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MSME

Why You Might Still End Up Broke Despite Your Bumper Salary

Why You Might Still End Up Broke Despite Your Bumper Salary

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Salary earner,

A salary with a bunch of zeros tacked on the end doesn’t necessarily equate to wealth. At the end of the day, it’s just a number — and if the cash behind that number is not managed properly, it can disintegrate in the blink of an eye.

“Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep,” writes Robert Kiyosaki in the personal finance classic, “Rich Dad Poor Dad.”

At the end of the day, money does not solve financial problems — in fact, it often exacerbates them. Consider the lottery winners who lost it all within a few years; or the professional athletes who made millions in their 20s and wound up broke..

When income increases, people have a tendency to boost their spending, which can quickly spiral into dangerous overspending habits.

[Read Also: Too many side hustle ideas? Here are 11 questions to help you choose your best option]

“Money often makes obvious our tragic human flaws, putting a spotlight on what we don’t know,” explains Kiyosaki. “That is why, all too often, a person who comes into a sudden windfall of cash — let’s say an inheritance, a pay raise, or lottery winnings — soon returns to the same financial mess, if not worse, than the mess they were in before.”

What solves financial problems and produces money is intelligence. “Money without financial intelligence is money soon gone,” writes Kiyosaki.

Unfortunately, while most of us are taught how to make money — how to get a job and work hard — we are not taught how to intelligently manage it, the crucial part.

READ: Why Bitcoin could triple in value annually

The good news is that you don’t need to be a certified financial planner or have an MBA to develop financial intelligence.

Start by learning the difference between an asset and a liability, the single most important distinction to recognize if you want to get rich, Kiyosaki says. Next, focus on bettering your savings, and ensure that more money is coming in than going out.

Read Also: Nigeria lacks policy direction under Buhari – Ituah Ighodalo

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Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Columnists

How MSMEs can get easy access to finance

MSMEs must take the following steps for loan readiness.

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How MSMEs Can Get Easy Access to Finance

MSMEs are considered the backbone of the Nigerian economy. In 2019, they made up 90% of all registered businesses, contributed more than 50% of the country’s nominal GDP, and employ 84% of its labour force. Despite this, MSMEs were the recipients of less than 5% of all credit granted by the banking industry.

One reason for this is self-selection by MSME owners. Many MSMEs refuse to apply for loans from banks due to a fear of rejection and a belief that banks charge exorbitant fees and request hefty collateral before giving loans to MSMEs. Now more than ever, in this era of cashflow-based lending and low-interest rates, this harmful myth is costing businesses access to finance that they need to scale.

Another reason is the MSMEs’ lack of loan readiness. Unlike large companies, small business owners do not prepare themselves before applying for loans. This causes them to make many mistakes that discourage banks from lending to them due to a fear of non-repayment.

In order to overcome this hurdle and join large businesses in taking advantage of the low-interest climate, MSMEs must take the following steps for loan readiness:

1. Maintain financial records – Research shows that 69% of MSMEs in Nigeria do not keep detailed financial records. As a business owner, you must ensure that funds pass through your business account. Your business’s financial records as reflected in your bank statement will help your bank determine your repayment capacity. This is important, whether you want a collateral-free or collateral-based loan.

2. Use narrations for transfer into personal accounts – Again, always use your business account for business funds. However, if funds must be paid into your personal account for any reason, then ensure that those payments have a narration that reflects the purpose of the payment. For example, Two shirts purchased. This helps isolate business funds from personal when computing your turnover in order to determine your loan amount and repayment capacity.

3. Know what you want – Always know exactly how much you want and what you want it for. If your account officer asks you how much you want and you say “any amount you can give me”, they automatically assume you have no plan for the money or a plan for repayment. Before approaching your bank, determine how much you need and how much you can repay per month, using your monthly income.

4. Have a repayment plan – Always have a plan for repayment. Know how much you can afford to part with per month. Note however that your repayment plan might not align with that of the bank. Banks prefer not to take more than 33% of your monthly income in loan repayments, so your loan repayment period will probably be dependent on how much you can pay per month. Regardless, a well-thought-out repayment plan will build confidence in your repayment ability.

5. Engage your account officer– It is important to have an engagement with your account officer before applying for the loan. Instead of just writing a loan application letter to the bank and waiting for a response. Armed with your financial statement and your knowledge of how much you need and for how long, visit your account officer and have them work with you in getting your loan.


Ese Atakpu is a writer and banker.

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Commodities

AFEX raises $50 million to Finance Agri-SMEs in Nigeria

The $50 million Agri-SMEs fund is expected to bridge the funding gap between lenders and borrowers in the agric sector.

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AFEX to partner with FMDQ and Dubai Commodities Exchange, 50,000 farmers to benefit from AFEX Commodities agric funding initiative

AFEX Commodities Exchange Limited (AFEX), a private commodities exchange company, has announced the first Warehouse Receipt Backed Commercial Paper in Africa. The paper has tech-enabled operations and a 24-hour fast cash turnaround for borrowers.

This was disclosed by AFEX in a statement issued and seen by Nairametrics on Thursday.

The $50 million Agri-SMEs fund is expected to bridge the funding gap between lenders and borrowers in the Nigerian agricultural sector with a commodity-backed instrument – for the first time.

READ: AFEX partners FMDQ, Dubai Commodities Exchange to deepen markets opportunities

Ayodeji Balogun, CEO, AFEX, stated, “The AFEX financing deal will help eradicate the high cost of procurement incurred by processors by deploying a discounted value of a warehouse receipt distributed among five leading players in the Food and Beverage, Trading Poultry and Animal Feed segments in Nigeria.

“The receiving companies are top 10 players in their respective segments. They have now been enabled access to a tool for managing price volatility, enabling up to 30% direct savings on prices.

“With our vision to reach a cumulative total of over $5 Billion in investment to the agriculture sector over the next five years, this financing deal is right on track to achieve this goal.’’

He added that as AFEX move towards building a derivatives market in Africa, “we want to be able to reduce exposure to price risk for stakeholders, by enabling them to hedge their positions and trade in commodity derivatives.”

READ: CBN to increase loans to agricultural sector to 10% of total bank credit

Why it matters

  • The warehouse receipts, which can then be transferred from commodities to a financial asset and listed under the borrower’s portfolio on the AFEX trading platform, will create a sustainable funding structure and address underfunding in the Nigerian agricultural sector.
  • With the warehouse receipt system linked to financiers, the system allows financiers value and marks the commodities’ price to market on a real-time basis.

What you should know

  • AFEX’s mission is to provide low-risk working capital facility for stakeholders in the Agro sector, in a way that is transparent and has a very high viable investment return.
  • As a licensed commodities exchange and warehouse receipt system operator, it deploys a warehouse receipt system and collateral management infrastructure to increase market confidence for both lenders and borrower.

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