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Financial planning can be very complex and difficult for people who have little or no knowledge in finance and investment. If you are now starting your financial planning journey, you may as well be wondering where and how to start.

Financial rules of thumb can assist you have a personalized financial plan that will suit your goals and needs. Financial rules of thumb are simplified financial principles, which serve as a guide in making financial decisions. They make complex financial concepts very easy to understand and apply. These rules seek to address procedures for budgeting, savings, investment, debt management and retirement planning.

Financial rules of thumb provide a general guide for making financial decisions and may not be applicable in everybody’s financial plan. However, you can decide to tweak them to suit your financial situation.

Below are some financial rules of thumb that you can adopt to assist you streamline your finances and investment.

I. Pay yourself first

The general rule to kick start your financial planning is to pay yourself first. How do you pay yourself first when you have worked and the whole income belongs to you? It simply means that anytime you receive an income, be it daily, weekly or monthly, you should try as much as possible to save a certain percentage out of your income before you decide to go on a spending spree. This rule helps you to save first before you start spending your income. Even if you have a tight budget, you should always make room for savings. Take note, “Income minus Savings equal to Expenses”. It is recommended that you should save at least 10%  of your daily, weekly or monthly income before you start spending. To be able to do this consistently and without stress you should set a standing or direct debit order on your bank account.

II. The 50/30/20 Rule

Have you been struggling with preparing a budget? Then the 50/30/20 rule will assist you prepare a budget. A budget is a simple tool to keep track of your inflows (income) and your outflows. This rule helps you to plan how much to spend and save each month. It simply guides you to live within your means. The 50/30/20 rule suggest that your income should be allocated between needs, wants and financial goals. 50% of your income should be allocated to your needs (ie. things that are necessary for your survival such as food, rent, healthcare, clothing and utilities), 30% of your income should be allocated to your wants (ie. things that are essential such as internet, electronic gadgets, vacations, eating out and entertainment) and 20% should be allocated to your financial goals (ie. savings and investment).

III. Emergency fund rule

An emergency fund provides financial support for you in the event of unforeseen circumstances like job loss or any unplanned expenses. Hence emergency fund serves as a safety net. Emergencies are unpredictable and will be very difficult to know the amount of money you will need or set aside for such situations. However, the financial rule of thumb for emergency recommends that you should have at least 3 to 6 months equivalent of your income saved for emergencies. You can set-up an emergency fund by opening an investment account which is easily accessible and make a conscious effort to put at least 10% of your monthly income into it.

IV. The 35% Rule for servicing debt

Sometimes you might need support in the form of a loan to meet certain life goals like buying a car, running a business or acquiring a house. However, before you commit yourself to acquire a loan, you should have a payment plan. The rule of thumb is that you should not use more than 35% of your monthly income to service your debt. You can run into a serious financial crisis if you are using more than 35% of your income to service your debt. You should also avoid taking on more debt if you are not done paying the initial one you took.

V. The rule of 72

Have you ever wondered how long it will take for your investment to double? The simple way to have a fair idea of when your investment is going to double is by using the rule of 72. This is by dividing 72 by the rate of return on your investment. Although rate of return on investment is not fixed, you can use the average rate of return on your investment for the estimation. For example, if the average return on your investment is 16%, then your money will double in 4 and half years (ie. Number of years =72/16 = 4.5 years). It is also important to be earning a rate of return on your investment that is above inflation.

VI. 10-20 rule for retirement planning.

One of the basic tenets of a comfortable retirement is a good retirement plan. The 10-20 retirement planning rule of thumb means you should save at least 10% to 20% of your income towards retirement. You may have to save even more than 20% of your income towards your retirement if you are above 45 years. And this can be done by having a personal pension plan which is under the three (3) tiered pension scheme.

VII. The 4% rule for retirees

The ultimate question is how much money will be enough for you on retirement? The 4% rule of thumb can be used by retirees to estimate how much they should withdraw annually from their retirement benefits. This rule suggests that the amount you should withdraw from your retirement benefit annually should not exceed 4% plus the rate of current inflation. For example, if current inflation is 12% then your withdrawal rate should be 16% of your retirement benefit. The rule seeks to provide a steady income for retirees on retirement and ensures that their retirement benefit is not depleted within a very short time. You can decide to buy an annuity plan on retirement to provide a steady income for you on retirement.

