Are You Paying Yourself First?
For many Malawians 2023 was a year fraught with challenges. A tough period where we went through economic shocks and grappled with rising inflation and devaluation. There was increased pressure on disposable income for individuals of all walks of life. As we reflect, you may possibly be rethinking your savings and investment plans with a view to do better in 2024. To enter this new year with positive intentions for all your money matters. This is an opportunity to forge ahead into the new year with resilience and proactively shape your financial future, renew your aspirations, and achieve your dreams
In the face of uncertainties, you have two options, either to wallow in self-pity or take the challenge head on. I want to share some positive behaviors and practices which can help all of us to live a financially fit lifestyle. This is all about cultivating a savings and investment culture to transcend momentary shocks.
The first step is to earn adequate income by using your skills and capability to earn a regular income whether through employment or doing business. Then you need to create a hedge or financial safety net to survive any unplanned economic shocks or personal setbacks. The future is uncertain, and one should always plan for both the expected positive and unexpected negative scenarios of life. A golden rule when it comes to savings is to build a financial safety net from your recurring income (salary, profit, or commissions) equivalent to at least six months of your monthly income to cover your living expenses in case you lose your primary source of income. To build such a nest, you need to consistently maintain the discipline of investing a portion of your recurring income.
In his seminary book “The Richest Man in Babylon” George Samuel Clason shares some basic personal financial principles which have stood the test of time. His seven basic concepts which have been translated in various idioms include:
- Pay Yourself First.
- Live within your means.
- Make your money work for you.
- Protect your Wealth.
- Make your home a profitable investment.
- Secure your future income.
- Invest in yourself.
The second step in your financial journey is to know these principles by heart and implement them in your daily life.
How much you save or invest from your disposable income really depends on your goals. This must be a deliberate effort to ‘pay yourself first’ and works best when it is a defined percentage that is saved or invested monthly. Clason encourages that we set aside ten percent as savings, and this should be invested in interest earning assets. Standard Bank, as your preferred financial partner, offers a wide range of savings and investment products.
I will now unpack for you what our savings portfolio offers. We offer a Pure Save account that is flexible in investment and allows withdrawal on demand. Whilst earning you interest, ensuring your money grows even as you have unlimited access to your funds. If you are targeting savings towards an event or goal like a wedding or buying machinery for your farm, then our Contract Save account will come in handy. It comes with a minimum investment of MK10,000, offering up to 30% bonus on accrued interest annually. Reinforce your savings discipline with a standing order, ensuring you do not miss any monthly contributions as you ‘secure your future income'.
Alternatively, leverage any windfalls like bonuses through our Fixed Deposits account, allowing your money to grow until when needed. As a rule, prioritize your financial wellbeing, pay yourself first by setting aside funds for savings and investments before spending on needs and wants. Let your money work for you!
Thirdly, as your money grows you may consider investing in fixed assets like a second house, farming or venturing into a new business. This normally requires a large cash injection and if you are privileged to already be a homeowner, you can access funds through our Equity Release facility. The facility is where the Bank allows you to access up to 70% of the value of your house in financing which you can leverage for further investments. In essence, you are freeing up capital tied in your current home to allow for development of a wider investment portfolio. Seize this opportunity and get a fresh valuation of your property, as in the wake of devaluation property values would have subsequently increased. Equity Release facilities will enable you get additional funds by topping up on your current loan or getting a new loan as a new client, ensuring your dreams remain within your reach.
As you contemplate on your goals, Standard Bank stands ready to support your financial journey. Giving you financial comfort, appropriate savings products, and investment advice. As Standard Bank, we believe that Malawi is our home, and we drive her growth. We aspire for a better life for our clients and when ordinary Malawians grow, Africa grows.
Written by Joshua Banda, Head, Private Banking