There has been some anxiety among Ghanaians about investment, given the events of the recent past. As justified as this anxiety is, there is still a compelling case for investing, particularly when you want to build wealth. In this article, I will share insights on the persistent relevance of investment, even in the face of economic challenges.
The case for investment
Achieving lasting wealth necessitates a meticulous and strategic approach to finance that seamlessly integrates savings and investments. This is relevant for personal and professional endeavours as financial resources play an instrumental role in shaping our lives. If you have to build wealth, you need to plan how and when to do it. It cannot be random. You will need a strategic plan to build your wealth and stick to the plan with some allowances for unforeseen happenings. Letting your money work for you is still relevant today while planning to build your career and a better life.
Budgeting for success: The 80-10-10 principle
To optimise financial management, the critical 80-10-10 principle comes in handy. The principle emphasises differentiating between fixed and variable costs. A noteworthy recommendation is to maintain your funds allocated to fixed costs at 50 percent or less of the 80 percent allocated to your total – fixed and variable – cost. Leveraging tools such as Excel sheets and freely available templates, individuals can efficiently track income and expenditures, thereby creating ample space for essential savings.
Understanding and mitigating risks
It is important to note that every investment has an element of risk, and understanding your risk tolerance as an investor is critical in mitigating investment risks. Only when you know your risk tolerance level can you align your investment choices to fit your financial goals. You may be willing to take the risk; however, be sure you can also tolerate the same risk. Consider your need for liquidity, timelines and net worth as you decide on an investment.
In an era marked by economic uncertainties, embracing strategic planning, meticulous budgeting and a good comprehension of risks is important. The journey may be arduous, but armed with financial knowledge and a commitment to prudent investment, individuals can navigate the complexities of the financial maze and build a secure and prosperous future.
The writer is the Head, Client Experience – Stanbic Investment Management Services (SIMS)