 

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Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.

 

Published in Mindset & Motivation

Financial planning can be very complex and difficult for people who have little or no knowledge in finance and investment. If you are now starting your financial planning journey, you may as well be wondering where and how to start.

Financial rules of thumb can assist you have a personalized financial plan that will suit your goals and needs. Financial rules of thumb are simplified financial principles, which serve as a guide in making financial decisions. They make complex financial concepts very easy to understand and apply. These rules seek to address procedures for budgeting, savings, investment, debt management and retirement planning.

Financial rules of thumb provide a general guide for making financial decisions and may not be applicable in everybody’s financial plan. However, you can decide to tweak them to suit your financial situation.

Below are some financial rules of thumb that you can adopt to assist you streamline your finances and investment.

I. Pay yourself first

The general rule to kick start your financial planning is to pay yourself first. How do you pay yourself first when you have worked and the whole income belongs to you? It simply means that anytime you receive an income, be it daily, weekly or monthly, you should try as much as possible to save a certain percentage out of your income before you decide to go on a spending spree. This rule helps you to save first before you start spending your income. Even if you have a tight budget, you should always make room for savings. Take note, “Income minus Savings equal to Expenses”. It is recommended that you should save at least 10%  of your daily, weekly or monthly income before you start spending. To be able to do this consistently and without stress you should set a standing or direct debit order on your bank account.

II. The 50/30/20 Rule

Have you been struggling with preparing a budget? Then the 50/30/20 rule will assist you prepare a budget. A budget is a simple tool to keep track of your inflows (income) and your outflows. This rule helps you to plan how much to spend and save each month. It simply guides you to live within your means. The 50/30/20 rule suggest that your income should be allocated between needs, wants and financial goals. 50% of your income should be allocated to your needs (ie. things that are necessary for your survival such as food, rent, healthcare, clothing and utilities), 30% of your income should be allocated to your wants (ie. things that are essential such as internet, electronic gadgets, vacations, eating out and entertainment) and 20% should be allocated to your financial goals (ie. savings and investment).

III. Emergency fund rule

An emergency fund provides financial support for you in the event of unforeseen circumstances like job loss or any unplanned expenses. Hence emergency fund serves as a safety net. Emergencies are unpredictable and will be very difficult to know the amount of money you will need or set aside for such situations. However, the financial rule of thumb for emergency recommends that you should have at least 3 to 6 months equivalent of your income saved for emergencies. You can set-up an emergency fund by opening an investment account which is easily accessible and make a conscious effort to put at least 10% of your monthly income into it.

IV. The 35% Rule for servicing debt

Sometimes you might need support in the form of a loan to meet certain life goals like buying a car, running a business or acquiring a house. However, before you commit yourself to acquire a loan, you should have a payment plan. The rule of thumb is that you should not use more than 35% of your monthly income to service your debt. You can run into a serious financial crisis if you are using more than 35% of your income to service your debt. You should also avoid taking on more debt if you are not done paying the initial one you took.

V. The rule of 72

Have you ever wondered how long it will take for your investment to double? The simple way to have a fair idea of when your investment is going to double is by using the rule of 72. This is by dividing 72 by the rate of return on your investment. Although rate of return on investment is not fixed, you can use the average rate of return on your investment for the estimation. For example, if the average return on your investment is 16%, then your money will double in 4 and half years (ie. Number of years =72/16 = 4.5 years). It is also important to be earning a rate of return on your investment that is above inflation.

VI. 10-20 rule for retirement planning.

One of the basic tenets of a comfortable retirement is a good retirement plan. The 10-20 retirement planning rule of thumb means you should save at least 10% to 20% of your income towards retirement. You may have to save even more than 20% of your income towards your retirement if you are above 45 years. And this can be done by having a personal pension plan which is under the three (3) tiered pension scheme.

VII. The 4% rule for retirees

The ultimate question is how much money will be enough for you on retirement? The 4% rule of thumb can be used by retirees to estimate how much they should withdraw annually from their retirement benefits. This rule suggests that the amount you should withdraw from your retirement benefit annually should not exceed 4% plus the rate of current inflation. For example, if current inflation is 12% then your withdrawal rate should be 16% of your retirement benefit. The rule seeks to provide a steady income for retirees on retirement and ensures that their retirement benefit is not depleted within a very short time. You can decide to buy an annuity plan on retirement to provide a steady income for you on retirement.

