Where’s all the money going every month?
If you constantly ask yourself this question, you probably need a financial plan. We do understand that financial planning doesn’t come easily but so is life.
If you are determined to get ahead in life unless you are Prince Charles III you must learn how to plan your finances, put in the hard work and discipline in finding money and deploy proper financial plans to achieve your goals.
A financial plan is a clear guide to managing personal finances in order to achieve one’s monetary goals. To come up with a financial plan, one must factor in such things as; current earnings, savings, loans or debts, financial goals etc.
Two most prominent components of a financial plan that can help you get started;
- Understand your goals and categorize them into short, medium and long-term goals.
Short-term goals; These could be goals such as monthly or quarterly expense budgets, paying off regular debts, saving up to buy a gift or a vacation etc.
Medium-term goals; These are things you wish to achieve between 3-10 years. Say to buy a family house, build a fund to start a business or build an investment portfolio of a certain amount.
Long-term goals; Financial goals that go 10+ years, like paying off a mortgage, building a retirement fund etc.
- Risk management plan.
Every sound financial plan must have a clear risk management strategy. The amount of risk an individual is comfortable handling depends on person to person, some people have a higher appetite for risk than others, however, no matter your risk profile every financial plan must have a risk management plan that details how debts will be paid off over time and how known and unknown risk exposures will be covered.
The risk management strategy must consider 3 things;
- Retirement Planning.
Don’t take your retirement planning for granted during your younger age, only to try and fix things much later when your human capital is limited. Retirement planning should be part of your financial plan from your very first income. Start by understanding how much money you may need to save by the time you retire so you can live comfortably. This should be part of your long-term investment plans. We have great retirement options for you to sample, just give a call anytime.
- Emergency Fund.
For every financial plan, it’s essential to set aside six months to a year’s worth of expenses as a contingency in an emergency. If your car breaks down and needs to be repaired or replaced or say you get terminated from work abruptly. Whatever the case, an emergency fund helps you to buy time as you readjust. Definitely a buffer for a rainy day. A Money Market Fund is a great instrument for saving up your emergency fund. Consult us on how to get started if you don’t have one yet.
- An insurance cover.
A great financial plan can be completely blown off by a lack of insurance cover. In the midst of any financial plan, there is a likelihood of risk or an expected event that could happen. An insurance cover can mean the difference between peace of mind and having to shell out massive chunks of finances towards a medical condition or fix your car in case of an accident. Although different people may need different types of insurance it’s advisable to at least have medical and life insurance coverage.
It’s important to understand that these three are not stand-alone strategies but rather moving parts of the financial planning machine.
This is the first step to achieving financial freedom which means having the ability to live your life without worrying about the next paycheck. If you’re a complete beginner and are looking for a way to start saving money, consider giving us a call to discuss available options.
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This article is written by our Principal Officer Winnie M., who has vast insurance and financial knowledge spanning over 10+ years in the industry. You can write to her and/or share feedback with us via this email bimahakika@gmail.com
