Why Financial Security is Essential to Leading a Fulfilling Life

Living a fulfilling life is important for everyone. For one to do so, planning all of the five key pillars of life is a must. This includes health and well-being, religion or spirituality, friends, family and community, learning and knowledge, and financial security.

Financial planning is the road that leads to financial security. But, how do you plan to ensure that you lead a fulfilling life when you retire? How can you tell that you are working towards financial security, where you can meet your life goals by adequately managing your finances?

Individuals are different in various aspects, such as age, income level, plans and lifestyle, to mention a few; hence each plan is different. Here are ten things that can help you attain financial security:

1. Invest before you spend:

Your monthly consumption should equal your income (net of all taxes) minus your monthly investments. Regular monthly investment grows your wealth, so your money is making money for you.

As with any investment, have a diversified portfolio, a mix of growth investments in equities and alternatives, and income investments in fixed income solutions or structured products.

2. Have a constant stream of income

Being good with money means having a regular income stream, either from your workplace or your investments. Additionally, knowing how much you take home every month allows you to plan how much you’ll invest and how much you can consume.

3. Have a budget

Once you know how much you earn and invest, what is left for your consumption. Budget this consumption amount. Planning and tracking your expenditure for regular and unplanned costs is key to sustaining your lifestyle, and knowing how much you have each month to grow your wealth.

4. Treat yourself

Don’t accumulate for the sake of accumulation. It’s important to be kind to yourself and take that holiday without incurring any debt. Try to tie the treats to achieving a goal or a milestone so that it’s not just because it’s a holiday season.

5. Resist peer pressure

As you treat yourself occasionally, resist the pressure to buy things you can’t afford or don’t need but buy anyway just because your peers are doing it. Financial security requires the emotional maturity to live within your means,

6. Consistently pay down your debt

Debt is not bad, especially if applied to investments such as education or buying a house – that is good debt. Bad debts are those that don’t help you build assets or those that are not part of your goals, such as credit card spending on unnecessary luxury items or incurring debt for present consumption. Avoid bad debt, and pay back debt consistently; you’ll have more money to invest and treat yourself.

7. Emergency money

As with everything in life, emergencies arise, whether it be health problems or family emergencies. Financial planning involves having a fund stored away for the financial surprises that life throws at you.

RELATED CONTENT: Haba Haba na NSSF, Helping the Informal Sector Save for Retirement

You should have at least 3 to 6 months of monthly expenses in short-term investments to avoid stress and having to borrow expensively last minute. Get appropriate insurance for eventualities such as illness and death.

8. Periodic financial health checkups

Financial planning is the journey towards financial security. Every journey needs a periodic checkup and assessment. Goals change as life progresses, and so does your situation regarding income, health and family.

Keep reviewing your financial plan to monitor your progress towards achieving your goals for a house, education, wedding and retirement. You may realize you need to invest more or, in fact, have more money set aside than is required.

9. Continuous financial education, learning and research

All financial decisions should be based on research and learning. Financial education allows you to set realistic goals for yourself with achievable timelines.

Learning about financial planning makes you a more proactive investor, and research will enable you to analyze multiple options to ensure you make the right financial decision. Don’t just buy land because your friends are buying. Work with a trusted and qualified financial advisor.

10. Retirement planning

Retirement is as inevitable as death. You cannot run away from it, nor can you delay it. When it decides to come, it comes. No matter what. Everyone, whether in the formal or informal sector, will retire at some point, and for most people, life is never the same.

The worst thing that can ever happen to someone is to retire without something to fall back on. Depression sets in when the regular income stream reduces or stops flowing in as soon as someone retires. It is, therefore, essential to prepare for this inevitable day by saving a fraction of your earnings to a social security fund.

It is a crucial step in financial planning, no matter your age. Therefore, start by considering the lifestyle you want when you retire, how much it will cost per month (even an estimate), add for any unplanned surprises, and work backwards towards investing every month to reach your goal.

Plan for Your Retirement With NSSF

The good thing is you can get started with the National Social Security Fund (NSSF) with as low as 200 shillings a month. You can top up this amount whenever you have a surplus – or if you really want a sizeable nest egg in your golden years.

If you are unemployed, you can opt-in to Haba Haba by NSSF, save as little as 25 shillings a day, and withdraw half of your earnings after consistently contributing for five years.

You can register with NSSF using the USSD *303# or by visiting the nearest NSSF office. Click Here for more information on member registration.

If you are an employer interested in registering yourself/your company with NSSF, please Click Here for more information on employer registration.