Scientect

The cornerstone of financial stability and long-term wealth is the habit of saving and investing. For many young people, the idea of saving and investing can be challenging. This is due to inadequate financial skills. There are also pressures from social life. Additionally, financial demands from family, friends, and significant others can be overwhelming. We often face inadequate income, debt, and the high cost of living.

Nonetheless, by implementing a consistent and disciplined strategy, one can steadily build their finances and achieve their financial goals. This three-point strategy, which I call the SIP model, focuses on both short-term and long-term financial growth. The model combines disciplined saving, strategic investing, and leveraging your skills to generate passive income on a monthly basis.

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Savings strategy

The savings strategy is to save 10% of your monthly net income. Treat this saving as a non-negotiable bill, just like rent or utilities. To stay disciplined, set up automatic transfers from your current account. This should go to a separate savings account with the same bank or a different bank. The approach removes the temptation to spend the money and ensures consistent contributions. Furthermore, set a limit of up to 3 withdrawals from this account per year. Choose savings accounts that offer a competitive interest rate as well. Setting up a withdrawal limit will help discourage impulsive spending. It allows you to think carefully about how you use your savings – typically for emergencies.

For example, a regular saver with a monthly net income of GH₵ 3,000 will have the following estimated balance at the end of the year:

Net income:	GH₵ 3,000 per month
10% savings:	GH₵ 300 per month
Estimated annual balance (deposits):	GH₵ 3,600
Savings Account interest rate:	5%, pa
Interest earned per annum:	GH₵ 180
Total estimated balance at end of year:	GH₵ 3,780

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Investment strategy

Your investment strategy should include investing another 10% of your monthly net income in growth-oriented assets. This step can significantly accelerate your wealth accumulation. A good approach is to diversify your investment portfolio, including options such as:

1. Stocks and Shares Savings Accounts: These accounts carry a higher risk compared to traditional savings accounts. However, they offer the potential for higher returns.
2.    Fixed Savings Accounts: These are one of the safest investment portfolios. They offer a guaranteed return over a fixed period. There are several banks that offer as high as 9% interest rates for a 1 year fixed term.
3.    Treasury Bills and Bonds: These are short-term debt securities issued by the government and corporations. They are generally considered to be low-risk investments. In Ghana, for example, treasury bill rates can range between 25 – 30% for different fixed terms.
4. Direct Investment in a business: you can consider investing financially in a promising business of reliable associates, friends and family. Such direct investments carry significant risks and you would have to consider them carefully. These businesses include real estate, transportation, restaurant/ fast food chain, hair/ make up salon, studio or provisions/ technology/ clothing store.

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Passive income strategy

Whilst saving and investing are crucial, generating passive income can significantly boost your finances. It can also provide financial independence in the long term. Under this strategy, perform a self-assessment of your current knowledge. Evaluate your abilities, skills, and experience. Use the following questions as prompts:

1. What am I good at?
2. What am I passionate about?
3. In what ways can I realistically generate income from these on a small-scale/ monthly?

Following the assessment, identify potential passive income opportunities that you can feasibly carry out on a monthly basis. Potential passive income options to consider are:

• Part-time or flexible weekend work such as driving a taxi, delivery services, accounting or administrative work, photography, hairdressing or a barbering gig, professional part-time work such as teaching/ tutoring, locum, coaching and many others.
• Content creation has become a popular route to generate passive income over the last decade. You may start a blog or YouTube channel with associated social media platforms on a subject/ cause you are passionate about. You may also invest in writing and publishing books, or offer online or in-person courses or training workshops on subjects you have professional expertise in.
•    Another passive income stream you can invest in is freelancing and consulting where you can leverage your knowledge and skills in areas such as, writing, editing, graphic design, marketing, assessing or research.
•    You may also engage in selling products or services. For example, if you have a skill or craft such as trading, art painting, pottery making, clothing or bead/ jewelry making, consider selling your products or services locally or online.

Building your finances takes time and requires a consistent effort, discipline, and a long-term perspective. By adapting the SIP model, you can create a solid financial foundation and achieve your long-term financial goals. Consulting with a qualified financial advisor can help you develop a more personalized framework tailored to your specific needs and circumstances.