Financial Literacy
Diary of a working mother: Ready, steady, go!
Parenting is quite exciting and the fun part is usually when the kids are grown enough to be sent on on “silly adult” errands. You are within your rights to put your legs on the table and call on them to either change the television channel or simply hand you the remote control that is just a few steps away from you. These are some of the perks that come with the role and the kids accept them with exasperated resignation. It builds the character afterall.
But it is not always fun and games; parenthood comes with its own challenges. As a working mother, one is caught between excelling in the workplace and ensuring that the parenting role is not compromised. Folks in the private sector might not have it as flexible as their counterparts in the public sector. I remember the early years of trying to shape a career in the banking sector and the endless challenges that came with creating a balance as a working mother. Suffice it to say that it was a herculean task and when the opportunity came to move to the public sector, I embraced it with joy and relief.
Several years later, I still consider this to be the very best decision to have taken at that time as it has been well worth the while. The decision came with tradeoffs like getting a pay cut, moving into a sector that was rumored to be notorious for choosing nepotism over rewarding competence,etc. Fortunately, it was a pleasant surprise to note that the latter fear had been based on mere unfounded rumor.
My first on-the-job shock after moving to the public sector was finding out that folks actually come to work early. I had a supervisor who approached public service in a way that was quite delightful and remarkable; she would always show up before 8am, her break time was within the stipulated one hour frame and closing time was never before 4:30pm. This was a truly happy occurrence for me as I had already embraced these habits and it served as reinforcement in keeping me on that path.
She made me understand that despite the fact that folks tolerated excuses much more than those in the private sector, being accountable was still best practice. Further observation revealed that she rarely put herself in situations where excuses had to be made for being absent or not pulling her weight at work. This ensured that when an excuse finally arose, it was accepted without skepticism.
This is the first in a weekly series where I would attempt to chronicle the journey of balancing excellence in the workplace and at home as a parent. The bigger picture will be to share some field thoughts on developing a culture of excellence in the work place. It will be sandwiched between fact and fiction to make sure that identities are preserved. In other words, the series will be a journey steeped in faction (mix of facts and fiction).
Author: Blossom Ozurumba
About: Blossom is a personal branding enthusiast and has a day job at the Nigerian National Petroleum Corporation where she provides Technical Advisory on Media and Strategic Communication to the Honorable Minister of State, Petroleum Resources. During an academic leave in 2014, she founded Digital Media Development Initiative, focused on advancing use of digital media for sustainable development.
Financial Literacy
How to invest for retirement
Planning for retirement means planning to reduce obligation in the future by investing today.
“If you plan to retire in five years what should you be doing today?” That’s a question I got last week, and talking with the client, a lot came up which I have decided to share.
First off, What is retirement?
Nigeria’s public service has an official retirement age of 60 or thirty-five years of unbroken active working service, but in financial planning, retirement is a financial, not a chronological event. Retirement can occur when your passive income can meet your non-discretionary expenses.
You start to plan for retirement the day you start to earn an income. Your retirement plan will centre on how to generate passive income and reduce expenses. In Financial Planning, Four distinct stages are usually described in a so-called Lifecycle Chart. These are the Accumulation, Consolidation, Spending, and Gifting stages. Chart 1. Financial LifeCycle seeks to segment investing priorities, recommended asset allocation, and risk profile in a chronological timeline as the person gets older. I will take each of these stages and explain how they are linked to your retirement plan.
READ: How to choose the right Pension Fund Administrator (PFA)
Chart: Financial Life Cycle
Early years: Use Your Time and Make Money, (Accumulate)
The first stage is called the Accumulation stage. Imagine a 22-year-old who has just graduated and is a management trainee. He typically has a low credit score and assets and income are also substantially lower. What he has in abundance is time. So it’s important to deploy his time in the best way to make money. Hence in the accumulate stage, the goal is to generate cash flow either from a job, multiple jobs, working longer hours, saving, cutting unnecessary expenses, etc.
The key measure in the accumulation stage is the Savings Rate which is essentially how much of income earned or generated has not been spent. On average, the participants in the accumulation stage have fewer dependents and maintenance needs which should theoretically make it easier to save.
READ: This thread exposed everything that’s wrong with Nigeria’s VAT
Mid Years Use Your Money To Buy Assets (Consolidation)
In the consolidation stage the focus shifts from saving to investing. At this stage, the income earned and credit scores have improved. This is when the talk of buying a home or starting a business takes concrete shape because, at this stage, those dreams can be funded. Hence capacity to take on debt is improved, and debt is used to invest in assets like a home. Remember debt is simply front-loaded consumption, which means we are taking our future income to invest today, intending to repay with future income generated from today investment.
