Are you financially secure? Contrary to popular belief, financial security doesn’t mean having a lot of money. It means being able to effectively apply the financial resources you have to meet your present needs and future goals. It is a long-term state that incorporates practices like saving and investing, budgeting and managing your debt so that you can live the life you want to without worrying about the money to support it.
So, how do you achieve financial security? Here are a few tips:
1. Set Financial Goals
Financial planning begins with an honest review of what you currently have and what you want to achieve in the future. Evaluate your spending habits, financial priorities and income. Then, based on where you want to end up, set financial goals – long, short and medium-term – which will then determine the steps you can take to achieve them.
2. Save
Saving is probably the most repeated pieces of financial advice. The rules are simple: start early, save regularly, and do so before spending. To take it a notch higher, place your savings in a high interest account and only spend them for their intended purpose. If you are able, create an emergency savings fund to cover your essentials when other income streams have been interrupted.
3. Invest
While savings are usually intended to cushion you during uncertain times, investments are all about earning a return from your money, but with the acceptance of risk. Investing is a sure-fire way to achieve your financial goals faster because you buy assets hoping that they will generate a return in the future. The type of investment you choose will depend on your risk appetite, the return you expect, your liquidity needs and the investment horizon. Before taking on any investment, conduct your due diligence to find a vehicle that is right for you.
4. Diversify your Streams of Income
When you have more than one income stream, you are protected if one of them is compromised. Figure out what other avenues you can exploit to increase your income. Investing, starting a business and freelancing are good places to start.
5. Budget
Create a budget and stick to it. The rule is deceptively simple, but if followed, it will work wonders on your bottom line. Create itemized lists with all your monthly spends, and decide which ones you will continue to incur and the ones you can cut back on.
6. Manage your Debt
Borrowing money is not inherently bad. In fact, it is sometimes necessary and can facilitate important activities, such as starting a business or paying for education. Having debt may slow you down but it should not stop you from achieving your financial goals. With proper debt management strategies, you can gradually reduce the amount you owe and build the discipline necessary to maintain a healthy debt level.
Ultimately, financial security is a state of wellbeing that can be achieved with some planning, application of the above strategies and discipline. Get in touch with our Financial Advisors on sales@sib.co.ke for insights on achieving financial security.