 

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Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.

 

Published in Mindset & Motivation

If I should ask you about your employment benefits, you will most likely emphasize on your take-home salary. For most employees, there may be other benefits that may not have been considered. What are they? How much is it worth to you? Are you missing out on opportunities to;

1. Reduce expenses

There may be expenses that you would have incurred if weren’t working with your current employer, an example is lunch. If it would have cost you GHC 600 to get lunch, you can take the expense item out of your budget and allocate the funds towards other important expenses or invest it.

2. Plan for your retirement

Beyond contributing to the mandatory Tier 1& 2 pension schemes, some employers contribute to Tier 3 PF or personal pension, unregistered provident fund schemes or may even have health benefits for their retired employees and their spouses at retirement. Having these benefits can make a significant difference and ensure a comfortable retirement.

3. Plan towards other future goals and create wealth

Apart from retirement plans and other cost savings opportunities mentioned earlier, other benefits like cheap loans, bonuses, allowances, cash gifts, commission, and employee stock option plans, professional development if used properly can help you create wealth and achieve your finance goals.

 4. Prepare for financial emergencies.

 Do you have access to benefits that help you handle emergencies that may come your way? Having a health insurance can help save money and give you peace of mind when you encounter health emergencies. Beyond this, your employment benefits may include other insurance products or arrangements to help you deal with unforeseen contingences.

 5. Reduce your tax burden

 Some employment benefits come with tax saving opportunities. Beyond the value you derive from that benefit, you also get to reduce your tax burden! An example of this is the tier 3 provident I mentioned earlier that allows you tax savings of up to 16.5% of your basic salary.

It is essential that you know, understand and take advantage of all opportunities you are entitled to. Review your employment contract or have discussion with the HR or whoever is in charge of employee benefits to understand what you are currently entitled to. If there are any good opportunities you haven’t fully taken advantage of, start now. If you are considering a job or career change, being well-informed about benefits offered by the available options will help you make better money decisions.  It is important to look beyond your take-home but instead focus on but the long-term value of your entire compensation.

 

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Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.

Published in Career
Wednesday, 12 January 2022 14:45

6 Helpful Tactics to Thrive Financially in 2022

The New Year brings an opportunity to reflect on the past year and to set new goals for the year ahead. Were you able to achieve your goals for the previous year? Looking at your current circumstance, do you think there are aspects of your life that need improvement? Answering these questions will give you a clear picture of where to focus and how you need to approach the New Year. If you are considering setting physical and mental wellness resolutions, consider adding financial wellness resolutions as well. On the other hand, if you never had a clear plan for the year, this is the time to plan because a sailor without a compass will always get lost.

Planning for the New Year can be a very tedious exercise and you might lose interest and leave your life to chance especially where the previous year did not gone as planned. You need to approach the New Year with high optimism and with the hope of getting the best out of it. A brand-new year is a great opportunity to build a new habit as well as improve upon old ones. You may want to buy a car or move into your own house. Regardless of your goals for the year, you will need a very well thought through plan and strategy to sail through.

One area you cannot ignore for the coming year is having a good financial plan. A good financial plan will ensure that you have financial security and peace of mind. This will mean you will have enough funds to cover your lifestyle, emergencies and future financial goals. Here are a few strategies to help you thrive financially in 2022.

I. Set Financial Goals

The first step you need to take is to set financial goals. In setting a financial goal, you need to assess yourself to know where you are.  To set a concrete financial goal, you will need to answer honestly the 3 questions below;

  1. Where am I now (current financial situation);
  2. Where do I want to be (financial goal); and
  3. How do I get there (action steps).

 II. Live within Your Means

“Living within your means” is simply having your expenditure for each month be less than or at least equal to your income for the month. Remember, you are not in competition with anyone, and you do not need to impress anyone. The best way to live within your means is to set a budget. It is important to note that having a budget alone is not enough. To ensure you succeed, you stick to the budget you set.

III. Pay off your Debt

To achieve your financial goals, you will need to be very discipline about managing your debt, if any. Try to pay off your debt by first getting rid of smaller debts. This will motivate you to pay off larger ones. Avoid taking on new debt if it is not necessary.

