One of the biggest challenges facing most if not all of us today is how to manage our finances in such a way that we end up living comfortable and fulfilled lives at least on the financial side of things. This is especially so as the Covid 19 pandemic has resulted is serious disruptions such as loss of jobs, closed businesses, reduction in income levels, unexpected expenses in having to support loved ones, medicare and myriad other scenarios that have impacted on our finances. At the same time, some have actually made millions if not billions from the situation.
This speaks to positioning or simply put, how well one is prepared for eventualities when they do arise as they must one time or the other.
Here, I will attempt to outline some basic rules and guidelines that we can adopt to ensure that we are financially secure as we journey on in life, no matter what we do for a living. It’s basically about getting priorities right and being disciplined but as we know life is full of uncertainties nonetheless.
Envision where you want to be
I think the best way to start is to conduct some self assessment right away and envision where you want to be by the time you retire, some people don’t actually retire fully but will become less active.
However, it is pertinent to take stock and note the difference between where you want to be and where you are now and fashion out strategies to bridge that gap…it will matter ultimately. You must ask yourself whether you want to own your own home, have some funds or income source to take care of medicals and other essentials; do you want to be in a position to make your own decisions instead of relying on others? Do you expect a pension? Are you insured in any way? Health plan perhaps? A lot depends on how much you’re worth.
Live below your means –
One of the very basic steps towards financial security or financial freedom is keeping something at the side from what you earn from your job or business. The rule of thumb suggests 10 per cent of earnings but some experts will tell you to go further to 20 per cent or more. Save first before you start spending. Be certain that if your pay is say N200k per month, you can live on N150k or less because you won’t die if you get a pay cut as many have experienced over the past year or so. It’s always prudent to set something aside for the rainy day and it’s more likely to come than not. Some will suggest that you must have the equivalent of three months pay if single and six months pay if you have a family set aside in savings or better still income bearing investments just in case of job loss, illness and other unforeseen.
Invest rather than save –
Flowing from that above, it’s good to save but better to invest as a hedge against inflation at the very least. Nigerian inflation rate is at record highs and the outlook is not quite positive in the short to medium term so if you keep your money just sitting in the bank, it’s losing value. There are many options open to account holders even if you are not a serious millionaire. These include Commercial Papers, retail over the counter debt instruments, mutual funds etc in which you can put your money and earn significant returns. You can also put your money in stocks, which requires opening an account with a reputable stockbroker but buying directly requires some expertise so you don’t end up gambling. Mutual Funds like ARM, Stanbic IBTC Aggressive Fund, Vetiva NewGold ETF, Vantage, FBN Nigeria Smart Beta Equity have performed well in resent months. Entry level is low and you can exit at any time. You have the advantage of expert management to boot.
For those who are still young, the time to start thinking in this direction is now, not when you “hammer”…time is a friend of the investor and if you understand compound interest, I don’t need to say much.
It’s all about property –
There are a few acquisitions as satisfying as brick and mortar. Landed property or real estate has historically proven to be a solid investment even in mature markets. Reason is simple, land is a finite resource and people need spaces to live, work and play. It’s better to get a leg in early. Yes, it can be expensive but we know that many of those artisans that we look down upon are actually homeowners. It can be two rooms on the outskirts of town but it counts eventually. We should take advantage of any significant cash that comes our way to buy land wherever or completed/uncompleted buildings or apartments if we can. You can hardly go wrong, as long as your documentation is fine…always involve a lawyer…the property will appreciate just sitting there. For those of us abroad, let’s learn from the Asians who deliberately set about acquiring property leveraging on an efficient mortgage system while lying low in shared accommodation. I will tell you one lie…I know a Nigerian couple in the UK with a portfolio of about 140 properties including buy to let flats, shops etc as far back as 2007. They started from just one and worked the system. Again if you want to invest back home , it’s all good but as I said involve a lawyer and engage professionals in the acquisition and maybe building rather than just family or friends…many fingers have been burnt….you don’t bet your life’s saving/work based on mere trust.
