Jul 10, 2017

Living a fulfilling life is important for everyone. For one to do so, planning all of the five key pillars of life, namely; (i) health & well-being, (ii) religion or spirituality, (iii) friends, family & community, (iv) learning & knowledge, and (v) financial security, is a must. Financial planning is the road that leads to financial security. So how can you tell that you are working towards financial security, where you are able to meet your life goals through proper management of your finances? Individuals are different in various aspects such as age, income level, future plans and lifestyle, just to mention a few, hence each plan is different. However, here are 10 things to do to attain the financial security we all look forward to:

1. Invest before you spend: Your monthly consumption should be equal to your income (net of all taxes) minus your monthly investments. Regular investment every month grows your wealth, so your money is making money for you. As with any investment, have a diversified portfolio, with a mix of growth investments in equities and alternatives, and income investments in fixed income solutions or structured products,
2. Have a constant stream of income: Being good with money means having a regular stream of income, either from your workplace or from your investments. Additionally, knowing how much you take home every month allows you to plan how much you’ll invest and how much you can consume,
3. Have a budget: Once you know how much you earn and how much you invest, what is left is for your consumption. Budget this consumption amount. Planning and tracking your expenditure for regular and unplanned costs is key to sustaining your lifestyle, and knowing how much you have each month to grow your wealth,
4. Treat yourself: Don’t accumulate for the sake of accumulation. It’s important to be kind to yourself, and take that holiday without incurring any debt. Try to tie the treats to achieving a goal or a milestone, so that it’s not just because it’s a holiday season,
5. Resist peer pressure: As you treat yourself occasionally, resist the pressure to buy things you can’t afford or don’t need but end up buying anyway just because your peers are doing it. Financial security requires the emotional maturity to live within your means,
6. Consistently pay down your debt: Debt is not bad, especially if applied to investments such as an education or buying a house – that is good debt. Bad debts are those that don’t help you build assets, or those that are not part of your goals, such as credit card spending on unnecessary luxury items, or incurring debt for present consumption. Avoid bad debt, and pay back debt consistently; you’ll have more money to invest and treat yourself,
7. Emergency money: As with everything in life, emergencies come up, whether it be health problems or family emergencies, among others. Financial planning involves having a fund stored away for the financial surprises that life throws at you, with at least 3 to 6-months of monthly expenses in short-term investments, to avoid stress and having to borrow expensively last minute. Get appropriate insurance for such, like illness and death,
8. Retirement planning: A key financial goal is planning towards retirement, no matter what age you are. Start by considering the lifestyle you want when you retire, how much it will cost per month (even an estimate), add for any unplanned surprises, and work backwards towards investing every month to reach your goal,
9. Periodic financial health checkups: Financial planning is the journey towards financial security. Every journey needs a periodic checkup and assessment. Goals change as life progresses, and so does your situation in terms of income, health and family. Keep reviewing your financial plan to monitor your progress towards achieving your goals for a house, education, wedding and retirement. You may realize you need to invest more, or in fact have more money set aside than is needed,
10. Continuous financial education, learning and research: All financial decisions should be based on research and learning. Financial education allows you to set realistic goals for yourself, with timelines that are achievable. Learning about financial planning makes you a more proactive investor, and research allows you to analyze multiple options to ensure you make the right financial decision. Don’t just buy land because your friends are buying. Work with a trusted and qualified financial advisor.