weddings or launch events after work or on weekends. From this freelance job, she could get as much as Rp 2.5 million to Rp 6 million per event.

Besides supporting for her niece, Nayaka – who lives with her father and niece – also spends around Rp 2 million-Rp 3 million every month on groceries, plus another Rp 2 million for her transportation and maid salary.

She is currently paying monthly installments of Rp 1.3 million for her car and Rp 1.2 million for a gold bar that she bought for investment. The installment for the 25 gram gold bar will be paid off within six months. Nayaka also regularly sets aside Rp 350,000 per month for her mutual funds. She also allocates Rp 2 million-Rp 3 million a month on a unit-linked product.

Goal: Support her niece's university education which will amount to Rp 100 million per year and start a small catfish farm for Rp 5 million.

LiveOlive comments:

Kudos to Nayaka for taking responsibility for her niece! Also admirable is her work ethic and commitment to support her family. To make sure that she also takes care of herself, we suggest a few things to strengthen her financial foundation.

1. Build an emergency fund

Nayaka should have enough fund to cover at least six months of her expenses. This is imperative because while she has a stable job, unexpected expenses can de-rail her finances and cash flow. The last thing we want to see is for her to get into debt as a result of illness in the family, a leaking roof or urgent car repairs.

[Read: Three Things That Should Be in Your Emergency Fund]

2. Protect her income

Here are few things that Nayaka needs to consider, if she doesn’t already have them:

  • Personal accident insurance for herself. This will replace her income in case she is unable to work because of accident or injury.
  • Critical illness insurance for herself. This will cover illnesses like heart disease, cancer, etc. If she has a unit-linked policy, she may already have this as a rider.
  • Insurance for her father. If he does not yet have medical cover, we strongly suggest to register him with BPJS. She can also try private insurance companies, but it may cost more because of his age – especially if he has pre-existing illness.
  • Medical insurance for her niece. Since her niece will not likely be covered by the health insurance provided by Nayaka’s company, she will need health insurance cover.
  • Life insurance with her father and niece as beneficiaries. Her unit linked policy may already include this so she just needs to ensure that she has covered about 10 years of her income so in case something happens to her, her niece and father will be taken care of.

3. Retirement planning

Now is a good time to start working on this goal. Nayaka can consider a mix of investments, depending on her risk profile.

[Read: Planning Life After Work: Reaching Rp 3 Billion]

Nayaka and her goals

Given that her niece is entering university next year, Nayaka needs to set aside funds from her monthly salary and keep it in a time deposit. Investments will not really help at this point, because her timeline is too short – she will need the funds in a year's time. In fact, investing may even be unfavorable because she may need to sell at a time when the investments are not making money – which they often do within short time frames.

Depending on how which university and what course her niece will take, she may need Rp 100 million-Rp 300 million yearly. With only a year to save for this, Nayaka will need to set aside at least Rp 10 million a month from now on.

Supplementing her income as she is now doing, thru freelance work, is a good move.

However, Nayaka may face some problems if she decides to start a catfish farm. We have nothing against fish. We really don't. We are also not opposed to her starting a business.

We are just not sure if this business idea aligned with her passion. At this point, Nayaka does not really know a lot about fish farming and the risks that come with it. If she thinks this will be a good source of passive income, then she may be surprised. It will require being very hands on, especially when she is starting.

If Nayaka wishes to supplement her income, it may be an idea to build on what she already knows and is good at. If it is being a master of ceremonies for events, she could actually grow this into a business by promoting her services more aggressively so that she has a more gigs. She can have a Facebook page where she can show her 'portfolio' of MC-ing jobs; she can also post ads on LinkedIn, Facebook and other sites where potential clients may be visiting.

[Read: How I Prepare Myself to Become an Entrepreneur]

Nayaka really has to think about any business venture she goes into. With large expenses item looming in the horizon, i.e. nieces' college education, she cannot afford to make mistakes with her money.

Read more: How The Price of a Louboutin Shoe is Enough to Start a Business

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