Financial wellness is the cornerstone of a secure and prosperous life. It involves understanding your financial goals and making informed decisions to achieve them. This blog delves into the essence of financial wellness, income management, asset allocation, tax avoidance, risk management, budgeting, estate planning, and specific products from Britam.

What is Financial Wellness?

Financial wellness is a comprehensive approach to managing your financial life. It’s about understanding your financial goals and making informed decisions to achieve them. Financial wellness encompasses control over your finances, the capacity to manage them, and the flexibility to handle unexpected expenses.

Importance of Financial Wellness

1. Control of Finance: Ensuring that you are in charge of your financial decisions.
2. Capacity to Manage: Having the resources and knowledge to manage your finances effectively.
3. Flexibility: Being able to adapt to financial changes and emergencies.

Financial Analysis Tools

These tools help maintain the financial health of an organization or individual by planning, organizing, controlling, and monitoring financial transactions. Examples include cash flow statements and budgets.

Budgeting – The Foundation of Financial Wellness

A budget is a detailed plan outlining how you will spend your money each month. Different types of personal budgets can help you manage your finances effectively:

Types of Personal Budgets

1. Zero-Based Budget: Starts with the assumption that all expense items are zero and must be justified for each new period.
2. Envelope-System Budget: Similar to the zero-based budget but uses cash allocated to labeled envelopes for each category.
3. Pay-Yourself-First Budget: Focuses on saving a fixed amount before allocating money to other expenses.
4. The 50/30/20 Rule: Allocates 50% of your budget to essential expenses, 30% to discretionary expenses, and 20% to savings and debt payments.

The 50/30/20 Budget Rule

This rule helps you allocate your income efficiently:

• 50% Needs: Essential expenses such as food, housing, and medical costs.
• 30% Wants: Non-essential expenses like entertainment and dining out.
• 20% Savings: Includes savings, investments, and debt repayments.

Illustration of 50/30/20 Budget Allocation:

Self Analysis – Assessing Your Financial Status

1. Financial Insecurity: When expenses exceed income.
2. Financial Security: When expenses equal income.
3. Financial Comfort: When expenses are slightly below income.
4. Financial Independence: When expenses are significantly below income.

Key Components of Financial Literacy

1. Income Management: Efficiently managing your earnings to cover expenses, savings, and investments.
2. Asset Allocation: Distributing your investments across different vehicles to minimize risk.
3. Tax Avoidance: Strategically planning to reduce tax liabilities within legal boundaries.
4. Risk Management: Identifying, assessing, and controlling financial risks.
5. Estate Planning: Planning for the transfer of your assets to beneficiaries.

Financial Wellness Journey

Your path to financial wellness involves four key stages:

1. Budgeting & Consumption: Establishing a budget and managing expenses.
2. Savings & Investment: Allocating funds towards savings and investments.
3. Retirement & Insurance: Planning for retirement and securing insurance.
4. Financial Freedom: Achieving a state where financial stability and independence are realized.

Onboarding Requirements for Financial Services

For Kenyans Abroad:

1. Passport: Bio-data page, entry stamp page.
2. Work Permit/Diplomatic Card/Residential Permit: Valid documentation.
3. Utility Bill: As proof of address.
4. Notaries/Public Stamp: On all required documents.
5. KRA Pin Letter: Proof of tax registration.
6. Duly Filled Application Form: Complete and signed.
7. Alternative Documents: National ID or Alien ID, passport page stamped on exit.

For Non-Kenyans (Business and General):

1. Domiciled in Kenya or Business in Kenya: Proof required.
2. Valid Passport: Identification.
3. Alien ID: Legal residency.
4. KRA Pin Letter: Tax registration.
5. Duly Filled Application Form: Complete and signed.

Speaker’s Profile

Selestine Tamara Were
Senior Financial Advisor
Phone: +254777675977
Email: info@tamaras.co.ke

Selestine Tamara Were is a seasoned finance and accounting professional with a Bachelor of Commerce in Finance and CPAK from the University of Nairobi and KCA University College. Currently pursuing a Master’s in Public Finance, Selestine has six years of experience as a financial advisor with Britam. She specializes in financial planning, retirement planning, insurance, and investments, offering simple insurance solutions and wealth-building steps.