SOMETHING ON FINANCE

Several persons have in the past asked me for tips on how to
save, so I thought I’ll make a post on it. I may not be a financial guru or
investment banker, but I think I know one or two things about saving. Things I
learnt on my own or from others or from reading online posts on personal
finance.

The conversation has since gone beyond just saving. The game
plan now is; work, save and invest.  Learning
how to save is the first step, but you also need to learn how to get your money
working in order to earn you stress free returns.

Imagine a life where you enjoy your free time exploring your
hobbies, instead of spending it on a side hustle because the returns you get
from your investment pays you just as much.

In my response to the question on how to save, I started by explaining
that one can only save from excess cash left after basic needs have been met. I
added that life choices can also reduce the cost of the basic needs if one decides
to go strict on savings plans.

Saving requires sacrifice and discipline.

My watch words have been – ‘every kobo counts’ and ‘there
is rice at home’.

Record keeping shouldn’t be alien to your personal finance.
I have an excel sheet where I have records of projected earnings/income,
expenses as well as debtors/creditor list.

Don’t make the mistake of not putting down the amount and
name of those you lend to, especially if you do so frequently.

Every kobo needs to be kept on track to avoid income
leakages. I update this excel spreadsheet on a weekly basis. It has account balances,
investment balances with maturity dates as well as projected monthly expenses.
From the top of my head I know my fixed monthly expense. This amount only
varies those months where I have extraordinary expense(s).

At the beginning of each year, I plan my financial calendar.
It’s not necessarily cast in stone, but it serves as a guide. I tweak it as the
year progresses based on new realities.

I plan my travel trips, make budget for each trip and also
craft saving plans towards the proposed trips. I also do same as for other projects
like professional examination fees and any other things I plan to do that year.

One thing I do is conservative
budgeting where I underestimate my income/revenue lines while overstating
my expenses. This is to hedge against unpleasant surprises.

Talking about discipline, this may sound funny, but I
actually borrow from myself. If something comes up, or I spend beyond my initial
budget, I make sure I return whatever sum spent. Say I spend N20,000 not
budgeted for from my account in X&Y bank, I record it as borrowing from
myself which must be paid back, after which I expunge the record.

In as much as I try to avoid impulse buying, I have told myself I need to spoil myself once in a while. So my check/control here is making sure every kobo spent on impulse buying is returned to which ever account I took it from. If this is not done, one day I will realize my savings/capital base has depleted drastically.

I once read on a blog about saving a part of your monthly earnings in foreign currency. I adopted this in 2018. You need to hedge against exchange rate, especially with the dwindling crude oil prices and coronavirus influenced economic meltdown. Savings apps like Rise vest and Cowrywise affords you the opportunity to invest in foreign currency. Though I have an issue with their not allowing one invest directly from your domiciliary account. You need to buy dollars from them at rates higher than black market rate, and when you want to transfer back to your account at maturity, its at a fee.

Always keep records of all income and expense! This is key. I
can’t overemphasize this. Update the records as well. Give your self-saving
targets for a certain time frame. When you hit the target, increase it even if
you meet it before the set date.

Each month I plan for any extraordinary expenses that needs
to be settled. For example, next three months I need to get new tyres for my
car, make payments for trips and return monies I borrowed from myself. All these
have been calculated, a funding plan drawn up and placed on my table to remind
me daily. This serves as a reminder so when income comes, I attend to them
first (of course these are second to my basic needs which I have already
factored in).

Never forget to make room for unbudgeted expenses. Always
envisage them. When I have to immediately fix a car or do something, I take them
as borrowing for myself. Wherever I took the money from, I must return it.

I mentioned something about the phrase ‘There is rice at home’ being
one of my watch words. When I need to cut cost, maybe after spending so much on
entertainment, or there is need to save for a new project, I remind myself there
is rice at home. During the ‘there is rice at home’ phase I pack my lunch for
work. I avoid excessive spending and stick to a strict budget while always
reminding myself there is rice at home to prevent me from indulging in junk
buying. Eating out is totally prohibited this period.

Some people do extra stuff like not buying asoebi. For me, I
like being there for friends and supporting friends whether it is marriage or a
new business. Either I save towards buying the asoebi or make provision for it
in next month’s expense. If it’s immediate, I recognize it as borrowing from
self.