 IV. Save and Invest

Once you know your income and you have reviewed your spending habits, it should be clear and easier for you to know how much to set aside every month to meet your future needs. The best strategy you can adopt for the New Year is to pay yourself first any time you earn income.

There are various rule of thumbs you can adopt to help you save and invest but the 10 – 90 strategy is recommended. That is, save and invest 10% of your monthly income and spend the remaining 90% on your needs and wants. Try as much as possible to automate your savings and investment by simply setting a standing order on your bank account or mobile money account.

 V. Plan for a Comfortable Retirement

Retirement is a period you cease to be actively employed. In retirement your savings throughout your working life should be able to cater for you. You need to be able to estimate the amount of money you will need during retirement. Apart from the mandatory schemes, you can enhance your retirement benefits by opting for a voluntary personal pension plan. In 2022, take the necessary steps to save towards a comfortable retirement. This will improve your overall financial wellness.

 VI. Stay Organized

Setting goals and having a financial plan is good but your efforts will be in vain if you are unable to stay on track. You will need time, consistency and discipline to achieve your goals. Try as much as possible to evaluate your financial plan at least every quarter to ensure you stay on track.

 Our financial planners are available to assist you to design and implement a good financial plan. Connect with an Axis Pension Advisor to discuss your financial goals for 2022 and more.

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Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.

Published in Mindset & Motivation

The Coronavirus Pandemic continues to threaten economic growth, business continuity and the livelihood of individuals across the globe. The pandemic has exposed the fact that most of us live from hand to mouth with nothing or very little to fall back on when an unexpected event happens.The situation calls for each individual to review his or her financial plan and employ strategies to survive this season and thrive afterwards. In our various engagements, reference has been made to the concept of an Emergency fund as a viable option to make up for income short falls. In addition to reviewing your budget, an emergency fund could be a vital part of your COVID-19 response strategy, assuming you already have one. 

An emergency fund is simply money or highly liquid assets you have set aside to cushion you against life’s unexpected events such as the loss of a job, medical emergencies, a major repair to home or car. Having an emergency fund should be a key part of an individual’s financial plan. It ensures financial stability and peace of mind during turbulent times. An emergency fund also safeguards future security by helping avoid tapping into your long term investment (e.g. retirement fund) to address emergency needs. Here are 5 tips to help you build your emergency fund during and after the COVID-19 pandemic;

I. Stick to Your Budget: Make a budget and live by it. As discussed in an earlier article, list all your monthly income, discretionary and non-discretionary expenses. Cut out or reduce unnecessary expenses to make room for savings. This will also help you determine your monthly living expenses.

 

II. Assess your need: Determine how much you need to save in your emergency fund. The general rule for building an emergency fund is to set aside 3 to 6 months of your living expenses. However, the ideal amount is dependent on your personal circumstances .i.e. job security, number of household income, nature of employment, income stability, medical condition etc. If you are more likely to have emergencies, you may need to set aside more than 6 months of your living expenses. For an individual who is less susceptible, 3 months or less may be fine.

 

III. Set a periodic savings goal: Based on your level of need, plan to save a specific amount of your weekly/monthly/quarterly income towards your emergency fund. However, if your income is irregular, try to set aside as much as you can as soon as possible. Regardless of the regularity of your income, saving should be carried out with the total amount needed in mind.

 

IV. Automate your savings: Set up a savings account or money market mutual fund account. The account should be easily accessible at no cost and should be separate from a bank account you use daily (e.g. Current account) so you are not tempted to dip into your reserves. Automate your savings into your emergency fund account using standing orders or direct debits. You may speed up your savings by saving windfalls, 'left-overs' and proceeds from selling something you do not need.

 

V. Review your plan: Financial planning is an ongoing process. It is important to review your progress towards building your emergency fund regularly and adjust if necessary e.g. if your circumstances or living expenses change (marriage, childbirth etc.)

 

Building an emergency fund is one of the first steps towards achieving financial peace of mind. Whether you are able to do so immediately or after the pandemic is over, adding an emergency fund to the list of your financial goals is a must. It is important not to save above what you will need at the detriment of achieving other financial goals. Once you are able to build your emergency fund to the level you need, channel your savings towards other financial goals such as achieving a dignified retirement.

 

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Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.

Published in Budgeting & Saving