Welcome to the 'Investing in Nigeria with Raphael' series. This series focuses on educating everyday Nigerians on the Investment landscape in Nigeria. We will be introducing different characters who face issues with investing and highlighting the various ways to solve their problems. This series is brought to you by Raphael Emenyonu, an investment manager at ARM.
Dele was one of the lucky few who got what could be termed a good job not long after NYSC. Initially, he felt well remunerated as his income could easily cater to his needs. Barely a year after he got married, he began to notice a strain on his finances. His financial goals were increasing, life was getting more demanding and his income was no longer adequate.
At first, he focused on getting a promotion at work in the hope that a bigger salary will fill the gap. But even after the promotion came, it seemed like his needs also increased with his income. He recently just got to know that his wife was pregnant with their second child, and he is now more concerned about his finances than ever. Is there a way to make his money work for him? Dele needs help….
It is obvious Dele needs a second income source. His work is however too demanding to afford him time to pursue other businesses. His only option is to put the money he currently earns to work, he needs to ensure his money is working as hard as he does.
How do you get your money to work hard for you?
Making your money work hard for you requires a bit of Mathematics. If you have a goal that would cost you ₦200,000 in 24 months but could only save ₦5,000 conveniently every month beginning from today, your total savings at the end of 24 months would become ₦120,000.
So, the next question is at what interest rate per annum would these savings grow to ₦200,000 at the end of 24 months. That is ₦120,000 savings in 24 months at ₦5000 monthly should grow at the rate of X to achieve ₦200,000. What is X? X is 4.18% per annum. You need an instrument that would preserve the savings and grow at a minimum of X.
Solving Dele’s dilemma
The first thing Dele needs to do is to set his financial goals and be clear on them- he needs to be clear on what he wants to achieve. He can also set his financial goals according to preference for achievement. Click here to gain access to our FREE financial goals guide.
Secondly, he needs to ascertain his financial status. That means he needs to be clear on his Net worth (his total assets minus liabilities). This would provide him with a position of how much he can conveniently set aside to achieve his set goals. To achieve this position of being able to set some money aside he needs to make use of a budgeting tool to capture every penny that is earned and spent. Click here to gain access to our FREE budgeting worksheet.
The third step of making his financial dream come true is to break down his numerous goals into short term (0-2 years goals), medium term (2-10years goals) and long term (>10years goals). At this stage, he also needs to get a detailed understanding or knowledge of the various financial instruments that are available as they are specifically structured for the different categories of goals listed above.
To gain this understanding, he would need to speak to an investment manager to get an idea of what investment packages best suits him and then, begin his investment journey. You can click here to gain access to our FREE investment log which outlines investment firms in Nigeria and their various packages. You can also click here for a list of question you can ask the investment manager to help you zero in on what investment package is best suited for you.
Stage four requires Dele to not just go to sleep after investing his hard-earned money but take steps to monitor and review his investments regularly. He would need to review his short-term goals monthly, medium term goals quarterly or half yearly and long-term goals annually to stay on top of his investments.
I guess we have been able to solve Dele’s puzzle. He can get back to work and rest assured that his hard-earned money is working as hard as he does, and his growing financial goals are consistently achieved.
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