I won’t allow saving money ruin my relationship with people.
The key is proper financial planning and record keeping, while of course being
disciplined to stick to your budget. Same thing I say to people who complain
about rent. I wonder why they wait for a month to rent due date before they
start thinking of raising the funds to pay the rent. Why not spread the amount
over the year and keep a certain amount aside every month towards rent payment?

Sometimes customers come to my desk and say they want to
invest their savings. When I calculate the interest they will earn, their
facial expression changes and they say they rather put it business. I wonder
how many of these customers really put the money in business to earn a higher return.
I can bet 95% of them end up spending it. I read a girl’s interview on Zikoko
about her wanting to save huge capital before she starts investing in order for
her to earn big returns. She was discouraged to invest just N100,000 and earn
less than N25,000 in nine month’s time. I shook my head because odds are, she
will never save that huge capital to start investing.

As Dr. Tayo Oyedeji (C.E.O of Overwoodng) rightly said – ‘idle
money grows wings’.

That capital she is keeping in her savings account will end
up being spent on clothes or something else. Also, investment needs a lot of
patience. We need to get rid of this get rich quickly mind-set. Sometimes it’s
not about the interest to be earned. It’s more about finding a safe place to
keep your savings. An extra naira earned is far better than keeping the money
fallow in your account.

There’s this phrase that stuck with me which I got from
training school - don’t eat your future today.

Start saving, start investing the money in Treasury bills or
Mutual funds. I remember when I started investing in Treasury bills, the
principal was small, and as we know, the higher the principal, the higher the
interests.

I always re-invested the interest and principal on maturity,
along with new savings from my salary. My savings grew gradually over time
without me even taking notice. I mean, looking back at when I started investing
to where I am now, its mind blowing how much I have achieved. It takes just one
small step and then continue consistently.

One needs to continue saving/investing because we are in a shithole country with no good health care system. Besides, money is never really enough. When you set a target, you’ll realize the moment you get close to hitting it, that target that once looked like a lot of money seems so small. Most importantly for us living in this third world country, despite our savings, we are only just one health crises away from poverty.

Read self-help books on finance and financial blogs (Good sites are Nairametics and Proshare. Do research on investments, there are so many options.

The golden rule is, the risker the investment the higher the
returns. First you need to know your risk threshold. Personally I am very risk
averse, so I shy away from high risk instruments such as crypto currency and
stocks. Though recently I couldn’t help but take advantage of the global
meltdown in the capital market caused by the novel coronavirus.

There’s this game investors play around shares and dividend
payments. They buy stocks close to the closing date/qualification date for
dividend payment for Blue chip companies that have consistently paid good dividends.
They wait patiently for the share price to go up and then sell off. They gain
from dividend earned, and then again from selling off the shares later on.

For this, I’ll only advise persons who have large capital
base, enough to diversify and play around various options. Sometimes it could
be a long wait for share price to appreciate. Also, it’s easier for such
investors to absorb shocks from economic uncertainties than for someone who has
limited savings.

Well, this post is mainly for starters. I’ll advise anyone to grow their principal/savings to an appreciable level before thinking of diversifying.

Not everyone has same level of discipline, so it’s best to start with savings plans on Cowrywise or Piggvest. You are not able to touch your funds till maturity date set by you and also you earn interest on your savings. Another reliable option is Overwoodng.

From there, you can move to investing in Treasury bills through a Commercial Bank. I know Access Bank currently has the minimum principal amount for investment (N100,000). Though Tbills rates crashed last December when individuals and Local companies were banned by the CBN from Omo bills. This unfortunately had a negative impact on mutual funds and the rates on those earlier mentioned savings apps.

This has led to increase in popularity of agro-investments. Three trusted ones I know that have been in business for years now are Agro-Partnership, Bazuze and Requid. There is also Farm Sponsor which has a shorter tenor of 3months at 15% flat. What I like about these alternative investments is that their rates are flat, unlike the conventional investments and mutual funds that have annualized rates. Though the agro investments are a lot riskier, I know they are all insured by Leadway. But truth is, if anything goes wrong, after Leadway insurance pays them, it’s left to their discretion to pay off their subscribers or disappear.

But it’s all worth it, as far as you play by the rules of diversifying your funds and not putting all your eggs in one basket. Most importantly, not investing amounts that you know you can’t bear to lose.

