Risk Part 1

Risk is a part of our everyday life and as such we cannot talk about Personal finance and not discuss our risk appetite because so many financial decisions are hinged on our risk level.

 Virtually all areas of Personal Finance have risk elements in it, from Investment decisions to Savings decisions to Spending decisions to borrowing decisions, to changing your job, etc. and therefore we must consider it.

My Personal Finance Story

Hey, my name is Felix (Not real name), I am in my mid-thirties and this is my personal finance story:

I was born into a humble family, where both parents were Civil servants, our family finances were up and down, but we never lacked food and shelter at any point, and all the six children went to good school and at no time were we sent out of school for school fee, it was paid as at when due, how my parents pulled that off I do not know considering their salaries as at then.

One major key for a good life I learned from my parent is the dignity of labor, my dad was an electrical engineer and as such he did contracts, and this was my first shot at making money. I worked and I was paid to the level of my knowledge at par with the others at my level. I had my first proper job as a primary school teacher when I finished secondary school, that was 1996, salaries were paid in cash those days, well packed in envelopes with your name well written at the back, I remember my very first salary, I took it home very proud and I was encouraged by my folks, I can remember I bought a bible with part of the money, yea I love God.

Can we Face the Reality?

I have been a bit disturbed by the timing of recent policies of the Nigerian government, there are three in particular that I feel is bound to make a standard of living that is already low, lower:

   1)       The total deregulation of PMS (Premium motor spirit) which increased the price of the product by about 67%. I am not against deregulation, in fact, it is the way to go, but I thought necessary infrastructure/policies and structures would have been put in place before such statements are made public. The bottom line here is that cost of goods and services will increase, and as a matter of fact, it has increased already.

2)      The intended increase of VAT from 5% to 10%. This will increase the cost of goods and services because the increase in Tax will be passed to the buyers.

Differentiating Needs and Wants

In the past week, I have had to explain to blog readers the concept of Needs and wants, as this is a key area were we can cut down on expenses so as to achieve a good savings habit.

Yes Saving Habit, savings is a concept that needs to be learnt and we will discuss more in our next post, however we will not get a grasp of it until we have been able to separate and identify our wants and our needs.

Needs can be defined as something you have to have, something you can't do without they are essentials and without which living will be very difficult. While Wants are non-essential expenses but make our life more pleasurable, enjoyable and adds comfort to our existence, but we can live without them. Allow me to categorize our Basic Needs into the following headings which are:

1)    Housing, this should not be tacky, but decent and nice.

2)    Food, I recommended a good healthy meal

3)    Clothing, having appropriate clothes for all occasions, not too many.

4)    Basic toiletries.

5)    Means of Mobility

LBI—Living Below your Income,

This is the last set and the most appropriate. They live within a strict budget, the people under this category have a firm financially disciplined life style. They have an organized finances and they have proposed and are building up savings by keeping an amount consistently on a monthly or daily basis. They even have wise investment making extra income on the side line and, this is a sure way to being wealthy.

LAI—living above your Income/ LWI—living within your Income

Over the past week, I have had to answer a lot of questions from blog visitors about the three categories that I talked about in the last my post, if you miss it you can get it here. I will take out time to explain in details about the three categories, starting from the LAI—Living above your Income, I must stress at this juncture that we can only have a grasp of our financial life if we are ready to take responsibility for the way we have being spending and not explain things away, in a bit to justify how we have been spending our money. Note we all are looking for financial liberty and freedom, we all want to be financially stable. Also, it is not only low-income earners that need financial literacy, even the rich who do not manage their funds well.

Living Above your Income is simply a situation where you spend more than you earn on a monthly basis and you are left with nothing to save. In principle, we are to save at least 10% of your earnings. Sadly a larger percentage of people are in this category, the deception of most people is when I earn more I will save better, forgetting that spending and savings are habits which need to be cultivated over time, so I put it to you if you cannot save when you earn little you will not save when you earn big as your expenses grow as your income grows and it is a big pitfall that we all have the potential of falling into.

Dynamics of Budgeting

As individual, family or corporate organization, we have had to do a form of budgeting either once or twice.

 What then is the term BUDGETING? Budgeting is an estimate of income and expenditures for a period of time. Budget is futuristic; it is a workable plan of all income and expenditure for a specified future period. To have a good understanding of wealth and equally be wealthy, budgeting plays a crucial role. The formula for Wealth is:

                    Wealth= Time + Money.  

We must understand that to be financially independent our passive income must be greater than our expenses.

Mortgage 101

Been a house owner via  Mortgage is very prevalent in developed countries, however not in Nigeria due to the high interest rate which is applicable to any other loan that can be accessed here. So what then is Mortgage?

