Nine pillars to achieving financial wellness


Financial stress is typical around the beginning of the year especially after yuletide with somewhat unrestrainedspending. Many of us have found ourselves in this situation and therefore can relate to the circumstances. With the proper financial discipline and attitude, however, this cyclical financial blot can be overcome and we can move towards financial wellness.

The first thing, when it comes to the journey financial wellness, is appreciating your current context. The assessment of your context will help you define the steps you have to put in place to get you to where you want to go. In this article, I will share nine (9) pillars that will help you achieve financial wellness in the long term.

Have a financial plan

Having a plan is indispensable if you want to achieve financial wellness. In building, for example, you just don’t move to the site with your tools and start digging. You first need to have an idea or a blueprint of the kind of structure you want to put on the land. How do you want the structure to look like? Is it a story building? Is it a two-bedroom house? All these things will inform your decision as to what amount of money and time you will spend on the building. In the same way, you need to draw a plan for your financial wellness journey.

Putting together a financial plan sounds very easy, but it isnot. The best way of going about this is to find an investment advisor who will guide you through the journey. In Ghana, there are many institutions that do this at no cost. Your financial plan should state clearly what your financial wellness objective is and a budget that will make that objective materialize. The budget will inform where your money goes and what you will be able to save and invest.

Adopt a principle for controlling your finances

One thing COVID has taught us is that anything can happen. We woke up one day and we had to go on lockdown and if you were the breadwinner of the family and you were told to stay home because maybe the business is not doing that well because it thrived on organising events. All of a sudden, they are not there anymore, and you are not receiving what you had to receive. What is your backup? You have to develop a conscious mechanism to control your spending in such a way that you have a back-up in times of crisis.

For those who have families, you can draw up a budget and decide where the saved money should go to. And it’s good that you put your monies together. Unfortunately, people are against joint accounts but when you do that, it is easier to track the movement of the money in that account. It is also important that you make room for miscellaneous as well and other family bonding activities. It helps keep the joint account going.

Let your money work for you through savings and investments

Once you have put together your budget, and you have made room for savings, don’t just leave it there, invest. Saving money is good but when you leave it at that, the money does not grow. The way money works for you and grows when you find good ways to invest it because if you don’t find a way to make money work for you, you work for money until you die.

So, make sure that the savings you have is put in an instrument so it grows. There are people on retirement who are living on the returns on the funds they invested in addition to their statutory retirement benefits. Imagine you have bills to settle and your statutory retirement benefit per month is GH¢300. It will be virtually impossible to survive. That is why it is critical that you invest so your money grows to take care of you in dire situations.

Plan for your retirement

Everyone will retire at a point in time so you need to work around it. You don’t have to wait for retirement to come to plan. As mentioned earlier, how your retirement will look like will depend on how you plan for it. When you retire, yourincomes also retire but your expenses do not and that is the critical reason why you have to plan for your retirement.

It is important that before you retire, you ask yourself some critical questions in order for an effective retirement plan. You need to ask yourself how you want to live after you retire and also assess the kinds of expenses you envisage to make in your retirement such as medical bills, utilities, school fees, etc. After this has been done, the next thing to do is to budget and determine how much you will need to offset or meet your expenses after retirement. Decide how much to invest and where to invest in order to generate enough for your expenses post retirement.

Have an extra income stream

A single source of income will always be difficult to live on. You need to find a way to make extra income. Your eight to five job is just not enough. There is something that God puts in every man. You have a talent and might be working in an institution that does not bring out what you do like playing the guitar, like writing, like singing or even speaking. Don’t sit on that talent.

Find something doing with it. Initially, when you start, it might seem like it’s really not bringing in anything, but harnesses it and with time, you can start asking people to pay for it, and it brings in much fulfilment. So, whatever it is you’re doing now, this year, I want you to start thinking, what else can I do? Because your eight to five is really not enough. If your budget is not allowing you to make room for savings and investment, find something else that will add on to what you are doing.

Maintain accountability partners

Another thing that has helped me is having accountability partners. The journey to financial wellness is a long one and it gets tiring along the way and you might lose focus. That is why you need someone that will cheer you to keep going on and to keep eyes focused on the goal. I have a friend that is unrelenting when it comes to my goals. I show her my goals at the beginning of the year. And every quarter she calls me to walk me through them to ensure that I am on track. Your coach can be one, your wife, your partner, your husband, orfriends can be your accountability partners.

Start paying off debts

This is a very critical issue that must be taken seriously. Paying off your debt is very important if you have to achieve financial wellness. There are two ways this can be done – the snowball payment and the avalanche payment. The avalanchepayment is where you list your debts and you pay off the ones that have the high interest first.

The second one, which is a snowball is when you list them pay off the smaller ones first. This gives you a sense of motivation to clear all your debts. No matter which one you choose, there is one key principle that you need to implement when you want to be well financially; look at your loans and try and settle them. You need to pay off your debt. But don’t be in a hurry to pay all of them and be left broke.

Avoid quick cash schemes

If you want to achieve financial wellness, you must avoid quick cash schemes, which are schemes that promise quick and huge returns on your investments. When you want to invest your money, time is important. Being consistent and patient is important because investments grow over time.

So, when someone is promising you about 10percent above the risk-free rate, you need to question a bit more what theyare using the money for and where they are placing the funds in the returns. And if it does not make sense, it really does notmake sense. If it sounds too good to be true, it is really toogood to be true. So just watch it, your money is your treasure so make sure you are putting it in an investment that you understand.

Create an emergency fund

Finally, you need to create an emergency fund. This is not the fund you draw from any time you are called for a funeral. The emergency fund is really a plan that when you have lost your job, for instance, you have the capability to take care of yourself and your dependents for at least six months before your next job or before you find your footing.

So, if you are in a formal work environment and you are earning a salary, my advice is to build a fund or a portfolio that has a minimum amount of your six months’ salary. Make sure that you have that, if anything happens, you know that you can fall on it before your next before the next strategy will take you have various securities or instruments that you can put your money into, which is government bonds, bills, equity, and the higher they get, the more complicated it becomes.

>>>the writer is Head, Sales, Stanbic Investment Management Services (SIMS)

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