By Bernice Alhassan and Eru Kobe Godwin.
When you think of your future in terms of your financial wellbeing, what’s the first feeling you get? Fear and uncertainty or confidence and peace of mind? Oh well, if you’ve never given the issue much thought, you should now. Money can be a pain in the butt when you don’t have it but it’s worse when old age catches you still calling your kid who’s half way across the world for some financial aid. As a matter of fact, it’s downright embarrassing. That the Nigerian society approves of it doesn’t make it any easier. You may be burdened with a number of other financial obligations, but that shouldn’t deter you from charting out a financial plan for yourself and your family. Times are changing; people are getting smarter and are learning to pay now, so that they can play later. What then can you do to secure your future financially? In my usual manner, I’ll be letting you in on a few tips that can help you sleep with both eyes closed as the future approaches.
Determine your short and long term financial goals: This involves carrying out a complete analysis of your present state, including your assets, net income, debts and living expenses. Once you’ve done this you can start setting long and short-term financial goals. In the short term, you may want to pay off credit card debt, buy a new car or take a vacation; your long-term goals might include saving for the down payment on a home, retirement or your children’s college fees. Decide what lifestyle you want to enjoy between now and when you retire; what retirement lifestyle do you expect to have and what sort of education do you expect to provide for your children. Once you’ve identified your goals, give yourself a timeline for achieving them. You’ll then know how much of your income to set aside each month, and the wisest investments to choose. Review your goals periodically so they’re always fresh in your mind. If you go off course, don’t get frustrated and give up; simply reassess and continue working toward your goals.
Get insurance against life’s curveballs: A lot of folks overlook this very important point. After you’ve assessed where you are now and where you want to be in the future, take steps to protect your ability to get there and stay there. A major part of your family’s financial program is to insure against major financial loss. There are simply no guarantees against serious illness, accidents or untimely death. So take the steps necessary to insure against loss of life, loss of income and loss of physical assets. You just never know when insurance will come in handy.
Create a budget: This is very important if you want to be able to control your savings and expenditure. If you don’t follow a budget, you’re likely spending more than you realize, and saving less than you are capable of. Begin by tracking your monthly expenditure. A simple way to go about this is to keep record of ALL purchases down to the last penny spent. Also include bills paid. At the end of the month, do a comparison between your income and your expenditure for that month, then ask yourself some basic questions like; “were all my expenditures necessary?”, “Did I live within my means?”, “What can I cut out or at least cut down on?”, and so on. Next, prioritize your expenses and needs. Obviously, some expenses are fixed, like food, housing and utilities. But when it comes to your other “needs,” figure out what you can do without — but be rational and reasonable. You can’t cut out every seemingly unnecessary expense; a luxury-free budget is about as sensible as no budget at all. And completely depriving yourself of all treats will likely send you on a seriously budget-damaging spending spree.
Pay yourself first and invest: Make an effort to save at least 10% or more of your pre-tax income. It is important to get into the habit of saving and investing, even if it’s little amounts at a time. You’ll be surprised at how fast your savings can grow if you are constant. The next thing to add to your savings is investments. Investing early in life is definitely advantageous because your money has more time to compound and grow. But it’s never too late to make investing a new habit. Many people don’t believe they have enough money to become investors. But you don’t have to invest a large amount of money initially, or regularly. It’s perfectly fine to start slow and small and stay small while you adjust to your new financial habit. If you’re able to, have the money taken directly out of your pay cheque — you probably won’t even miss it. Your investing plan should include a strategy for increasing your contributions. After a few months of investing, when you’ve adjusted to living on less money, boost the amount you’re investing up just a percent or two. You can also look for ways to invest lump sums of money, such as when you get a bonus, a monetary gift or your tax refund.
Share the property before your time is up: I’m just talking about a will. Many people think they don’t have enough money or possessions to worry about; however, a will should be an essential part of any financial plan. Your will ensures that your assets, such as your possessions, home, other property, savings and investments, are passed on according to your wishes after your death. If you die without a will — called dying intestate — your assets and possessions will be distributed according to your state’s law. A living will should also be included as it addresses the health care measures you would or wouldn’t like taken if you’re ever unable to make such decisions for yourself. Now, contrary to popular beliefs, a Will doesn’t mean the Grim Reaper is about to pay you a visit. It simply means that your affairs will be sorted out in the ways you want and, as a result, you can go about your life with a peaceful mind because your loved ones are protected.
Living in the moment doesn’t mean you should put your future on the back burners. Financial security often boils down to the simple task of anticipating the consequences of your actions. The aim is to make sure that whatever choices you make today you can handle tomorrow. And if you still don’t have a blue print for your future financially, work towards getting one today.