Ask a Financial Advisor – Volume 2
Financial independence starts with careful planning. If you want to be a millionaire in the future, you have to do the work today. We’re excited to present the second installment of our Ask A Financial Advisor column. Financial experts from United Capital have once again taken questions from our community and answered with real advice. Volume 2 of Ask A Financial Advisor features advice on starting and maintaining a saving plan as well as saving for future goals. How can I start the process of investing my money? Right now, I know nothing and would like to educate myself before doing anything. What are some trusted sources and beginner tips? – Naome Jeanty It’s great that you want to educate yourself prior to getting on the investment ladder. There are loads of resources available to one on the internet, so please do as much research as you can. The best way to create a life that is not dependent on a paycheck is to start investing early in your life and these are our top three tips – 1) invest at least 20% of your savings on a consistent basis. 2) take calculated risks, especially when you are young 3) start investing for retirement as soon as you have a steady income from paid employment or an on-going business venture. I earn N134,000 and I look forward to getting a landed property and also a car by this time next year. How can I save to meet up with this target? Thank you. – Toyin As with starting any project, it’s important to define clear goals -which you’ve done already. You do however need to prioritize these goals such that you are able to differentiate between routine expenses, short term and long term savings goals. Use the SLA Savings calculator and remember that an emergency fund is key. This is where it comes in handy to set up a Private Investment Trust. And when you do need to borrow, let it be for investment purposes i.e. purchase of land etc. How do I start and MAINTAIN a savings plan. I currently live paycheck to paycheck when debts have been ignored. I want to put money aside, I’m currently paycheck to paycheck (bills paid, rent paid etc) but at the cost of ignoring some debts. (Owe family and friends money…I can’t afford to pay them back at the moment). – Gloria Determination here is the key, both to getting out of debt and maintaining a consistent savings plan. The first step is to determine what you can actually save after taking out your routine expenses, i.e. food, transportation etc. Then the next step is ensuring that you actually do save. A great way to going about this is to set up a direct debit order on your salary account or main business account which ensures that a designated sum is debited at regular intervals i.e. monthly, quarterly etc and moved into an investment vehicle such as a Private Investment Trust. If you’d like to get your questions answered by a financial advisor from United Capital, submit your questions by clicking here.
5 wedding planning tips for the business savvy bride
Have you recently gotten engaged? Congratulations! Are you deep in the trenches of the madness that is planning a wedding? E-hug. I had no idea what I was getting into when I began to plan my wedding. Prior to getting engaged, I had invested little to no time envisioning my wedding, and I generally dreaded attending weddings (with some exceptions). What I have always enjoyed though, is research and strategic planning. Likewise, when it was time to plan my wedding, I treated it like I would any professional project. It’s been a year since I got married and with the rear view mirror in sight, here are 5 tips I would give any #BossBride: 1. Develop your wedding brand To begin my wedding research, I followed major wedding sites like Bella Naija on social media. I pored through every single post on blogs like Aisle Perfect and bought books like Vogue Weddings: Brides, Dresses, Designers. Once I had a better grasp of things, it was time to decide on my wedding brand. What will my wedding look like? What will it feel like? I asked myself these questions because I didn’t want my wedding to be a copy-and-paste smorgasbord of every trend. It was especially important to me to have a bit of my personality stamped on the wedding. Accordingly, I put together a concept note describing my vision for my wedding (aka #Blavid2015). I have always been passionate about the arts and I created my vision around this. Both my traditional and ‘white wedding’ were like mini-concerts: I had traditional dancers, a choir, musicians, a quartet and poetry reading. Of course several things went wrong on my wedding —but what most people (hopefully) remembered, was the music and the ambiance. 2. Get the budget figured out early A vision without the finances to execute it is pretty much useless, so it’s important to get the finances figured out early. While the bride’s family traditionally pays for the wedding in Western countries like America, this is not always the case across the African continent. My husband and I come from different Nigerian cultures, with different traditional rules about who pays for the wedding. Thus, it was important for both families to discuss who was paying for what and decide on the budget early in the process. Getting a budget together will require getting various price quotes and a lot of prioritization, so it’s best to get an early head start. 3. Do not waste your human capital Once I had a vision and a budget, it was time to figure out who would help me execute my vision. Beyond the usual suspects like my maid-of-honor and best friends; my mother and I delegated tasks and asked favors from whoever asked what they could do to help (perhaps to their shock, Ha!). For example: a family friend who owns a marketing firm designed our logo and handled the programs; another who is a creative helped design my wedding website and invitations. One of my photographer friends did my engagement shoot, and another friend with a hair business hooked me up with a great hair extensions. A former family chauffeur organized a tour of the city for our foreign guests, and my brother-in-law’s fiancé made our bridal train proposals. I could go on and on, but the point here is: #TeamWorkMakesTheDreamWork. 