In February, the global news media was awash with the story about how the world’s largest pension fund, Japan’s Government Pension Investment Fund, lost 9.1% or $136 billion in just three months.
Earlier on, it was reported that data from Wilshire Associates and Northern Trust show that Institutional investors in the US lost (on average) about 6.8% in the fourth quarter of 2018. According to the report:
“Plans in the Wilshire Trust Universe Comparison Service posted median returns of -7.05% and -4.05% for the fourth quarter and year ended Dec. 31, respectively”. “That performance represents the worst quarterly performance since the third quarter of 2011 (-8.53%), and the worst year since the financial crisis, when plans fell by -24.79%.”
Global Equity Market under-performed in 2018
The abysmal performance, as noted above, could have been the product of the global equity market melt down of 2018. This was rightly noted by Jason Schwarz, the President of Wilshire Analytics and Wilshire Funds Management who was of the view that “Equity exposure weighed on planned performance in the fourth quarter, as geopolitical concerns, earnings revisions, and higher interest rates led to a deterioration in investor sentiment.”
As a measure of how bad the global equity market was in 2018, the MSCI World ACWI ex-U.S. equity index posted quarterly and one-year returns of -11.46% and -14.2%, respectively while the Wilshire 5000 Total Market index, returned -14.29% and -5.27%, over those periods, respectively.
The story was different in Nigeria
The story seemed slightly different for Nigeria pension fund investors who saw their Retirement Savings Accounts ending the year with positive performance, some of which were in double digits. Those investors in the Retiree Fund category also had something to smile about as the fund managers gave them Christmas presents of positive returns.
However, I cannot say the same for mutual funds, as year end data are not yet available for analysis. But if the year to date performance noticed in November is a prelude to what the year end results might look like, then investors in fixed income mutual funds will have something to be happy about; even as those in equity-based funds and exchange traded funds may not be as happy.
Yet, Nigerian Fund Managers deserve commendation
Whatever the result, Nigerian fund managers (especially pension fund managers) deserve some bottles of Champaign and a pat on the back for a job well done in 2018.
How to avoid debt despite economic challenges
Analyzing your income and your needs will help you to develop a befitting spending strategy that covers your expenses.
With the current economic climate, running into debt seems unavoidable for many individuals and organizations. Individuals, as well as businesses, are faced with daunting economic challenges which the pandemic has triggered.
It is important to note that staying out of debt requires cultivating an effective financial management approach.
It involves taking proactive steps towards managing money and time to limit debt and reduce financial worries. With the change in the economy, if sound and diligent financial efforts are placed in motion, it is possible to prevent accumulating debts.
Here are some ways to limit debt amid the present economic challenges:
1. Set Spending Limits
- It is easy to run into debt if spending habits are not placed in check. The increasing use of technology in the business sphere has made goods and services readily available.
- This means that purchasing desirable goods and services has been made effortless which plays a major role in increasing spending.
- Thus, setting spending limits will give you knowledge of how to utilize your finances. It will help you to know what you can afford within the range of your income.
2. Evaluate your Income and Expenses
- Having a sound knowledge of how much comes in and what it should be used for will enable you to spend your money wisely.
- Analyzing your income and your needs will help you to develop a befitting spending strategy that covers your expenses.
- Know the nature and demands of the expenses you make. When your needs are properly budgeted for, the chances of getting into debt to settle unplanned expenses will be limited.
3. Contentment is Important
- If you want to limit debt, you need to decipher the important things your income should be spent on and stick to it.
- Being content helps you aim for necessities. It gives you an understanding of your needs and wants, thus limiting the way you spend on unnecessary yearnings or desires.
- With the present challenges, contentment is required to exercise control over your finances.
4. Acquire Financial Knowledge
- Money management is a skill that needs to be sharpened to suit different economic climates.
- Financial literacy is required to make productive use of your finances. It is important to read books on finances or take courses on financial management.
- This habit will help to expand your knowledge on different concepts of money management which can be applied to your finances.
5. Be Realistic with Your Spending
- It is natural to desire things. The society is constantly portraying new products and services daily which give people the impression that they need to buy the latest products to stay in vogue.