 A mortgage is a debt instrument, secured by the collateral of a specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments, usually monthly. It is a secured form of loan and usually secured with the property being purchased. In Nigeria most commercial banks offer mortgage loans we also specialized banks called mortgage banks whose primary focus is mortgages.

In accessing a mortgage loan, there are few criteria that you must fulfil and there is a limit to the loan you can get for your home, irrespective of your income. These factors may include but not limited to the following:

#MyPersonalFinancestory-Facing my personal finance giant

My name is Segun, I am married and blessed with two beautiful children, I live in Lagos and I lost my job in January, 2016. This is my personal Finance story.

I have being reading this blog for quite a while and there’s a need to share my story not for pity party but to encourage somebody.

My wife lost her job during the bank crisis in 2011 and she switched into business- selling cloths and ladies accessories after we searched for another offer and could not get. And this she did making gains until the recent downward turn due to the exchange rate, which has brought the business to its knees. Sad enough, the same economic situation affected my company and I was affected by the downsizing in January 2016.

Currency Devaluation, Dwindling oil prices VS Personal Finance in Nigeria

If you are a regular reader of the blog, you will recall I did a piece on living in trying times, you can get it here. Without mincing words, Nigeria’s economy is going through difficult times and this is not just peculiar to our dear country alone, it is a worldwide issue. With the dwindling oil prices, major oil producing countries have been adversely affected, and countries with major dependence on this commodity with Nigeria topping the chart are having serious economy crises.

The current global economy down turn is caused by the following:  The slow and declining growth in China and the Euro zones, raising global terrorism cases and  increase in the world oil supply and if you remember from the law of demand  and supply , that the higher the supply the lower the price and Nigeria as a country cannot do anything about it, what other oil producing Countries like ours are leveraging on is diversion into other produce such as Agriculture, IT, Mineral resources etc. which Nigeria is yet to properly take advantage of, and  utilizing the external reserves to handle projects and reoccurring expenditure. The mismanagement, and looting of our reserve does not give the country the option of falling back to make use of the external reserve hence our urgent need to loan funds from IMF.

I CAN DO MORE !, I CAN BECOME BETTER!!

         Let me start by saying Happy New Year. I want to believe we are all ready to achieve our financial targets this year 2016, and if this is your decision, there is a need to be resolute enough to achieve it through a well-articulated vision and determination.

     I am optimistic it is going to be a great financial year, even though the economic indices are not favorable, yet many will achieve financial freedom this year and these classes of people are the smart ones. We will look at how to be smart with our finances in 2016 and beyond so as to meet our financial targets and achievable.  That is why we are starting the year with the topic I CAN DO MORE, I CAN BECOME BETTER.

#MyPersonalFinancestory-School Fee Burden

Hey, I feel it won’t be a bad idea to tell my own #mypersonalfinancestory.  My name is Steve and I am from Edo State, in fact a typical Benin boy. I used to work with the Edo State Government until Five years ago when I got my current Job which transferred me to Lagos. To tell the truth I never liked Lagos life for anything but the MONEY was needed for the family, oh I forgot to mention that am married and have three children, two of which were in school as at the time I got the big Job in Lagos. My thought was to relocate my family to Lagos and settle in, but one thing is typical of me, I love to count my cost before making any financial move, I hate financial surprises. Besides, I am not an accountant but an engineer. I moved down to Lagos and went on school hunt for the kids and then I got the shock of my life; The schools were expensive, good schools of the same standard like the ones they attended in Benin City were three times the cost and the cheap schools were washout, couple with the fact that the selected accommodation was also on the high side, and the cheaper flat we were staying back in Benin was not just cheaper, it was bigger and better by all means possible. I reasoned with my wife and we reached a conclusion to keep them in Benin City. 

We reached the conclusion after doing cost and benefit analysis and today, I am happy I let them stayed back in Benin, has I am able to save better and give them quality education without putting myself under any form of financial burden, my family today lives in the house we built in Benin City while I work in Lagos and stay in a BQ. I decided to send this in after a colleague at work complained of the huge school fees to be paid by the third week of January.

Thanks Steve, the Flash points for me are as follows:

1)      You did not rush into decision making as soon as the salary status changed.

2)      As a married man you carried your wife along in your decisions.

3)      You counted the cost.

I know a few people might have reservations about Steve’s decision, but he acted according to his capacity.

You too can share your story on #mypersonalfinancestory, just contact us on twitter @pistis03.

Stay financially healthy as we progress on our journey to financial freedom; share the blog among your friends, families and foes.

WE WISH YOU A FINANCIALLY BUOYANT 2016.