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Personal Finance

Why your parents are wrong about money

Financial advice given by your parents may today no longer be workable since the world and activities have since evolved.



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The desires, perceptions, and mindsets of people often change as the world evolves. In finance, this also plays out; certain financial concepts that had been successful in the past do not have a place in the financial scope of today. As a millennial, you are faced with technological innovation that has affected every area of life, including finance. Due to this, a few financial resources have opened up, while the economic environment has also shifted.

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This means that, in this present financial climate, ideas that worked some time ago may have become outdated and ineffective. Many individuals develop certain values and mindsets that impact their financial lives when it comes to money. Because of the financial experience they have, the exposure or guidance they get about money from their parents, these values are created.

READ: Financial skills everyone should master (1)

Many parents strive to incorporate skills and abilities into various areas of their children’s lives. Most of them, particularly advise their children in the area of finance, on how to make money and live comfortably, while others rarely address money problems with their children.  The advice or guidance provided by parents on money is focused on what worked for them, which may be incorrect or misleading based on the evolution since their time. Your economic growth cannot be assured by the notions your parents hold about finance. It is therefore important to recognize and replace these convictions with well-informed and timely decisions.

READ: The painful sting of buyer’s remorse: How to prevent or get over it

Some of the misguided ideas parents have about money include:

It is not important to discuss money

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Many parents rarely have conversations with their children about money or household needs and how they are met. They believe that it is not necessary to relate their income, expenses, and financial goals to their children. This leaves the children with little or no knowledge of how to prepare, handle, and use their money.

(READ MORE: Side hustles you can start in 2020)

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Having a degree signifies having a career

Quite a number of parents pressure their children to go to school on the grounds that this alone ensures their prosperity and financial success. Although it is valuable and laudable to obtain a college degree, it does not inherently guarantee financial stability for everyone. A college degree can offer a few financial advantages, but it should be seen as an opportunity to obtain profitable knowledge and experience, not as a key to a job. The chances of securing a comfortable and attractive career are getting slimmer with the growing number of college graduates. Accumulating sound knowledge of economic and financial management is therefore important.

READ: Money mindsets that rich kids learn from their parents

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Stick to a job and save up

The idea of making money for most parents is to secure a job that makes ends meet. They typically do not welcome or mention the concept of harnessing a diversified income strategy, as this is a sign of inconsistency for them. This attitude restricts the children from seeking jobs only to gain enough for survival without investigating the financial resources that are made available to achieve their financial goals.

READ: How to redeem your unclaimed dividends in Nigeria

Investment is risky, avoid it.

Most parents, for fear of losing money, will caution their children against investing in financial schemes or institutions. Here is the deal, investment is risky. An assessment of the feasibility of the investment program and the potential of a return is therefore required to be carried out by people before investing.

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To gain financial stability you have to learn how to financially analyze your position and handle your money appropriately. This cannot be achieved by adhering to your parent’s loving but misleading financial tips or ideas. It can take a while to unlearn these values, but it is important to make your own decisions about your finances, as this will help you to remain responsible and accountable for your money.

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Financial Literacy

How to invest for retirement

Planning for retirement means planning to reduce obligation in the future by investing today.



How not to worry about money in retirement

“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.

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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.

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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.

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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.

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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.


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Financial Literacy

Steps to take to bag international scholarships

Here are the steps you should take if interested in pursuing international scholarships.



United Kingdom opens window of job opportunities for international students

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.

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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.

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