4. Beware of social media vendors Beautiful Instagram feeds do not a good vendor make. Some vendors spend so much time boosting their social media profile that they neglect their actual products and customer service. Additionally, particularly in Africa, some of the best vendors might not be social media savvy or on the Internet at all. No matter how many popular wedding hashtags a vendor is affiliated with, no matter how many blogs rave about a vendor, no matter if a vendor is a family member or friend —do not choose a vendor whose work you have not seen, touched, tasted, heard, etc. 5. Negotiate your contracts like a CEO I shamelessly negotiated prices with every vendor I worked with and they all gave discounts. Two of the most stupid mistakes I made however, were paying some vendors 100% upfront and not insisting on written contracts. As a lawyer, I am very ashamed to admit this. I blame my desperation to book these vendors and what I’ll call PWSS (Pre-Wedding Stress Syndrome). One vendor failed to deliver on almost everything he had promised—it nearly brought me to tears at my reception. When I wrote to him after the wedding, he apologized and explained that a bus with some of the materials he needed had not arrived on time. One year later, a promised refund remains buried in a labyrinth of excuses and justifications. I wanted to sue, but my pastor-mother insisted on leaving it all to God. The moral of this story: a) protect yourself by insisting on paying a balance after the wedding, and b) document all your expectations in a detailed contract. A final note: flexibility and adaptability are important skills for any seasoned professional or entrepreneur in today’s world. The same applies to a wedding: you may have to make concessions to make your family, in-laws and partner happy. I was resistant to some things at first (Type A problems), but I eventually realized that I would have a much happier wedding if all the important parties had some buy-in. I also rolled with the punches—or danced with them, I should say. I decided I would be happy on my wedding day no matter what, and for every mishap I noticed, I danced a bit harder. By the end of my reception, my curls were undone, my foundation had bled, and I had danced my happy heart out.
Ask a Financial Advisor – Volume 1
Financial independence starts with careful planning. If you want to be a millionaire in the future, you have to do the work today. We’re excited to kick off our brand new column called Ask A Financial Advisor. Financial experts from United Capital are taking questions from our community and providing real advice. Read on for our first series of answers covering topics such as investing as a fresh graduate, real estate as an investment property and how to start investing even when you feel like you don’t have any money to spare. Hello. I would like to ask about the best place and way to invest my money in Nigeria presently, some say federal government bond buying, but am not so clear nor sure. I mean am not so super rich and just 3yrs out of college but I think the little money I make part if it invested would go a long way. Pls kindly help a sister out. Gracias! – Abimbola Investments when being done on a relatively small scale, are safer when carried out under the umbrella of a professional Fund Manager/ Trust Company. That way, the minimum requirements for say an FGN Bond or any other instrument will be met through the pool of funds being managed by the company. Also, the risks involved will be shouldered by the company and you will be privy to professional wealth advisory services suited to your investment objectives. What can one invest in that requires minimum money? I’m a single mum and I feel I’m living hand to mouth, I’d like ideas on what I could invest in and how that will require minimum money that could potentially accumulate or grow. – Nikita You can invest in a contributory scheme with a minimum annual contribution of N60,000.00, which will come to N5,000.00 per month. If you were to set up a Private Investment Trust, your contributions will be pooled with other contributors’ funds and invested in profitable investments which the N5,000.00 would ordinarily be insufficient to partake in. The result of this is a healthy mix of stable returns as well as minimum -risk investments which will be affordable to you and simultaneously accumulate in the long term. Every month I seem to just break even and in some cases I am over budget. How can I save money whilst breaking even on my budget? – Sharon You need to decide on a percentage of your income to save every month, we would advise 10%-15% for a start. Once that decision is made, you can invest in a contributory scheme which requires you to make contributions per month. A Standing Payment Order (SPO) given to your banker to automatically credit your contributions to the Fund Manager/Trust Company will ensure you do not begin to overspend before the contributions are made. This will improve your financial discipline and at the same time ensure you have accumulated a tidy sum which would have yielded a stable return in the medium to long term. With the rising cost of living, buying property is virtually impossible. Although I qualify for a small amount, should I rather buy an investment property (property that I will rent out and never live in) or wait until I can afford a place of my own and buy one for myself? – Kendi Buying property is a highly capital intensive venture and may not be advisable if you do not have the liquidity. It would rather be advisable to invest your funds in REITs (Real Estate Investment Trusts) through a professional at a minimal fee, so that you can accumulate the funds until you can afford the property of your choice, whilst still enjoying some benefits of real estate investments through the underlying assets of the REIT. If you’d like to get your questions answered by a financial advisor from United Capital, submit your questions by clicking here.