- Many people go beyond their means to achieve this desire which eventually accrues unimaginable debts in the end.
- To avoid getting into debt, you need to be realistic with your spending. Analyze the essential things you need and check if you need to trim your budget to stay on track.
6. Get Extra Gigs
- If spending less is not keeping you out of debt, you need to try earning more to meet your needs. Additional income can meet more financial demands.
- Try to engage in activities that can earn you extra income. This will limit the tendency of accruing debts to foot your bills.
7. Have a Saving Plan
- One of the ways to limit the chances of running into debt is to make provision for unexpected expenses.
- The present economic situation poses a challenge to individuals and businesses. Many occurrences take place unexpectedly.
- In as much as having a budget is important, some pressing needs arise outside the budget that might throw you off guard if allocations are not made for such occurrences. Allocate your income to cover your saving plan.
Limiting debts requires a lot of self-discipline. It involves recognizing and curtailing the habits that are capable of getting you into debt. This means cultivating the habits of intentional and planned spending, as well as improved earning power.
Protecting your money from fraudsters
The ability to carry out transactions from the comfort of your homes, comes with the responsibility of safeguarding your money.
The advent of the cashless policy in Nigeria came as both a gift and a curse. On the plus side, one does not need to lug bags of cash around, especially for interstate transactions—just get depositors to transfer funds to your account, and you in turn, transfer to your business partners.
The policy has also made banks more innovative by creating various payment platforms that don’t need physical cash. Each bank has a robust mobile banking app where customers can transfer funds, subscribe for cable TV, book flights, buy airtime, etc., without entering a banking hall. For those without smart phones, the Unstructured Supplementary Service Data (USSD) option is there. Even ATM cards have been upgraded to do more than pay cash. What a time to be alive!
However, with these strides in innovation, come the downsides—robbers have adapted with the times by moving from the highway and taking their “trade” online. The various options open to customers for processing transactions can also be manipulated by thieves to defraud account holders of their hard-earned funds.
Hopefully, after reading this article, readers would be better armed to protect their funds from these “online robbers.”
1. Do not divulge sensitive account details to unknown callers
As surprising as it seems, many people still fall prey to this trick, despite several warnings. There have been many instances of people admitting that they received calls from unknown callers, who claim to be staff of various banks. They are told that their accounts require some form of upgrade\corrections, and to do this, information like ATM card PINs and PANs, and details of messages sent to the account owners’ phones are needed. The “bank staff” then creates mobile banking apps tied to the bank accounts of the unsuspecting owners, and from there, all funds are transferred to several unknown recipients.
2. Protect card details
As already stated, ATM cards are not just used for cash withdrawals now—they can also be used for funds transfers, bills payments, online transactions, etc. this means that one does not necessarily need the physical presence of their card to process some transactions. With knowledge of the card Primary Account Number (PAN), which are the 16 digits displayed on the card’s surface, the Personal Identification Number (PIN), and Card Verification Value (CVV) number, displayed on the back of the card, funds can be moved from one’s account.
It is therefore important to protect these details, especially when using the card in public places like ATM lobbies, and POS machines. You should be equally careful not to call out such details, if absolutely necessary, within earshot of people.
3. Always keep your phone safe
Imagine mourning the loss of your phone, then having the added heartache of losing the funds in your bank account(s).
The value of a phone goes beyond its price, these days. It contains private valued information of its owner, among which are bank account details; it also contains the SIM through which transaction alerts are received. The SIM makes it possible to process USSD transactions.
There have been instances where phones were given to repairmen, only for the owners to realise later that funds had been transferred from their accounts via USSD to unknown beneficiaries. Even relatives have been known to secretly steal funds from accounts, just by handling the owner’s phones.
Always keep your phone locked, and know where it is at all times.
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4. Pay attention to transaction alerts
It is very easy to assume that all is well with one’s account, and not bother with checking transaction alerts. After all, it is what you withdrew that must have left the account, right? Wrong!
As explained above, funds could have left your account without your authorisation. So pay attention to your transaction alerts, especially the balances, and quickly investigate any transaction that was not initiated with your permission—the earlier the better, for quick resolution with your bank.
