Ms Caroline Korir busy at a primary school classroom. With a recent pay rise, teachers should plan on how to spend and invest the increment. Photo/DENNIS OKEYO NATION MEDIA GROUP Rozeta Njiru stands in front of the class of noisy nine-year-olds and barely raises her voice to bring the class to pin-drop silence. Her skill and control comes as no surprise, considering that she has been teaching lower primary children for the past 22 years. Teaching is in my blood. I always admired teachers when I was a child and I knew I wanted to be a teacher. I have never doubted my calling, she says. However, she admits that certain aspects of her profession are at odds with her expectations of life. It was difficult, when she first began, to reconcile her passion for education and the low salary that seemed to plague practitioners in the industry. Her disappointment is shared by her colleague, Ms Caroline Korir. The mother-of-two has been teaching for one year. She has been obliged to pinch a penny here and there in the hope of achieving her dream of a career in academia and the future education of her children. You cannot eat passion or feed it to your children. But we have learnt how to manage our finances so that we can live comfortably, she told Money. Last month, Ms Njiru, Ms Korir, and 239,998 teachers got a salary increase. After a three-week work boycott, the union that represents teachers in the country struck a deal with the government for a Sh13.5 billion pay raise package. For Ms Njiru and Ms Korir, this will translate to between Sh4,000 and Sh5,000 extra money in their bank accounts at the end of every month. The increase will be backdated to July this year. But what to do with the extra money is something that many teachers are yet to figure out. I had not expected this. I am yet to decide what to do with it, said Ms Agnes Langat, also a primary school teacher. Many workers who get an unexpected pay raise face the same dilemma. More money does not always equal less worries. In fact, it has been proven that most people get more stressed the more money they get, says United States International University psychologist Samson Munywoki. Planning how to spend and invest your money can be a headache. Blowing away a big salary increase on nothing useful can be depressing. Financial advisers reckon that every working individual should always have a plan ready for every bit of extra cash that comes their way. The contents and goals of this plan are, of course, entirely subjective. However, there are guidelines that can help steer you into putting your windfall to better use. It is important, first, to calculate how much of your extra money must go to investment. The rest can go to leisure and other expenditure. The rule of thumb is that at least one-third of your earnings should go into investment. If you do not already have any investment instruments set up, it would be a good idea to dedicate more than one-third of your earnings, and your pay increase, to building a nest egg. Before going crazy on the stock market and buying government securities, you need to stock up on your emergency funds. Many families do not have money put aside in case the breadwinner suddenly loses their job or a member of the family falls ill. Before your salary increase is weighed down by new lifestyle expectations, build up an emergency fund that could see your family live for up to six months without any additional income. You can build the emergency savings fund while simultaneously addressing another personal finance need that could be weighing you down. Survey your debts and before you make any investment, clear outstanding, highly-priced debts. There is no point in buying a bond with a 8.09 per cent rate of return if you have loans bleeding you 22 per cent interest. Use the extra cash you have to pay expensive debts first; this will free your wallet for future endeavours. People with debts should not be waiting to be offered pay raises to pay them off. They should be going after increments to get rid of the debt, said financial literacy educator Patrick Wameyo. Emergency fund in place and debts cleared, you should now start thinking of longer term investments. Again, these will be determined by where you are in your career as well as your priorities. While employers are legally mandated to provide pension schemes for their employees, the funds accumulated in these schemes are often barely sufficient. Recently, Finance Minister Njeru Githae revealed that he would only receive about Sh72,000 from the National Social Security Fund were he to retire. You need alternative sources of income in your retirement and your salary raise might just be the kick you need to purchase real estate or invest in some bonds. The spectre of retirement is already breathing down Ms Njirus neck and one of her priorities when the extra money from the salary raise comes in is to increase her retirement security. She plans to purchase more shares in her savings and credit cooperative. She also plans to put some money into her sons business. Everyone who is working should save for retirement. However, if you have not been diligent in building a retirement nest during your career, take advantage of the pay raise and invest most, if not all of it, in a way that will provide steady income even after you leave employment, said Mr David Kariuki, the finance director of Assured Management Solutions Ltd, a personal planning consultancy. However, he notes that certain instruments might make sense for higher-income earners. If you have received an extra Sh500, it will make little sense to buy shares in a listed company. However, the money can be pooled and put into a chama. Education, for herself and her children, is at the centre of Ms Korirs plans for her salary increase. She will invest in an education insurance policy to take care of her childrens secondary school and university studies. She is also saving up for a masters degree that she expects will catapult her career to the next level. Her plans are strategic. Education in Kenya is getting more expensive. However, there is a growing crop of financial instruments from banks and insurance companies designed to help parents wade through an increasingly complex system. Ms Haalima Saadia, a research analyst at Old Mutual Securities, points out that not all of these instruments are for high-income earners. You can find policies that will cater for education for a monthly premium of Sh1,000. This does not stretch the pocket too much, she said. Ms Njirus focus in education is also strategic because it might eventually earn her another salary increase. Employers, especially in the public sector, consider education qualification of their employees to award promotions and salary increase. Many Kenyans do not have life or health insurance. Some who have cars pay minimum premiums to cover their vehicles. Many others do not bother to protect their homes against natural disasters or political violence. You can change this next time your salary is reviewed. Purchase a more comprehensive cover for your vehicle or increase your life insurance premiums. With the elections coming up, it might also be a good idea to get political violence cover for your property. Splurging on yourself is not entirely bad. Leisure, as Mr Wameyo puts it, is an absolute necessity. Buy yourself a new pair of shoes. Take your family on holiday. However, your salary increase should not drive you into a splashier life; the returns from your investments should be the catalyst for your lifestyle change. Of course you should strive to live a better lifestyle. But you must strike a balance. If you dont, your money will simply disappear, said Ms Njiru. She should know; she is a veteran of the saving and investing game.