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Five steps to financial independence

How to properly control your budget? Where to keep savings, in a bank or life insurance company? What is the return on investment insurance? We asked financial market professionals to answer these questions.
Five steps to financial independence

Everyone wants to feel the spirit of freedom and not think about how much money is left before the payday. However, not everyone knows how to create even a small capital but prefers to complain about a difficult life or bad employer.

How much to accumulate?

You should calculate how much money you need to not depend on your family or work for a month. Multiply the amount received by six: this money will become a financial cushion for six months, which will help out if you get sick or fired. The reserve may be less: think about how much money you need to feel confident and comfortable. When you have the final amount, this is your first step, your goal.

Budget under control

Even a high income can be spent on one party or several days of vacation. In order to control money, you need to start saving and stop spending impulsively, optimize loans, or better not take them at all, unsubscribe from all advertising mailings so as not follow the links and hang on store websites.

There is nothing difficult in maintaining a budget either: in order to better understand the financial picture you need to start a notebook or application and mark all income and expenses there. Usually, expenses that are easy to give up make 10-15% of the total income. This can be an extra taxi ride (when time and weather allow walking), buying coffee daily and so on.

Extra work

It will be difficult to start saving, even more so investing, without an income that meets your needs. We consider investments as a way to save and increase capital but not as a way to make quick money.

Analyze your job responsibilities. What can you become better at, what additional knowledge can you get? Someone can bake cakes on weekends or embroider. It is easy to sell the first products through acquaintances, friends, relatives, and social networks will give impetus to a small business.

First savings

Putting aside some of your income is the most important thing in a successful financial strategy. If you don’t start saving, you will never get passive capital to work for you, and you will be forced to constantly work and depend on external circumstances.

The less temptation to use savings the better. It is important to make savings less accessible: keep them in foreign currency or on a separate card or bank deposit. “According to many people’s experience, it is best to save about 10% of the monthly income. It is not so expensive, and in a few months it will be possible to accumulate a fairly significant amount, even if your salary is not a million tenge. It would be better, if possible, to save a little more money in some months, for example, 15-20% of income at least once every three months. You cannot expect that you will have something left at the end of the month; the savings must be set aside immediately. The beauty of this method is that, most likely, you will not notice the lack of these 10%, and the money will be saved,” recommends a financial analyst Ruslan Sundetov.

Selecting a savings product

The National Bank announced that inflation could reach 15% by the end of the year. Banks offer long-term deposits (for several years) at the same rate or less; this means that savings will not multiply. By the way, foreign banks do not offer high interest rates either. Most residents of developed countries acquire endowment or investment insurance. Thus, Unit-linked (investment insurance) has been operating in the West for many years, and the share of this product is constantly growing. “Investment insurance products are tied to the performance of stock markets and are potentially more profitable as their returns are subject to market conditions. However, the client also assumes the risks on them. They function in the following way: part of the insurance premium paid by the client goes to life insurance, and the rest is invested in the market in investment portfolios of the client’s choice, depending on his risk appetite,” notes the Board Chairman of LIC Nomad Life Aida Kamysova.

Zoloto Nomadov Invest (Unit linked). The insurance premium in this product consists of two parts: 10% are with a guaranteed rate of return from 2.6% - 3.41% depending on the insurance term, where the collateral is investment grade Eurobonds, 90% are invested in the largest index funds and are passive investment areas. “I would like to emphasize that the client has 10 areas of investment in his arsenal. He can move his savings between investment portfolios at his earliest convenience (within a few days) and invest them in several different areas in accordance with his preferences,” specifies Aida Kamysova.

A stable return can be obtained thanks to endowment insurance products. In addition to life insurance coverage, the client receives a guaranteed income specified in the contract. The product does not bring any risks for the client, since the insurance company assumes all investment risks. The insurance premium is paid by the client in tenge, which are accounted for in foreign currency at the current rate. “You can save money for 3 years or more without fear of currency depreciation. The payments are made with indexation to the exchange rate upon expiration of the contract. Unlike bank deposits, where the annual interest rate on foreign currency deposits does not exceed 1%, it is much higher for endowment insurance products. Zoloto Nomadov and Capital insurance products are suitable for conservative clients who want to have savings in a foreign currency with a guaranteed rate as an alternative to bank deposits and mutual funds. Product liabilities are secured by investment grade bonds. The guaranteed rate of Zoloto Nomadov is 2.6%–3.41% per annum and depends on the accumulation period. If the “Gold” product is aimed at customers with higher income, Capital is available to every working person. The annual fee from 100 USD and the annual guaranteed rate is from 2%. The client can also independently determine the frequency of insurance premiums: monthly, quarterly, semiannually or annually,” concludes the LIC Nomad Life executive.

From Nomad Life, It is possible to buy endowment insurance policies under the Zoloto Nomadov Invest and Capital programs online. A client can track the status of his savings, initiate changes to his terms of the contract, withdraw funds and carry out other operations in his personal account.

Photos are from open sources.

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