If you want to change the world, start with mastering your finances

Many founders kill their businesses and ideas with bad personal finance habits.

They’ve got a great idea, built a solid team and actually execute excellently. But the business fails. Their business has barely got of the ground and their product is only starting to gain traction, but because they have the title CEO, they feel the need to look the part.

So they go off to buy a luxury SUV, move into a porshe area of town, start flying business class etc. And typically, they don’t do this out of their pocket, they’d expense this to the company.

A few years/months down the road, business slows down and their isn’t sufficient capital to tide the business through. And they are left with selling or shutting up shop.
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Dear founder, give that business some time to grow and flourish. You will not only fly business, you’d fly private if you so desire.

Of course as CEO, you represent your brand and shouldn’t go around looking tacky or in a a jalopy. That is however not sufficient grounds to blow cash you have raised from investors or revenue your business is only starting to generate.

Shifting from ‘Spaving’to Saving

Incredible 50% savings off a new ultraHD TV! Is it really saving, if you’ve just spent some money?

That’s not really savings but something called spavings – a combination of spending and saving. Spaving is spending money during a sales promotion to save money.

Savings in its true form is money set aside for future use and not necessarily money left unspent because of a discount.

But you can convert your spaving into savings by transferring the discount received into a savings account. Though in practice, it may not always be possible especially if you have a tight budget and immediately used the spavings to buy other essentials.
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So when next year’s Black Friday comes around, don’t say you saved a lot from discounts, the right word is I spaved a lot.

Make sure you both know the important stuff

I wonder how much money people have stuck in banks without anyone to claim it?

Whether you choose to manage your finances separately or combine everything or any other way you choose to deal with your family finances, you should share relevant financial information to avoid problems.

It’s common for couples to have one person handling the money but if the responsibility unexpectedly has to pass to the other person, it could be very challenging and lead to a major headache for the person now who has to deal with them.

Situations that require a spouse to take over the handling of family finances are quite stressful on their own, you don’t want them to deal with the additional issue of a financial difficulty – not because their is no money but they don’t know where it is or how to access it.

To make life easy for your partner, you need to get on the same page regarding the following among others:
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➡️Account details – how to access them.
➡️Properties and investments – What is owned and where they are held.
➡️Income sources – How much is coming in and from where.
➡️Household bills – When they become due and how to pay them.
➡️Amounts owed – How much and to whom it’s due.

You have high yielding investments but do you have cashflow?

What shall it profit a man or woman to have high yielding investments but zero cash flow?

So Tiwa is on her first job out of school and has just been paid a year end bonus. She’s all about saving and investing, so when she hears of how land prices in Lekki have jumped for the early invesors, she makes a quick move to purchase some real estate.

Some months down the line, the investment is doing very well but she has an emergency and needs some cash that exceeds her emergency savings.

Unfortunately, investments in bare land don’t pay any dividend. The only way to get cash is to either sell it, lease it or do some business on the land. Now, those aren’t things that can often be done at the snap of a finger.

Also, it should be noted that she only needs some money but it isn’t easy to sell a fraction of a piece of land.

So with no cash flow from her investments, she has a crisis situation and may have to take a high interest loan, sell the land at a huge discount or more embarrassingly go begging.

Often, investments with the highest rate of return would require you to tie up your funds for a long time. And while it’s important to maximise your returns, you need to also have some investments that generate some cash flow.

Thoughts on saving money with a piggy bank or kolo box

Once again, people are breaking there kolo to find decent sums.

Last year, I thought it was throwing money away in unearned interest. If you put 1,000 into the box daily, you’d have at most 365,000 at the end of the year.

If you were putting the 1,000 into a high yield savings account (10% per annum, compounding daily), you could have additional savings of up to 18,000. Today, rates aren’t that high, maybe you get additional 7,000.