The one basic lesson to teach your kids about financial responsibility
Don’t you just wish you had been taught about financial responsibility when you were much younger? In our rapidly changing world, it has never become more imperative to teach our children the need for handling money well. In fact, it’s such an important skill that it will guide their decisions well into adulthood. If you’re able to do a good job with the lessons now, your children will look back and be grateful to you as a parent. And in getting this done, there’s no better time to start than now —your child is never too young to begin. It’s important for kids to get savvy about spending wisely, saving and the value of giving to others. Delayed gratification —an important lesson When I mention that there’s one basic lesson to teach your kids about financial responsibility, I mean that at the heart of every financial decision you’re getting your child ready to handle in their future is one basic fundamental lesson, which is ‘delayed gratification’. Delayed gratification is learnt from deciding to do a chore now and watching TV later. It is about eating up two candy bars now or keeping one till tomorrow. You see, for the most part, the concept of saving money and spending wisely is more about learning to wait for something versus getting it now. Financial discipline is first of all the ability to spend less than you earn (which requires proper budgeting and sticking to it) and secondly, being able to put that excess in the budget away over a period of time (savings). How do you help your child to be financially disciplined with the concept of delayed gratification? Start early Children form their habits based on what we expose them to. They are influenced by their environment and learn from the things they see on a regular basis. If you let your children understand that it may not always be the best thing to get something now, they grow with that lesson and it becomes easier as time goes on. For instance, I hear a lot of parents say they don’t like to go to the supermarket with their kids because they are afraid of the demands to buy something that’s not on the budget. If you train your kids that we do not always get what we want when we want them, they learn to respect those boundaries you’ve put in place. Teach by example Children learn by example. They’ll do whatever they see you do. There’s a need to model this concept for the children in everyday living. Use regular situations of life to let your children understand the need to wait for things. They can either decide to get something now or get it later. Showing them the benefits of waiting can aid them in their decision to wait for something they love. Let them see that waiting is better. The way you conduct yourself on decisions that have to do with spending and savings will impact on your kids. Don’t shy away from discussing money matters with them. Encourage savings Let your kids learn to save every part of any amount that comes through their hands, no matter how small. Teaching your kids to save is an integral part of helping them to understand the concept of delayed gratification. They can save towards the future or simply towards a desired gift or toy. Teaching your kids to understand delayed gratification is a gradual process and they will learn as long as you remain consistent in your teaching. Self-control is a gradual process for your kids and they will get there. Just be firm and compassionate about it. They’ll thank you later.
For young African women II: How to build wealth at every stage of your life
In Part One of How to Build Wealth at Every Stage, I discussed how to build wealth at the younger stages of life, from childhood to 19 years old. Here I discuss how to build on those stages. Stage 3: The Young African Woman This is known as the accumulation stage and is typically between ages 20-30/35. At this point, a person has just graduated or has started working and has some disposable income. Income is typically larger than expenses at this stage. Some may live with their parents while some may begin to consider getting their own accommodation. This is also a stage when people begin to think about settling down etc. This is the best time to begin to develop a personal financial system. The earlier you start the more time you have for your money to grow and enjoy the benefits of compounding. I love Albert Einsteins quote which says “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t pays it”. Basically, compounding interest simply means that the money you earn as interest is put back into your account or investment thereby allowing your money to grow faster. An individual at this stage should develop a savings and investment culture, learn and practice the principles of personal finance which is budgeting and also consider setting up an emergency fund. In terms of investing, this is a good time to invest in riskier assets and take advantage of long term growth opportunities. You can also begin to buy valuable jewelry like gold, which appreciates over time and can be sold when cash strapped. It is very important to withstand peer pressure at this stage. Focus on your vision and goal. Key things to consider at this stage include: Have a vision board Set financial goals Prepare monthly budgets Establish a savings culture Invest in the stock market Pay off any debts accumulated in University such as student loans, credit card debts etc Invest in yourself. Start a business Stage 4: The African Woman This is called the