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.
∙ 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?