This article is part of an ongoing series of basic financial education brought to you by financial industry professionals curated by PocketFin – The Financial School of Real Life. CNBC Africa provides content from PocketFin as a service to its readers but does not edit the articles it publishes. CNBC Africa is not responsible for the content provided by PocketFin.
No matter what your background or your age, there are a few universal wealth building principles that have been tried and tested over the decades. It does not matter if you are in your 20’s or in your 50’s, these principles can be applied and are sure to assist you in your wealth creation journey.
The 6 steps listed below will enable you to build a more prosperous financial future! Lets do this :
1.Keep your expenses low for as long as possible
Our world is built vastly on status and image, that combined with credit being offered in abundance often leading us to buying things we do not need to impress people we do not know! Can you imagine if you threw that concept out the window and instead focused on only your ‘needs’ combined with savings instead of only your ‘needs’ and then unnecessary ‘wants’?
2.Getting out of bad debt
Whilst no real debt can be considered truly ‘good debt’ there is most certainly debt that you can leverage in order to benefit from, it is important to at all costs try to eliminate debt over the long run.
3.Do your best to save 15-20% of your income to long term investments
The rule of thumb for retirement investing has always been to try to allocate 15% of your monthly income to retirement, if you can extend that to 20% it can assure you to an even better situation at retirement. Perhaps it is not possible to do either at this moment in time, but remember ANYTHING IS BETTER THAN NOTHING, let compound interest start working in your favor.
4. Having an Emergency Fund
Whether it’s retrenchment , a car accident or something else completely unexpected, one of the most important aspects to building wealth is to be adequately prepared via having at least three months of your income saved up in an interest bearing account, preferably six months of your income. Do your best to not access this unless there is a real emergency.
5. Be careful to not over-insure yourself
Whilst we should always have the relevant insurance to match our lifestyles through various phases of life it is important to review your insured amounts and the premiums. Other factors to carefully consider when it comes to insurance is the premium patterns (how much does it go up each year) and the term of your cover (when does the cover expire)
6. Paying off your property early
Chipping away at your mortgage and bringing those monthly payments down are a great way to minimise debt and to free up more disposable income. Just imagine not having that monthly payment each month!
Whether you like it or not retirement is coming and it is important that you acknowledge that fact as well as your financial habits and start making the necessary changes to building wealth. How prepared you will be completely depends on you! Learn to educate yourself financially and be disciplined in your wealth creation efforts.