Money Matters with Nimi: Young People, Here Are Some Tips Financial Freedom

International Youth Day is celebrated on August 12^th each year. The 2020 theme is “Youth Engagement for Global Action”. It seeks to highlight the ways in which the engagement of young people at the local, national, and global levels is enriching national and multilateral institutions and processes.

Financial literacy is a core life skill for participating in modern society and our increasingly complex world. Financial illiteracy in youths leads to ill-equipped adults. The life-long skills in financial knowledge, when imbibed early, give them the best chance for long-term financial independence.

Here are a few money tips to set you on the path to financial freedom:

Set SMART goals

Many young adults face the dilemma of making far-reaching choices regarding their future. Some feel compelled to make decisions that they may later regret. Some drift without much of a plan or purpose. This is where parents, guardians, teachers and all of us can play a role, as mentors, to guide and point people in the right direction by exploring innate potential, natural strengths, talents, and abilities. By establishing clear goals, you can make realistic plans for your life.

Start with a budget

Budgeting is a very effective way of keeping track of your expenses. Create a budget so that you can see exactly where your money is going. Start by adding up the essentials, transportation, food, rent, school fees, etc.

Before the lockdown, there was the tendency to eat out almost daily, pick up take-away meals, and generally have a lifestyle that you perhaps can’t afford just yet. This is the time to commit to save and invest for the future. The key is to live below your means and spend less than you earn even as things begin to ease up.

Use debt judiciously

It is better to borrow for things that have lasting value, such as your personal development and education. Or in assets, such as property, rather than for clothes, gadgets, and luxuries.

Your employer, family, friends, and banker might consider lending you money. Be meticulous with repayment and don’t abuse this trust. If you are struggling to repay, approach lenders and be honest about your situation – they may be able to adjust the terms. It is about credibility – building a solid credit history from now is important.

Start to build savings

Things happen and it pays to be prepared for the unexpected. Once your debt is under control, build some emergency savings. So many young people have lost their jobs or taken pay cuts. You need a fallback, a cushion to tide you over such uncertain times.

Don’t wait until you have that windfall to start to save. No matter how little you earn, save something. Even the smallest amounts add up over time. Automating your savings by setting up a direct debit makes saving much easier. The mantra “pay yourself first” involves treating savings as part of your monthly expenses.

Set a realistic savings goal and start to save at least 10 percent of your income in an interest-bearing account or a money market mutual fund. Ideally, you should try to accumulate up to 6 months’ worth of your living expenses, or up to 12 months if you can.

Invest for the long-term

One concrete way to invest for the future is to get on the property ladder. You are never too young to get started. Start small and build, it may be a plot of land to start with. Mortgages are available once you start to earn steady income at a particular level, but interest rates can be prohibitive. So plan to pay off any loan as early as possible.

Buying property involves leg work, doing your due diligence, and most importantly, selecting an experienced real estate advisor to help you avoid the common mistakes many make whilst investing in this important asset class.

Most people do not have the time or inclination to select individual stocks. With a relatively small sum of money to invest each month, a stock market mutual fund may be the ideal investment to start to address your long-term goals. The stock market continues to present significant discounts on the prices of some leading blue-chip stocks.

It may seem absurd to talk about your retirement when you have barely gotten started. Even if your company doesn’t have a pension scheme in place, make your own voluntary contributions to a Retirement Savings Account (RSA). A pension alone can hardly sustain your standard of living, you need to build a diversified portfolio of investments, to set you up for long-term financial security.

Choose your life partner wisely

Your choice of a life partner is one of the most significant decisions that you will ever make. Do your partner’s moral and ethical values match yours? Whilst you don’t have to agree on every single financial issue, compatible goals and values, as well as openness and trust, are key as you merge not just your lives, but your finances.

The company that you keep matters greatly. If you surround yourself with motivated, ambitious, positive friends, it is more likely to rub off on you. Networks and mentors are usually sited as ingredients for sustained success. Take relationship building seriously.

Invest in yourself

You are your greatest asset. Be deliberate about building the skills that you need.  There is an increasing demand for digital skills as a prerequisite to enter most roles. Education will always matter, so equip yourself, keep learning and improving by reading widely, attending seminars and other learning events. Seek certifications as appropriate.

Embrace your strengths, talents, and gifts. That thing that you love to do for free may well be the key to moving from passion to profit and establishing the business that you have dreamed of.

Invest in financial knowledge

Seek professional advice so that your own unique situation can be carefully considered and you can be guided appropriately. You also owe it to yourself to build your own knowledge. Knowledge is power and there is a plethora of information in books, the online and print media.

Armed with the required knowledge, you will find that you become far more intentional about your finances and are less easily swayed by peer pressure and the need to keep up with the Jones’.

Health is wealth

Don’t be one of those that expend all their energy and health creating wealth only to spend years in ill-health and then end up spending all that wealth to regain your health. It is those intentional daily steps that you take now that will help to sustain you in the future. Eating healthy foods, exercising, not smoking, limiting alcohol, are important immediate steps to take.

The COVID-19 virus lurks around us, don’t be complacent about the protocols; wear a mask, wash your hands often, use a sanitizer, keep your social distance, avoid crowds, seek medical assistance if necessary. Protect yourself and others.

Protect your wealth 

Don’t forget to protect the wealth you are creating. Sadly, the need for insurance usually becomes glaring only after a loss. Protect yourself and your assets with car insurance, homeowners or household insurance, health insurance and life insurance particularly if you are the primary breadwinner of a young family. 

Earn your independence

It is the desire of most parents to ease the path for their children. Whilst it’s nice to receive assistance from your parents, don’t let it short-circuit your own ambition, motivation, and drive. Your parents provided you with a sound education. Now that you are no longer a child, earn your independence, and start to take charge of your life. The choices that you make in your youth will largely determine how your life will be in the future.

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