Two life certainties, besides the day you were born, are the day you retire from active work and the day you die. Another certainty is that, the current Coronavirus Pandemic will eventually reach its end. The Coronavirus Pandemic, regardless of the many associated inconveniences and financial tolls, presents an opportunity to reiterate old savings and money management tips. Hopefully, the challenges brought about by the pandemic will be viewed as opportunities to drive some action. I hear fear is sometimes a good motivator.
In line with this, I want to shed light on two wealth building tips in this blog article that can be practised to overcome the 'pandemics' we encounter in our lives.
1. Increase your Emergency Savings
The first wealth building step is to build your emergency savings. Emergency funds help you ride out temporary life challenges. The hope is that we do not experience another global pandemic in our lifetime. On a micro-level however, we are all confronted with multiple life ‘pandemics’ such as job losses, death, accidents and we should all be adequately prepared. Aim to put away three to six months’ worth of expenses in a savings account. If you do not have three to six months’ worth of expenses saved, then it is time to make some sacrifices to increase your emergency fund.
One savings suggestion is to make a list of all your monthly discretionary and non-discretionary expenditures. Rank the discretionary expenses in order of importance, then cut out the items ranked near the bottom until you feel you cannot cut any longer. Add what is left to your non-discretionary expenditure. Multiply the total by three or six to determine the required amount to build into your emergency savings.
2. Invest for your Retirement
In addition to building your emergency savings, it is important to also keep a focus on other long-term saving goals. The most important in my view is retirement savings. The rule of thumb when it comes to retirement savings is to save up to 20% of your income starting with your first paycheck. If you are already on your 50th, 120th or 180th paycheck, the percentage of income you need to save to meet basic retirement goal should be more than 20%.
If you happen to work in the formal sector, your mandatory occupational pension and voluntary occupational provident fund (if you have one) could make up for the 20% of your income needed to be saved for retirement. If you really desire to live your best life in retirement you may consider putting aside in excess of 30% in retirement savings. If you are like most people who constantly withdraw from your provident fund for other very good reasons other than retirement, you should consider making up the shortfall by starting a personal pension investment account such as the Axis Pension Plan.
To conclude, we must recall the old Ghanaian adage made popular by today’s urban youth ‘Time No Dey’ – which simply tells us there is no time to waste. It only seems like yesterday when I sat for my BECE 22 years ago and I know it will only take a blink of an eye for the year 2034 when I retire to dawn on me. It is time we all take action.