Start a business –
Thetime tested path to true wealth is entrepreneurship. While many of us may not be cut out for that, it usually pays to start a business no matter how small to create a steady source of cash flow apart from your salary. There are really no hard and fast rules here but it’s prudent to invest in an area you know something about or you can learn….we must always be open to learning and not content in our comfort zone. There are simple things we can do in the services sector such as cleaning, home delivery, etc. we can do consulting as professionals and the beauty of it is that we can leverage on social media to sell out goods and services. We can encourage our wives to start and run businesses if we don’t have time or not so inclined … it will count when the chips are down.
Let’s keep ourselves informed about trends –
The Covid 19 pandemic, terrible as it is was a boom time for a few people. Like as said earlier, it is about positioning. The compulsory social distancing protocols changed the way people transacted businesses and we must key into this trend. Let’s get IT savvy, read about companies that are doing well and why. Let’s learn about how we can be relevant in the scheme of things and use IT to improve on what we deliver as employees or business owners. This converge/ conclave is virtual because someone somewhere envisaged the possibilities and the time and costs it would save the users of the platform and got stinking rich in the process. We can look around us as start solving problems and make money. Again, just look at what is happening in the crypto currency space, many of us didn’t have a clue of what was on but surely we secretly wish that we had a leg in when the Bitcoin was $300 or so, today it is $60,000. While, I will not recommend putting your kids school fees in crypto currency or any other volatile investments, we can take risks.
Insurance is key –
Many of us Nigerians tend to leave things to chance and to God as it were. But I’m sure this of us living abroad know that insurance is vital to hedge against life’s many risks…our assets, income source, health, children’s education can be assured from myriad insurance products available in the market. We should embrace that culture, it could really count one dark day. However, at it very least, we can do life. I know that the ACN has a policy for members….how many of us have paid our subscriptions? It’s beer money o…but we keep postponing…let’s wake up brothers. More so, life insurance policies offer specific saving options, which generates interest over the life of the policy, which means you can benefit even while alive. Many insurance companies today even allow monthly premium payments to make it easier for policyholders. Also, the days when insurance companies could outwit policyholders are gone, skeptics can be assured that the regulatory environment has zero tolerance for withholding claims, but if you don’t pay premium you are not covered. Let’s remember that your asset base or livelihood can be wiped out in one single moment if disaster strikes, the role of insurance is to restore you to that position you were before any eventuality.
Health is wealth –
…sogoesthe old saying, but really it’s important to stay healthy…and alive…to earn money, so we need to pay lots of attention to our healthy. Many of our health issues and untimely deaths are linked to our lifestyles and failure to do regular check ups to detect problems until it’s a bit too late. Severe illness can cost you your job, income sources or life. So it’s good to invest in health insurance plans, do our check ups, use our drugs regularly if we are on medication. There’s no ruggedity in the grave or on the hospital bed…and no matter how people love or try to care for you, it’s your can to carry.
It’s never too late-
For those who feel that they might have missed the bus, it’s never too late to start anything. Like I said at the beginning, you can always review your situation and look at how you can leverage on experience and skills acquired over time to make some money. The media space is wide open for example and you can start a video blog on YouTube talking about your favorite topics from which other can learn or enjoy. You can also start a small businesses, involve your wife or kids if need be. As stated earlier, you can get yourself engaged as a consultant and adviser, supervisor or wherever you can earn money if the time and skills are relevant. Many people are looking at agriculture and if you have undeveloped property just lying somewhere put it to work, poultry, piggery, veggie farm whatever, sweat that asset even if you want to sell or develop later.
Make a will –
This is an uncomfortable space for many of us, but we know we must go one day. Making a will is part of any sound financial plan, that’s a textbook given. Yes, we don’t want to die but what happens if we do and what we have worked for doesn’t go to our wives and kids, but others who just capitalize on a bad situation. It’s wise to make a will if you have substantial assets such as a house to ensure some security for our loved ones if we go. Covid 19 claimed many people we know, friends and family as well. In dealing with that uncertain certainty, we need to engage lawyers or trustee firms to make our will and file accordingly. Nowadays, your don’t even need a lawyer, many banks have Trustee subsidiaries and you can download a form online and get the process done for a small fee.
I’m not Warren Buffet for sure, but I do hope that the few nuggets suggested above can help us get our footing right concerning our finances and we can enjoy life more abundantly.
Wishing you all a successful converge and conclave.
FLY SAFE ALWAYS
Ayo Olesin
EC
