We all want financial security for ourselves and our families. After all, it is associated with higher levels of happiness and lower levels of stress – just some of the keys to a healthier life.
However, achieving financial security requires good financial planning throughout life. For some of us, this comes more naturally than for others. However, it is never too late to start organizing your finances. Few people look back on life and regret not spending more money but one of the most common financial regrets reported all over the world is not saving more money and not saving sooner.
The first stage in achieving good financial planning is to know your current finances. How much money do you have coming into the household every month and what you are spending that money on? Group outgoings into essentials and non-essentials. Essentials include your rent or mortgage payment, loans such as a car repayment, school fees, utility bills and a reasonable food shopping budget. Non-essentials include a social budget, gym memberships, TV subscriptions and all the other things that you enjoy but you don’t need to survive.
Once you take your essentials away from your monthly income, you can work out what is the maximum amount that you can save each month. Multiply this figure by twelve. This is what you could save in a year. Consider how you would feel if you managed to save that figure?
Considering this, what from your non-essentials list you really can live without?
You’ve worked out what you intend to save each month. Stick to it! Open a savings account so that your savings are separate from the money in your checking account. Why? First, a savings account usually offers a higher interest rate so your money will grow more quickly than in a regular account. Second, consider that money gone – it is not for spending, so it is best to put it somewhere safe and forget about it. If it is in your regular account, you may be tempted to spend it.
Saving for retirement is extremely important to avoid any hardship in later years. It is worth setting aside some of your savings to top up your pension pot in addition to the monthly contributions that come straight out of your salary. You can set up an additional monthly payment, known as an Additional Voluntary Contribution. Try to top up with as much as you can afford.
Once you have mastered saving your money, then you may wish to consider whether investment is for you.
Investments can be risky, hence the greater reward. But with risk comes potential for reward and loss. That said, some investments are riskier than others. An investment like the purchase of a property in a jurisdiction such as Cayman is a relatively safe investment in the current climate. With a growing population and high demand for housing, purchasing a property could be one way to see your money grow.
There are other types of investments, but these are both riskier and require knowledge and experience. It is not advisable to invest in a product such as stocks unless you know what you are doing. A money manager may be able to advise and assist you.
We at the Chamber Pension Plan have always believed that young people should be taught the skills associated with sound money management. If you have children, you can engender financial planning, even at a very young age. Encourage your child to buy a piggy bank so they can save their pocket money each week or month. You can also provide incentives for them to save their money. Offering to double their pocket money if they save it can teach them about the rewards associated with saving.
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