Meanwhile do take note of scammers in the agro funding
business, as there are so many now. The ones I have listed are the ones I have
done due diligence on. Safe thing I do is, spreading my funds across all three,
because, you can’t put your eggs in one basket. The likely hood that all three
agro fund managers will disappear into thin air at the same time is highly
unlikely.

The thing with agro investments is, you need ready cash at
hand as notice for subscription comes suddenly and before you know it, it’s
sold out. That’s why Requid is a favourite. They are basically secondary market
for the others who deal directly with the farmers. This enables them to have stock
for subscription almost all the time, though this is discounted in tenor and
interest rate.

Another investment option is Intermediation. I know a few persons who engage in this. Lending out funds to people at a fixed interest rate, but the trouble that comes with this can be quite overwhelming. A safe option is giving your funds to a cooperative that will handle the loans to their members, while you earn a percentage every month. In this arrangement, its easy to get your monthly earned interest but getting your principal out might prove a challenge. However, a more structured option is being proposed by Lendha, though it’s still in the works but will be out soon.

Due to my work schedule I avoid side hustles, mostly because
I crave a balanced life. I need to utilize my free time resting or exploring my
hobbies. Extra income is important but what could be better than getting the
extra income via your saved up cash working for you without you moving a muscle?

I would have invested in the Uber/Bolt but being someone big
on trust, and my innate dislike for stress (can’t be dealing with unfaithful
drivers and their drama). I stay within my comfort level and play around low to
medium risk investments, as well as stress free investments.

“I loathe the ‘hustle’. I believe life should be easy. Even
when it’s difficult outside of my control, I believe the solution is easy. I
believe in ease” – Jamie Varon

The financial market keeps evolving and new opportunities
keep coming up. Learn to read and subscribe to financial newsletters. Also have
smart conversations with friends and follow finance guru’s handles on twitter.

I’m still learning and studying the financial market in
Nigeria. I don’t rush into investments. I weigh my options, carryout due
diligence and run permutations. I take my time in assessing the risks, compare returns
from alternative options before deciding where to invest, but most important
deciding rule for me is safety of my funds.

I thought to myself one day, if companies can earn spontaneous
financing from delayed payments why then can’t I apply it to my personal life also?

I used to be the type to fix anything as soon as it’s faulty
or clear out a bill immediately it’s due. But I told myself to chill, no one is
putting a gun to my head. Since then I have enjoyed the beauty of deferred
payments and also learnt how to manoeuvre my cashflow such that it’s now easier
managing expenses and bills.

I used to hate taking soft loans from friends, but I have
since learnt how much it helps to ease my cashflow. I don’t joke with repaying
on the agreed due date. Also, don’t be that wicked friend that invests all his
money and is earning interest but goes about borrowing from his friends’ free
cashflow, thereby preventing them from investing.

Only when it’s necessary do I borrow from friends to bridge
my casflow, but I ensure it’s not more than a month, considering I have my cash
earning interest somewhere. Trying to outsmart everyone in the room is never a
cute trait.

Learn creative ways of managing your cashflow. One period
when Tbill rates were still high, I had a sum of money which I was to take from
to get a new car battery. A thought came to me, I looked up Tbill rates and available
tenor. I didn’t need the money anytime soon so I invested it. I got my interest
upfront, used part of it to buy the battery and still had change. Few months’
time, my initial capital matured. Win – Win.

Oh by the way, there is such a thing as being cash-strapped,
not broke, cash strapped. There is a big difference. I once tied all my cash in
investments but I quickly learnt it’s vital to have cash around. It’s okay to keep
some funds aside for emergency, miscellaneous and also investment opportunities
that may come up especially if you are into agro funding investments. But don’t
go spending it on frivolities.

I must warn this is not the time to invest voraciously due
to current economic realities (Coronavirus pandemic and Crude oil price war between
Russia and Saudi Arabia). Cash is king for now. There is so much uncertainties
right now. But do not tinker with your already running investments, ride it
out. This too shall pass. Last month was a good time to buy stocks as the
prices were down but with the imminent lockdown, cash really is king.

We should all ride it out and when the storm is over come
back to this post and start afresh for those who haven’t started yet. For those
who have built a capital base start investing and remember, do not eat your
future today.