Anyway, I think it’s an interesting practice because it’s lose change that ends up in this box, that you’d probably spend some way or the other. Besides, It’s not like you’d withdraw from your account to put money in your kolo. So, there is perhaps a place for it in the overall scheme of things.

I however think, you don’t need to wait until December to get the cash out. Every month or quarter, get the cash out and let it earn some interest.

Are you using or have you used a piggy bank to save lose cash and what was your experience like?

Simplify your finances to get ahead

Managing your money can be complicated (even if you have a little), but it becomes easier to control if you simplify the process.

Steps to simplify your finances –

  1. Consolidate your accounts – It’s not uncommon for people to have multiple bank and investment accounts. Apart from avoiding the payment of multiple bank charges, streamlining the accounts would make them easier to track.
  2. Automate your payments and investments – With direct debits from your accounts for these, that’s something less to worry about.
  3. Use technology – There are apps you can use for budgeting as well as fintech platforms you can use to save and invest in multiple asset classes.

Other ideas:

  • Eliminate paper statements.
  • Consolidate your debts, if possible.

Tighten your belts – Keeping it together in a tough economy

You are not a ‘marlian’, so you better tighten your belt, the government is coming for a bigger share of your wallet.

This is what’s happening –

VAT – As we all know, this is going to 7.5% from 5%

Electricity Tariff – Tariffs are going up by about 78% in April.

Petrol – Has been stable but with pressure on government finance they could adjust that upward.

Inflation – This has been trending upwards. And as we all know with a higher minimum wage, things could get more expensive.

And to make it worse, income from Treasury Bills has slumped.

So we all have to tighten our belts. And if you don’t wear belts, tighten whatever it is you wear.

Dividends: Why you should take notice

Before you close your mind to Nigerian stocks, you should read this…
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By the way, the market has been steroids since the start of the year. We predicted this would happen when treasury bill crashed last year.

Anyway, to this dividend matter.

If you’ve been following the price of quoted securities for some time now, the graph is more downwards. And because of that, most people don’t like to touch stocks even with a pole.

However if you take a closer look at how these stocks have performed when you factor dividend reinvestment, the picture is a lot different.

Hopefully, you already know about the magic of compounding.

Unlike your fixed income where you can just leave an instruction for your investment to be rolled over at maturity, with stocks you have to make the active decision to reinvest your dividends.
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Need further guidance on how to retrieve your dividends, send us an email – info@thriveng.org

Source: Bloomberg

Dangote is Africa’s richest but do you know your net worth?

You know Jeff Bezos is the world’s richest and Aliko Dangote is Africa’s richest, but do you know your net worth?

By the way, given the stock market rally, Aliko is $1.51 Billion richer since we said happy new year.

To measure is to know – if you cannot measure it, you cannot improve it. – Lord Kelvin

It’s easy to just keep living your life – making money, buying stuff, putting some money in savings but not making real progress in terms of growing your net worth.

Calculating your net worth allows you to track your growth, so if income grew by $5,000 and net worth grows by only $1,000, you know you spent most that additional income.

Treat your investment portfolio like your fashion closet

Whether it’s closet or wardrobe you have, there would be a bit of this and that in it.

Some trendy stuff and some classic stuff, some traditional and some western pieces, some expensive items and some Etsy stuff.
You’d also have stuff for different seasons or weather conditions. As well as covering for different parts of your body.

Even if you have a stronger affinity for a particular item or type of clothing, it doesn’t mean you won’t buy some of the other things too.

An investment portfolio is quite similar, you should buy some stocks and some bonds, some Nigerian stocks and some international one’s too.
Also, while you might have affinity for one type of asset class, you shouldn’t buy just that one.

Nigerian stocks – Capital growth.
International Stocks – Growth and currency hedge.
Real Estate – Inflation hedge
Treasury Bills – Security

Just as nobody has a closet with only shirts, you shouldn’t have an investment portfolio with only stocks or even worse the stock of one company and the most extreme – only the stock of your employer.