The transition from student life into corporate or entrepreneurial life is quite a momentous time in any young professional’s life. One of the first major changes for most is the responsibility to manage money. Do it well, and the freedom will be liberating; but, if you do it badly, both your work and personal life will suffer.
This is where basic knowledge about finances comes in handy. The general idea is that the sooner a young professional can learn these facts, the faster they can achieve personal and professional success. Here are a few tips that can help get young professionals (such as myself) well on their way to financial success:
TIP #1: PROTECT YOUR MONEY/ GUARD YOUR WEALTH
As a young professional starting out, you will want to protect your money from taxes as much as you can. This can be done by investing a portion of your salary into a retirement fund as these exempt from taxes and from inflation. You can do this by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, equity stocks, bonds, and unit trusts or mutual funds. A general rule of thumb would be to invest 10-20% of your salary. Trust me, the moment you understand the power of compound interest, you will want to start investing today!
TIP #2: UNDERSTAND THAT MONEY IS A TOOL
If you are in your 20s and ready to build wealth, it all starts with recognising that the money you earn is nothing more than a tool. Instead of thinking of the money you earn as the solution to your problems, think of it as a tool you can use to create the life and lifestyle you want through making smart choices regarding spending, savings and investing. There are quite a number of financial products that can assist us in benefiting from money as a tool to create what we want . Sometimes, however, choosing from these can become a daunting task. The truth is, this shouldn’t be – the Internet offers many free online courses and study materials that can help in understanding what investment will best suit your needs. Another option would be to seek professional advice from a registered financial advisor. Knowledge is very much power in this case, so seize your power!
TIP #3: AUTOMATE YOUR INVESTMENTS AND LEARN TO LIVE ON LESS
No matter where you are in your personal finance journey, one of the best steps you can take is automating your investments so that they can take care of themselves. Setting up an automated savings plan like a monthly stop or debit order from your bank account will help condition yourself to save consistently without having to decide between delayed gratification and instant gratification. This was one of the very first things I am thankful I did when I started my job at Kgori Capital as it helped me learn to live on less, without really feeling the impact of it. It is also a lot easier to build real wealth when you have made saving and investing a priority instead of an afterthought. Healthy financial habits that last are something you will be truly grateful for further down the line.
TIP #4: INVEST IN YOURSELF
You may have heard the phrase “the single best investment you can make is in yourself” being said before, but only because this is the absolute truth. This is particularly when you are younger, as you get to benefit from the acquired skill for longer. Think of it this way, who is going to benefit more financially, a person who becomes a lawyer at age 53 or age 23? Starting sooner means more time to reap rewards. It is not only formal education or degrees that I am referring to. Investing in yourself can mean anything where you are learning and growing. It includes reading books, taking online courses, getting certifications, or even personal development programmes. Understand that you are your best asset. The more you invest in yourself, the more valuable you become.
TIP #5: BE OBSESSED WITH GROWTH
This one is a favourite of mine because it can mean the difference between a mediocre life and a fulfilling life. Being obsessed with growth means that you are relentless about learning, experiencing, and become a better version of yourself each and every day. One thing I often hear from my elders at home and colleagues here in the office is that as you get older there will be more demands on your time and energy. I always try to put time aside to set priorities for myself. I make sure to be obsessed about doing things that are new, that scare me, and that will lead to my personal growth both in and outside of the office. If you are not growing, you are not moving forward, literally and figuratively.
TIP #6: DEVELOP THE HABIT OF SAVING/INVESTING
Earlier, I suggested you should spend money on yourself to learn and grow. Another crucial thing to do is to get into the habit of saving and investing even if you start with just a few Pulas. It is not really about how much you save, but most importantly about creating a habit of saving. When you begin to earn more money you will already have the “muscle memory” of saving and investing. To make things even easier, there is now the option to invest online in Botswana without having to set foot inside an investment firm. Kgori Capital recently launched its online transacting capability for its Unit Trust offering, and this is something I am really excited about as it’s the first of its kind in Botswana. It makes it seamless for investors to start growing their money right from their cellphones or indeed any device which has Internet access. There really is no excuse to not invest, now!
TIP #7: USE YOUR OTHER 8 HOURS WISELY
The general idea is that you work 8 hours, sleep 8 hours, and have 8 hours left over. Life happens in the latter 8 hours because the time you work you sell to somebody else and the time you sleep is not yours. The only way you can grow, exercise, develop a strong network, and improve your life is after work and before bed. Make the most of this time! Invest it wisely in things and people that will make you better. What is the worst that could happen if you, say, invested that time in learning a new skill?
TIP #8: SET INVESTING AND FINANCIAL GOALS
Jot down your goals purposefully. What are you looking to achieve? Set your goals, and make them specific. How much do you want to store away every pay-check, every month, every year? Where do you want to be in 5 years financially? If you could have one financial accomplishment for this month, what would it be? And what are you really trying to achieve from of your investing? Intentionally asking myself these sort of questions and jotting down my answers to these has helped guide me on what steps to take next in my wealth plan.
THE BOTTOM LINE
So what it the bottom line? Well, it is simple: the one thing I try to do consistently from month to month is to keep my core expenses low and park away some money into an emergency fund for any possible rainy days. I have found that it is important to build habits that help you make better financial choices, leading to better financial health. The best time to start investing is now!
By Sheila McHarg, Operations Analyst, Kgori Capital