Financial sector players in the insurance, banking, retirement and securities space joined the world in commemorating the world savings day under the theme, “sustainability and personal finance – living the commitment”.
In living the commitment, the players’ message emphasized the importance of saving, protecting, and growing/investing the modest amounts we earn. The players shared a guide to personal financial stability, where they encouraged everyone to apply the 50/30/20 rule; where you allocate 50% of your income to necessities, 30% to discretionary spending, and 20% to savings.
To actualize this rule, you need to give your finance a health check. When we hear the phrase, “health check,” we all think of a doctor, a dentist, a gynecologist or an optician. Some have even tried the routine health check-ups of every six to twelve months as the medical practitioners recommend. When was the last time you actually reviewed your expenses and assessed your financial situation – financial health check?
Choosing to take a health scan of your finances should never wait for a significant life events like marriage, divorce, the birth of a child, or the passing of a loved one, to happen.
Just like you would regularly monitor your physical health before getting in a worrying health situation that cannot be handled by your doctor, checking whether you are breaking even or not with your finances ensures that you’re on track with your goals, you are within your budget, and managing your debts effectively. Your financial situation can directly impact on your lifestyle, day-to-day living, children, family, and overall well-being. It can either support you or hold you back, depending on how you manage it.
Checking whether what you spent on last month was a need or a want is as healthy as checking whether you’re saving enough, managing your debts, and spending wisely. Staying on top of your money and saving helps you avoid problems down the road.
To effectively check your financial health situation, you need to begin by reviewing whether there are any major changes in your life that have taken place For example, have you changed jobs? Have you received a salary enhancement? Have you gotten married, separated or divorced? Have you welcomed a new family member? Are you having children joining another level of education or do you plan to change their schools? Have you received an inheritance? Have you bought a home? Have you retired? Have you lost the family breadwinner?
Each of these and more life events can alter and paint a clear picture of your financial situation. By doing that, you are scanning your financial situation which will inform your 50/30/20 rule of your plans come next year.
Secondly, in scanning your financial health, review your saving strategies, partners and goals. Use short- or long-term goals to make saving meaningful. Work towards achieving a specific goal which will put a smile on your face when achieved. For example, if you want your children to have university education without any hustle (which is long term) estimate how much money you will need and how long it might take you to save it. By doing that, you will be checking your financial situation hence informing your 50/30/20 rule of your personal finances, and living committed to achieving your plans and set goal.
Lastly, uncertainties are ever present in our lives. You can never know what will happen in the next hour or day. That’s why as you check your financial health status, you need to be prepared for the best and any worst situations. As humans, we crave for security; we want to feel safe and have a sense of control over our lives and well-being, yet fear and uncertainty can leave us feeling stressed, anxious, and drowned in endless “what-ifs,” and about what tomorrow may bring.
And the 50/30/20 rule comes in handy when it comes to preparing for uncertainties in life, and one of the best investment vehicles is life insurance to guarantee you good returns. By having that, you will certainly achieve the 50/30/20 rule of your personal finances and continue living with minimal worry. If insurance was not part of your financial health check, it’s not too late, you can start today and protect yourself and your family from unexpected events. Whereas saving money (20%) requires knowledge and discipline, it should never be hard for as long as you set a goal to achieve it in the short or long term.
As 2024 ends, apply the 50/30/20 rule to your earnings. You’ll have taken a meaningful step in assessing your financial fitness today and be ready to plan for a stronger tomorrow!