Consolidation stage and is typically between ages 30/35-55. At this stage your expenses are rising higher than your income. You may be married or starting a family. You may have moved out of your parents’ home and live on your own. Needs include education for kids, rent, mortgage, planning for retirement, higher education etc. Financial discipline is required at this stage. It is important to be strict with budgeting and not forfeiting savings and investments. In terms of investment it is also important to begin to diversify your portfolio. This is also a good time to take some risks depending on the side of the spectrum you fall on. Key things to consider at this stage include: Set up an education trust fund Buy land and or get a mortgage Health insurance Life insurance Build up your assets Plan for retirement Create multiple streams of income Invest in yourself It is also important to note that you are never too old to dream. Mrs Betty Irabor started her magazine at this stage. Mo Abudu started her tv station, Ebony Life TV in her late forties. Stage 5: The Older African Woman This is called the retirement stage and is age 55 and above. At this stage most individuals would be getting ready to retire or be retired. In most cases there is no steady income except from pension allowances. Needs include healthcare, retirement home, and vacation, maintaining a standard of living, estate planning and leaving a legacy. A woman who was financially intelligent in her younger years will enjoy this stage. She may have set-up a business that is running on its own and therefore be enjoying the fruits of hard work during her youth. This is also a time to ensure you are fulfilling purpose and at this stage you may even start a new business. Please note that these age ranges are just a generic template and not cast in stone. Individuals may past through these stages at different ages. Once you have determined the stage you are in your financial life cycle, it is important to set financial goals and to determine action steps required to achieve your goal. An important point is to ensure that you create a plan to achieve this goal and that your plans are as flexible as possible. For example you could have a goal to set-up an emergency fund of 6 months’ worth of living expenses by 30/12/16. Action Steps: ∙ Track spending ∙ Create a budget ∙ Pay-off all outstanding debts ∙ Reduce excess spending on eating-out and eat home-cooked food ∙ Reduce spending on aso-ebi ∙ Set up direct debit with bank What are some of your goals for your financial future? What phase of life do you find yourself in? Could you begin to implement some of these key elements now?
For young African women: How to build wealth at every stage of your life
This is part one. Read part two here. The Young African Woman – How to Build Wealth at Every Stage of Your Life I recently attended a seminar where one of the key speakers mentioned that there are three main categories that are forecasted to thrive and succeed in this season: Youths, Africans, and Women. It is therefore a good time to be a Young African Woman. In order to succeed as a Young African Woman and to ‘win’ in all areas of your life, you must be in control of your finances and build wealth. It is therefore important to understand the different stages of life i.e. the financial life cycle and how to build wealth at each stage. I would start from the girl child, in order to ensure that we also empower our children, sisters, students, mentees etc. This is the most important stage because if you get it right at the stage, you are likely to be wealthy. There are different theories on the number of stages in a financial life cycle, however, for simplicity they’ve been split into 5 stages. Stage 1: The African Girl Child This is typically between ages 0-12. At this stage, we begin to understand the value of money i.e. N200 can buy more sweets than N100. We begin to have conversations like Kid: “Mum, why can’t we buy a bicycle?” Mum: “Because we do not have enough money at the moment.” Kid: “But mum, what about the money in my piggy bank? I have a lot of money in my piggy bank.” Mum: “Honey, N500 is not enough to buy a bicycle.” Generally, we believe that money is to be used to buy junk food and also to buy toys. At this stage we receive pocket money. Financially intelligent parents would begin to teach their children the basics of savings via a piggy bank or a kids’ account. They would also learn the concept of earning money by being paid for household chores as well as through mini businesses such as making and selling lemonade or bracelets etc. I attended a conference where a speakers stated that when she was younger, her parents paid her whenever she did her household chores and that was how she learnt the value of hard work and earning money. My daughters started their first business at age 6 and 3. During their Christmas holiday, they made personalized bracelets from beads and with virtues such as love, faith etc, and sold them to their aunties, uncles and friends. Shortly after, they received an order to make personalized bracelets for a birthday party. Within two weeks, they made about N30, 000. I introduced the concept of a piggy bank and also taught them how to give as well. I also had a very proud moment the other day. My daughter had received some money as a gift from her uncle at Church to buy ice cream. A blind man came to ask for money and she heard me say I didn’t have any cash left. She then said to me “Mummy, he can have this money” and she gave