When I was younger, the idea of investing, saving, or even planning for retirement, always led to the thought “I still have a lot of time for that”. And maybe I do, but what I learned at the Retirement Planning Seminar by NICO is that the longer I wait to start saving, the more I will have to save later.
Last week I introduced you to the Ndalamas, who also attended the seminar. What they picked up from the seminar was that there was a need for them to plan for their retirement and the first step was budgeting.
Budgeting, in simple terms, is the process of creating a plan for your money. A budget can assist the Ndalamas to have an airtight strategy for monitoring their finances and minimizing unplanned expenses. Ultimately, a budget is the answer to age-old questions like where has all our money gone? And how will we settle our bills?
At the seminar, Mr. Lipunga advised us to be intentional and focused on our approach to retirement. He emphasized that the best time to start budgeting and planning for your retirement is NOW. Often, we like to wait for ‘a perfect moment’ to start planning our finances, but that “perfect moment” is just another way of procrastination playing tricks on us. Think of a budget as a map that leads you to your dream holiday destination—in this case, your financial goals. You need to stick to the map to get to where you want to be financially.
Budgeting allows you to create a realistic plan for how you spend your money. It allows you to divide your money between what you need, what you want, and how much you can save.
One of the first steps is to prepare a forecast of your future revenues and expenses. At 35, Pemphero knows his family needs several things for them to live comfortably. He understands that at his age, he may have to save a bit more to secure his children’s future. Creating that first budget is the first step to take if he is to keep track of his finances.
What to consider when creating a budget
- Be guided by a budget for your expenditure: This is probably the most difficult part, but Pemphero was advised to come up with a strict expenditure plan for him and his family and stick to it. These days, there are a lot of apps that can allow you to track your budget and expenditure.
- Set aside a minimum amount every month for savings: Saving is like paying your future-self. At Pemphero’s age, it is advised to save a minimum of 20% of income every month. This requires discipline that pays off very well in the future.
- Commit to spending within your budget: The Ndalamas have been advised that they cannot spend what they do not have and to avoid going into debt as much as possible. Tracking their expenses means following where every tambala goes and how it is spent. From the little expenses, like data bundles to huge investments like land, they should be sure that they are well within their limits.
- Do not revise your budget every time you are tempted to violate it: It will become a habit that is harder to stop. Pemphero is advised to not borrow money from himself—an example of this is taking money budgeted for something else with the intention of “replacing” it’ later. Pemphero should ensure that he is using the funds he budgeted for their intended purpose. Convincing himself that he will “replace it will only make it a habit that will be hard to curb.
- See opportunities to expand revenue and spend below the budget: Having a budget does not mean having to exhaust it. If a cheaper alternative that can give you the required satisfaction is found, switch to it.
- Focus on needs and not desires and wants: As Pemphero grows older, his needs need to take priority over his desires. This will mean more money directed to his retirement savings.
- Allow yourself to enjoy life but budget for it: It is still important that Pemphero enjoys his life. As he gets more and more accustomed to this way of life, Pemphero can also come up with better ways to save for family vacations, new assets for his family, and most importantly, what he can spend during his retirement period.
- Have an accountability partner, such as your partner: Pemphero and Mercy already share expenses. It is important that they work together to keep each other in line to encourage financial discipline.
NICO Asset Managers advised Pemphero to map out his spending for six months or even a year down the line. Through this, he can track and forecast the periods where he must be stricter with his income and those where he can relax when there is extra cash available.
Budgeting may not seem to be something everyone can do, but it is something everyone looking for an enjoyable retirement should do. It is your responsibility to determine your destiny.
Now that you have created a budget that allows you to accumulate savings, what next? Investments! An important aspect to consider in this journey is a careful investment plan to safeguard your savings. Next week, we will be exploring investment plans to grow your savings.
For more information, contact NICO Asset Managers on:
Call Centre: 323