Are you working for your money, or is your money working for you?

The Dream: Retire at 50. Participants in an investment education webinar by CIC Group titled “Fire Up Your Financial Future” took a poll that established seven out of 10 people would like to retire by the age of 50, provided they have sufficient money to last them long into their later years.

Data from the Financial Sector Deepening (FSD Kenya) shows that only 15 percent of Kenyans actively invest in pensions or long-term savings, signifying a gap in financial planning. Luckily, today, anyone with a smartphone and internet access can access a lot of digital tools and financial literacy to help them embark on a journey of securing their future through long-term savings.

Assuming you begin working at the age of 25 and plan to retire at 60, you will have approximately 420 paychecks, which translates to 12 paychecks per year for 35 years. That is your window to build wealth. Relying on your salary only will not be sufficient. The key is to make your money work for you. Regrettably, most people are heading towards retirement without a plan, which is risky. There is still an opportunity to reverse this trend and make your retirement days less dependent on others.

One of the most powerful concepts for saving for retirement is the 25X rule – multiply your annual expenses by 25 to get the amount you need to retire comfortably. Sounds daunting? It is not, if you start early, save consistently, and leverage the magic of compound interest. It is entirely within reach, even with a modest income.

During the webinar, participants asked questions that mirror real-life financial challenges. One of the questions was “How do I start investing if I do not have a lot of money?”. The answer is simple: start small and be consistent. Investing just KShs 500 a month can snowball into substantial wealth over time. Others were concerned about not reaching their retirement target, and in that case, flexibility is crucial. One can consider adjusting the retirement age, reducing future expenses, or engaging in an income-generating activity. And what about emergencies? This is where a mix of liquid and long-term investments, along with insurance, plays a critical role.

To make this climb successfully, you need a strategy. Investing is the bridge between working for money and having your money work for you. Start by understanding the power of compounding, where your returns earn returns over time. Next, consider inflation: If your investments do not outpace inflation, the value of your money erodes. Finally, maintain liquidity. It’s not enough to own assets; you must be able to access cash when you need it.

Also essential is understanding the difference between guaranteed and variable income. Guaranteed income, such as bonds, provides stability. Variable income, such as dividends or rental income, offers greater potential returns, but this comes with more risk. The goal is to find the right mix that aligns with your lifestyle, risk tolerance, and long-term goals. Most importantly, this is not something you do once; it requires regular review, adjustment, and commitment.

Recognising these realities, CIC Insurance has provided the CIC Invest App. It allows anyone to begin their investment journey with ease. The App offers real-time portfolio tracking, digital convenience, and access to expert advice, empowering users to make informed decisions on the go.

Building on this foundation, it is crucial to adopt a long-term mindset towards investing. Disciplined investing helps mitigate short-term volatility and encourages financial resilience.

Diversification is equally important. Spreading investments across different asset classes reduces risk exposure and ensures that your financial future does not hinge on the performance of a single investment. Each asset class behaves differently under varying economic conditions, and a balanced portfolio enhances your ability to weather market fluctuations while steadily pursuing your financial goals.

As the investment landscape continues to evolve, embracing digital tools allows you to take control of your financial journey with greater transparency and flexibility. By committing to regular saving and investing and maintaining a well-diversified portfolio aligned with your objectives, you can build a more secure and prosperous future.

Read Also: Why More Money Won’t Save You Without Financial Discipline

James Njagi is the Head of Business Development at CIC Asset Management Limited