Also note that the absence of alerts despite transactions could also be a red flag, as the SIM could have been swapped, giving fraudsters a free hand to run your account.
5. Know the USSD code for instant account deactivation
Imagine the horror of receiving alerts showing that your account is being continuously debited as you helplessly watch it happen, especially during over weekend when banks are closed.
This doesn’t need to happen. Right from the first debit, you should be able to take action and deactivate your account to prevent further debits. This is why it is important to know the emergency code of each bank where your funds are kept. For example, with Zenith Bank, any phone can be used to enter USSD code *966*911#, provide your account number, and the number used to receive alerts, and the account gets instantly deactivated. After this, you can take your time to investigate the stolen money, instead of frantically running around to stop further debits.
It is also important to know the various ways to reach your bank during emergencies—get their customer care lines from their websites, and if they have chatbots, engage them; also know their email addresses. Getting your account officer’s number too is useful.
Apparently, with the ability to carry out transactions from the comfort of your homes, comes the responsibility of safeguarding your money (to an extent). These tips should make it easier to do so.
However, in a case where the money has already been stolen, contact your bank as soon as possible for investigation and possible recovery.
How to prioritise your needs over wants
It is crucial, as a financially oriented person to learn how to prioritise your needs over your wants.
To become financially stable, you have to learn to make some strategic decisions, and one of them includes prioritising your needs over your wants. The things you need are the things you cannot do without, your necessities, which include; shelter, healthcare, food, clothing and other essential items. Wants, on the other hand, are the things you can live without. For people who want to be financially responsible, wants are considered luxuries. It is crucial, as a financially oriented person to learn how to prioritise your needs over your wants. If you buy everything you feel like buying even when you don’t need them, you are being financially irresponsible, and it might have a massive effect on you. If at all you are going to spend on your wants, it shouldn’t take more than 10% of your monthly income. The deal is; if you want to buy the things you want or desire, you should earn more money.
The needs of men are grouped into three (3), according to Abraham Maslow’s hierarchy of needs. They include;
- Self Fulfillment Needs
- Psychological Needs
- Basic Needs
If your needs don’t fall into any of these groups, then they should be considered as wants.
How do you prioritise your needs over wants?
1.List your needs and wants
Writing down your needs and wants will go a long way in helping you to prioritize. Your needs should come first while your wants follow. Your needs should include your house rent, your feeding allowance, your medical fees, and other basic needs, in order of importance. You can group your wants into a hierarchy of priority and move the ones you cannot afford to the following month.
2. Research the prices of your needs and wants
Research the prices of the things on your list and affix. They might not be the exact prices and might be in ranges, but it is good that you do this. This would help you to calculate how much you might be spending in a month and if it fits your monthly income. With this, you will be able to remove the things that might put you in debt. The goal at the end of this should be to spend lesser than your monthly income and have enough for emergencies. This helps you to focus more on your needs rather than wants
3. Cut all luxuries
As far as basic needs go, there are some rules to it. It is essential that you eat, but you don’t have to eat at restaurants when you can cook at home and save costs. If you can’t cook, you can also check out some cheap restaurants instead of the big and expensive ones. Also, if you are not financially capable to rent a big apartment, look for smaller and less expensive options that would help you to save cost. Some basic needs can become wants if you don’t watch it.
4. Get multiple sources of income
The way this works is, if you get more sources of income, you get to settle all your financial needs which are your top priority, then you don’t find it difficult to buy the things you want. To prioritise your needs over your wants then becomes more comfortable.
5. Be sincere with yourself
Be realistic in your budget and don’t list out the things you cannot afford. If some of your needs will make you spend more, look for cheaper alternatives. You are the only one seeing your budget.
As stated above, some of the basic needs include; food, shelter, water, clothing, security and so on. They are the things that might kill you if you don’t have them. It would help if you considered these basic needs first when creating your monthly budget. Having satisfied these needs, you can go ahead and get the things you want. Never choose your wants over your needs. It is a risky financial move that might make you go broke and run into debt.