Financial security is one of the goals of every successful and serious minded adult, among other things, it is one of the bedrocks of a good life and everyone aspires to be financially secure. As we go about setting goals for various areas of our lives, we should not neglect working towards financial security.I discussed over a manicure with one of my plus size queens and wealth adviser, Tomilola Olotu and we had a chat about some key moves everyone must take to secure their future financially. These actions are not only relevant to us as individuals but also caters for generations to come.
1. INVEST YOUR MONEYDon’t leave idle cash in your bank account. Outside of your emergency funds, any money that you do not need for one month and above can be invested in a financial instrument that will yield returns. The goal here is to ensure that your money works for you.There are various financial instruments you can take advantage of e.g. Treasury Bills, Bonds, Commercial Papers, Stocks etc, the key things to keep in mind are your objective, risk appetite and duration. You can invest in Mutual Funds if you are not too comfortable investing as an individual. Mutual Funds are collective investment schemes (i.e. a Fund Manager pools money together from a group of investors and invests on their behalf). The benefits of a Mutual Fund are competitive returns, liquidity, professional fund management and diversification among others. A Money Market Mutual Fund is a great place to start for beginner investors as this is a low risk Fund.Other types of investments include: real estate, commodities like metals, energy, businesses etc,
2. EMERGENCY SAVINGS FUNDSLike the name suggests, emergency savings funds come in handy when you have an unexpected occurrence. The size of your emergency funds can range from three months to one year of your monthly salary, it is advisable that these funds be in cash or very near cash instruments i.e. 30 to 60 day fixed deposits. Liquidity should be key for your emergency savings funds as things can happen unexpectedly and the whole point of having these funds set aside is to be prepared for such times.
3. HAVE A BUDGETTo secure your future financially, you should have a budget in place and also have short, medium and long term financial goals. The purpose of budgeting is to ensure proper allocation of your income and resources, clarity for decision making and also to measure your performance in terms of accountability and accomplishment of your goals. You can decide to have a financial accountability partner who you can trust with your information and budget plan, this will help keep you in focus and accountable.
4. INVEST IN A BUSINESSIf you don’t have the flair for entrepreneurship but want an opportunity to earn returns from companies, you can become a venture capitalist. A venture capitalist is someone who provides capital either to a startup or small companies that are looking to expand and need financing. Venture capitalists can earn huge returns if these companies are a success but also face a risk of losing funds if their pick of companies do not make the expected returns.Becoming a venture capitalist is more of a long term plan as it requires that you have adequate finances to fund a startup or small company. Things to consider as a venture capitalist are looking out for businesses with a strong management team, great competitive advantage, sizable potential market and unique product or service offering.
5. PAY BACK PLANSome of your goals i.e. buying a house, investing in real estate, starting a business might require taking a loan. Loans are not the enemy, taking a loan without doing adequate research and not having an effective pay back plan is what can spring up trouble. Before you take a loan, some questions to ask yourself are: How much principal am I able to contribute?, How long do I need to take this loan for? Will my income be sufficient to meet the monthly payments without putting a heavy constraint on the rest of my expenses?, If my main source of income goes away, do I have a back-up plan to finance this loan? These questions should lead you to do a proper accounting of your income versus your expenses and help in setting up an effective pay back plan if you choose to go ahead with taking a loan. For small businesses, there are other options for funding i.e. grants (from private and government bodies), institutions both locally and internationally that help fund businesses at a more affordable rate.
6. PLAN FOR THE NEXT GENERATIONYou are never too young to start putting plans in place to take care of your next generation. If you are planning to have a family and have children, it is important to start saving some funds for that purpose so when the time comes the money would have accumulated substantially. When investing, you can be intentional and create a children’s account either for education or expenses.Another good plan for the future is putting a will in place. There is a lot in stigma attached to having wills especially here in Africa, the general assumption is that preparing a will is like preparing to die. On the contrary, preparing a will is the responsible thing to do so that the people you love and care about the most do not have to suffer in case of any incident. Some Trustee companies have a simple will service that cover the balances in your pension and bank account. This is especially helpful to individuals who work a 9 to 5 job. The alternative to having a will is that when someone passes on, the beneficiary has to obtain a letter of administration (LOA) from the court. This can be an extremely tedious and emotionally draining process, also, there is no sure way to guarantee that the rightful beneficiary is the one that will apply for an LOA. Having a will in place will surely give you peace of mind and is more cost effective than getting an LOA.
I hope you have learnt from these tips to manage your money and secure you and your generations to come because I have.
If you need more financial advice Tomi is willing to help, you can send her a mail @firstname.lastname@example.org.
Thank you for reading.