By Oyinlola Oresanya (@oyinnlola)
As the proverb says, “Money does not grow on trees!”
Money can however grow when you wisely save and invest.
Securing financial well-being is one of the most important things one needs in life. It doesn’t take a genius to do this.
The Consumer Financial Protection Bureau (CFPB) release of January 2015 defines financial well-being as: “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”*
It doesn’t matter how much or how little your money is, the important thing is to educate yourself about your opportunities. Most successful investors start with the basics of saving and investing over a long period of time. Although some people may stumble into financial security – inheritance from a wealthy relative or a business may take off. No one is really born knowing how to save or to invest.
Over time, people of even modest means who begin the journey reach financial security and all it promises: buying a home, educational opportunities for their children, and a comfortable retirement. If they can do it, so can you!
According to the CFPB report, the four elements of financial well-being are as below:
Present Financial Security — having control over your day-to-day, month-to-month finances. You are aware of how your money is being spent and you do not feel controlled by your expenses. You do not worry about where you will get the money to help you pay for all your financial obligations.
Future Financial Security — capacity to absorb a financial shock. Instead of borrowing money, you are in a great financial situation that lets you to survive financial emergencies without feeling too stressed about the monetary side of the situation.
Present Financial Freedom of Choice — financial freedom to make choices to enjoy life. You are free to spend on things that you enjoy without worrying if you can really afford it or not.
Future Financial Freedom of Choice — on track to meet your financial goals. This criteria looks at whether you’re on course to meet your long-term financial goals (e.g. retirement planning, paying off debt or saving for a house).
The U.S. Securities and Exchange Commission in its paper “Saving and Investing – A Roadmap to Your Financial Security through Saving and Investing states the keys to Financial Success to be:
- Make a financial plan.
- Pay off any high interest debts.
- Start saving and investing as soon as you’ve paid off your debts.