10 tips to securing your financial future
WE all dream of financial security. Regardless of age and how much we want to enjoy the moment, it is hard not to think about our futures and how to ensure that when we get older — if we do — that it’s in keeping with the vision that we had for ourselves.
Unfortunately, some of us think that it can be quite a chore and we find that we keep putting it off, but investment banker at Goldman Sachs, McWayne Flowers, said that positioning yourself for financial security does not have to be an overwhelming task.
Below, Flowers shares 10 tips to safeguard your financial future:
1. Take stock of your finances
Your first step is to look at your monthly expenses; make sure to cut back or eliminate things that you don’t need altogether. This stage also involves seeking financial guidance as well as educating yourself on how to make your money work for you.
2. Open a savings account and an investment account
There are several types of savings and investment accounts, speak with a broker to determine which best fits your financial goals.
3. Ensure that your rent is less than 30% of your income
For many people, rent tends to be the largest monthly expense. Spending more than 30 per cent limits your ability to take care of other expenses (bills) while saving and investing.
4. Create a budget and stick to it
Do not get in the habit of trying to keep up with appearances, discipline yourself to live within the budget that you have set for yourself. Don’t go broke trying to look rich.
5. If you have “extra cash”, immediately put it into savings
Whether it is that we do a gig or we get it as a gift, sometimes we will find ourselves with extra cash.
“This is not an invitation to splurge or treat yourself; it is an opportunity to maximise your savings and investment strategies. So, don’t get comfortable with it now, put it in your investment or savings account,” Flowers recommended.
6. Create an emergency fund
“This is an account separate from your investment and savings accounts. It should be able to cover at least three to six expenses. Emergencies always happen and often times at the most inconvenient times,” Flowers said.
He pointed out that with an emergency fund, you would have bought yourself some time to seek a new job or recover from the emergency without depleting your savings account.
7. Pay off credit card or any debts
Start by paying off the smallest amount with the high interest rates. Interest rates tend to accumulate and add to the total amount owed.
“By paying off these, you avoid accumulating interest while giving you a sense of accomplishment that you have paid off some of your debt, and the motivation to tackle the remaining debt,” Flowers advised.
8. Establish a great credit record
A great credit record will be needed when it is time to make a major purchase, such as a house. It will also help you to secure lower interest rates, which can save you thousands.
9. Get insurance in case of medical emergencies
“Medical emergencies can be extremely expensive and burdensome for you and your family. Getting insurance, especially if your company doesn’t offer it or the plan you have is not the best, will reduce that burden and expenses significantly,” Flowers advised.
10. Plan for your retirement
Most people think retirement is too far in the future to start saving right away, but they couldn’t be more wrong. When you retire, chances are all or the majority of your earning power will cease naturally. Therefore, you have to plan adequately to cushion your expenses as well as to ensure that you can live a good quality life.
So, if your company has a payment plan, you want to make sure that you take advantage of that. In the event that you are self-employed, you should consider an individual retirement account , which is offered by a number of Jamaican banks.
In addition to these, you should consider making substantial investments through reputable financial institutions. When your money makes money for you, then you will be able to add this to your retirement accounts.
— Penda Honeyghan