The key measure in the consolidation stage is the Rate of Return which is essentially how much has been generated from the investments made.
READ: How to choose the right Pension Fund Administrator (PFA)
Spending & Gifting Phase; Use Your Assets To Generate Cash Flow and Time (Spending and Gifting)
Why is it called the spending phase? Because that’s what the individual is doing, spending down accumulated investments. The spending will include buying annuities or perhaps relocating to another city, your dependant’s college needs, etc. At this stage, typically very few are still earning “new” income but are rather spending from the return of prior investments.
The key measure in the spending stage is the Withdrawal Rate which is essentially how much of investment can be withdrawn as cash annually to ensure we do not outlive our investments.
READ: How interest rates impact your wallet
Retirement is All About Passive Income
Passive income, which is the income we are making from investing from the accumulation and consolidation stage is now sufficient to generate income and reduce expenses to meet our expenses in the spending/gifting stage.
To give an example, assume we took a mortgage to buy a house in the Consolidation Stage, in the Spending stage, we pay no rent, thus we save cash, which reduces our Non-Discretionary Expenses. In essence, retirement is planning to eliminate your future expenses to the point where you need less income when you retire.
What Should You Invest In Before Retirement Or In Retirement?
Our objective is simple, Income. In retirement, we invest solely to make income to meet our spending needs, Risk profile is also very low because there are fewer recovery options if your investments sink.
The retirement portfolio is an income-generating portfolio that will be overweight in fixed income products. First, determine what the risk-free rate is. In Nigeria, we can take the yield on a ten-year FGN bond as a guide, this means we can have a target of 10% as our huddle rate for the long term. Thus I will recommend an 80/20 portfolio with 80% going to Fixed Income consisting of long term bonds, REITs, and other top-grade commercial paper.
However what happens if we lock in our funds for 10 years at 10% and rates jump to 20%, meaning a loss to our portfolio. To avoid this risk we can create a bond ladder, where we break down the bulk sum and duration of our total bond investment outlay. Let us assume we have N10m in cash to invest, instead of one single lot investment of N10m, we split into 5 equal investments of N2m and place for 6, 7, 8, 9, and ten-year maturities. This means by the 5th year the first N2m will mature, if rates are higher, reinvest, if rates have fallen then reevaluate.
READ: 10 Side gigs to venture into while working a full-time job
What about Equities
Yes, equities also pay a dividend. In buying equities, we must ensure we are only buying stocks that pay a dividend above our huddle rate of 10% which is the 10-year FGN bond rate. Which Nigerian stock meet that huddle rate?
- Lasaco
- Zenith
- GT bank
- United cap
In closing, let us summarize. Retirement is not chronological age. The event occurs when our passive income pays our bills. Planning for retirement means planning to reduce obligation in the future by investing today. Investing in retirement is income-based with a huddle.
Financial Literacy
Steps to take to bag international scholarships
Here are the steps you should take if interested in pursuing international scholarships.
Studying abroad gives you exposure among many other things, and that is precisely why many Nigerians have been looking for ways to study abroad. However, not everybody is privileged with the resources to study overseas and this is where the international scholarship option comes in.
If you are interested in studying abroad and don’t have enough funds, you should consider applying for international scholarships. This article lists the steps you can take to bag international scholarships but before delving into that, here are some types of scholarships available to you as an international student:
- Location-based scholarships
- Course or program-based scholarships
- Sports-related scholarships
- Research-based scholarships
- University-funded scholarships
- Organization-funded scholarships
- Government-funded scholarships
Having discovered the types of international scholarships available to you, here are the steps you should take to bag any of these international scholarships.
Research: Research is vital if you don’t want to miss out on good opportunities or make mistakes during your application. Research scholarship opportunities available in your prospective college or location and be on the lookout for hidden scholarships.
Check your eligibility: Having done thorough research and discovered the available scholarship opportunities, check to see if you are eligible for them. Many international scholarships have their criteria and requirement, so you should confirm that you are the right fit first.
Get the required documents: After confirming your eligibility, you should get the necessary documents. If the scholarship requires you to write an exam, prepare for the exam, write a good statement of purpose and prepare all other documents.
Start your admission process: Some international scholarships require that you start your admission process and probably get the admission before starting your scholarship application.
Contact past scholarship winners: You might want to contact the previous scholarship winners to know what they did right and how you can learn from them.
Apply for the available scholarships: The last step is to apply to every available scholarship.
The best way to get funds for your undergraduate, postgraduate, or PhD pursuits abroad is by applying for international scholarships. If you do thorough research, you can find fully funded scholarships that won’t require you to pay any amount. One of the essential steps to getting an international scholarship as a Nigerian is staying abreast of current information and this will require you to network with others.