him her ice cream money. At a very young age, I opened investment accounts for my daughters with a monthly direct debit in place. Warren Buffet began investing also at this stage. He has also created an online club for kids called the Secret Millionaires club where kids learn the basics of entrepreneurship and wealth management. This is a good place to start. Stage 2: The African Teenage Girl This is typically between ages 13-19. At this stage, we develop a better understanding of money. Our needs include buying top-up cards for mobile phones, shopping and entertainment etc. We understand that it is not everything you want that you can get. We also start earning money via jobs like baby-sitting, etc. In developed economies, at this stage, teenagers are sent to work in fast food restaurants or retail clothing stores to earn some money. Some teenagers are also required to work in companies as interns during holidays. Ty Bello, Nigeria’s renowned photographer started her hair styling business at age 15. One of Africa’s youngest billionaires Ashish Thakker started his first business at age 16. When you get to University, you begin to understand the importance of managing your finances. In University, you are also introduced to the concept of credit cards, over drafts etc. It is important to educate teenagers on the pros and cons of credit cards and overdrafts. A lot of students get it wrong and end up in a lot of debt once they graduate from university, and this affects their ability to build wealth in other stages of their life. Key things to consider at this stage include: Learn the value of hard work and earning money through internships, holiday jobs Start a business using your talents and gifts Start a savings and investing culture Be involved in the process of managing bank accounts and investing. Read books on personal finance How did you fare in these stages as a young person? If you have passed these 2 stages, you can still share them with a young person or a parent who might need it. In Part II, we discuss – stage 3: The Young African Woman, stage 4: The African Woman, and stage 5: The Older African Woman.
10 excuses to give friends when you are too broke to go out
As Motherland Moguls, we know that every kobo, pesewa, and cent counts while chasing your dreams. So while we love our friends, going out often can be a financial burden. If you’re fortunate (or unfortunate – you choose) enough to live in an isolated town where eating out requires an hour commute to the city center, then you must be doing your fair share of saving. If you live in a major city – Lagos, Johannesburg, Nairobi – that new pop up down the road that sells overpriced cereal is tempting. To add to all of this, we all have that friend who always wants to eat out. But there are days when you really know you cannot afford to go out but don’t want them to know you’re skint. Yes, we know that, cause we’ve been there and had to come up excuses like 10 below. 1. “I didn’t do my BVN so my card is not working” This applies if you live in Nigeria, or all your money is deposited in a Nigerian account. If that is the case, you have the new banking policies to thank for this excuse. 2. “Oh, I’ve been eating at *insert restaurant name” too much” This excuse could come back and bite you, as it insinuates you go out to eat often. In the same vein, you could be left with the burden of deciding what restaurant, which leaves you with two options: either suggest somewhere so awful that you know nobody would agree to venturing near, or suggest something completely different and free! 3. “I forgot my card at home” This only works if you are actually out and about with them, or in their house and you have not brought out your card at all. This also means if you are dying for a bottle of water – no can do. 4. “Sorry, I have an appointment/meeting.” Please do not Snapchat anything other than your coffee mug after making this excuse. 5. “Oh my gosh, I wish you had told me earlier, I just ate and I AM STUFFED!” This works better with people who do not know you that well. Why? Because if you love food the way I love food, then your friends know the truth and will know you’re lying. 6. “I’ve been really busy, and need to take time out to rest” I like this one because even if all you’re doing is watching show re-runs with a tub of ice-cream, it makes you sounds somewhat important and occupied with life. This is less of an excuse and more of a genuine reason. Again, stay away from Snapchat. 7. “My parents want me home” This excuse varies in effectiveness based on your age. But if you and your friends are from traditional African homes, I’m sure it would have a decent level of effectiveness. 8. “I’m not feeling too well” – ties in with number 6 I’m slightly wary about this one because it may come to pass. However, if you’re have a little headache, a little exaggeration would not hurt. 9. “Stuck in school/work/at a family event… rain check?” It’s always nice when an excuse has a reason behind it, followed by the possibility of rescheduling. This is probably the most respectful of the bunch. 10. * Phone on flight mode * “Did not get your call/message, my phone just does that.” Not a big fan of this one. I think we can all agree it’s pretty rude. But a friend suggested this and it worked. It also helps to remember all the money you are saving from ignoring those calls and messages… Business Tip: Anytime you cancel on your friends, put that money into your savings accounts. It always pays to pay yourself first, ladies.