One of the major roadblocks to financial success is to depend on a source of income that can barely sustain you. When you have limited amounts of income there are only two things you can do. The first thing is to reduce your expenses. And the second thing is to earn more income. Reducing your expenses will not make you rich as there is only a small room for what you can reduce. Thus the main purpose of reducing expenses is to prepare the way for new income to come in. If your expenses are not well-adjusted before you bring in new income. Additional sources of income will only serve your living standard. And not your financial Independence or Freedom. So the main reason for reducing expenses is to maintain a living standard that makes additional income beneficial for your independence. The second thing you must do when you have limited amounts of income is to make more money. Making more money is the fastest way to become Rich as there is no limit to how much money you can make.
So how then can you make more money?
To make more money there are two options to explore. The first option is to increase your Passive income. And the second option is to increase your active income. Everyone at first glance wants to increase their passive income. But not everyone has the required amount of seed to produce solid passive income. Increasing your passive income requires active income. No one makes passive income from thin air. A solid Passive income requires the investment of a solid active income in the right investment vehicle. This means that if your active income is weak your passive income will also be weak. And if you invest this income in the wrong investment vehicle you will lose your savings.
So if you have a limited amount of resources investing is not the fastest way to become rich. While you can produce passive income from your limited savings. It is a mistake to depend on it for your financial independence.
So how then can you achieve Financial Independence?
To achieve financial Independence with speed you must first convert your active income from weak to strong. And invest this income in the right investment vehicles. You must also create Lifetime passive income that does not require ongoing work.
So how then can you create a strong active income?
To create a strong active income you need to increase your sources of income from one to many. There are eight side income options that you can explore. If you want to know more about these eight side income options. The Pros and Cons and how to choose the right side income for you. Send an email to [email protected] The key here is to know that depending on one source of income will not make you rich.
So after you choose a source of side income how do you make money from it?
To make money from any side income you need to develop what I call Rich skills. Rich skills are the only skills that can make you rich. Although there are many other skills that can earn you income. Only the rich skills have the capacity to make you rich with speed. There have this capacity because they solve high value, high risk, difficult to solve problems that command high income. Regardless of the skills, you choose to develop. There are generally two broad types of skills you should know. The First skill is what I call Financial Slavery skills. And the second skill is what I call the Financial Freedom skills.
Financial Slavery Skills
Financial slavery skills are skills that keep you in a limited income position. They extend the number of years you remain in financial slavery and can never make you rich.
So what are the Financial Slavery Skills?
Financial slavery skills comprise two types of skills. The first is the Job-related skills and the second is the Company related skills.
The Job Related Skills
Job-related skills are skills that are solely meant to help you in your Job. Some of these skills are relevant to a small industry or a specific job. These skills are not bad in and of themselves there are only limited in scope and relevance. They make you depend too long on one source of income and Job-related skills cannot make you rich. Developing these skills do not only keep you stuck in a limited income position. They also reduce your Job and income opportunities. For example, before I exited the corporate world I worked in two separate industries. The first is the Pharmaceutical industry and the second is the Medical equipment industry. I gathered over 20 certifications. But none of these certifications is useful to me today. These certifications and skills were job-related. And only relevant to my job at the time. If you happen to find yourself in such a Niche industry, department, or job role. Please know that job-related skills are temporary and are for your job. Your goal is to focus on developing other skills that can make you rich.
The Freedom Skills
Freedom skills comprise three different skills.
The first skill is Problem-solving skills also called creativity or innovation skill. The second skill is Relationship building skills also known as Networking skills. And the third skill is marketing skills also sometimes referred to as sales skills. These three skills are the only skills in the world that can make you rich. Especially if you want to be rich within a reasonable time frame. They can make you rich as an employee and they can also make you rich as a business owner. The beautiful thing about these skills is that they align with the way money is made. Money is made when you solve a problem (Innovation & Creativity skills) for other people (Relationship skills) in exchange for an agreed reward (Marketing skills). These skills are your fastest flight ticket to financial freedom.
So now that you know the three skills that you need to become rich. How then do you develop these skills?
How to Develop the Freedom Skills
To develop the freedom skills you need three things. The first thing you need is a knowledge system. To learn any new skills you need new knowledge. The second thing you need is an opportunity system. Knowledge without the opportunity to apply knowledge is not power. The average person in Nigeria is a graduate with so much knowledge but little Money. To make knowledge financially beneficial you must convert it to understanding. And the only way to do this is to apply knowledge through deliberate action. The opportunity system is thus a system that provides you the platform to take action, apply knowledge, and practice your rich skills. The Third thing you need is the money-making system. The reason why you developed a skill is to make more money. Making money involves leveraging a money-making system. Without a platform that gives you the opportunity to make more money. You cannot become rich. Thus the money-making system is the ultimate thing you need to convert your skills into cash. These three critical elements are what you need to become your Rich self.
Perhaps you are thinking to yourself how do I start and where do I begin. To get started you need the three systems. And that’s where we come in. We can help you develop the three Rich skills using the three systems highlighted above. To learn more send an email to [email protected]
The lack of money is not the lack of money but the lack of Rich skills.
Grace Agada is The Senior Financial Happiness Director @ Create Solid Wealth. She is an Author, and Column Contributor in Six National Newspaper. She is a contributor at BellaNaija, Nairametrics and Proshare and she is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you send an email to [email protected]
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.
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.
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.
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.
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.
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?
- 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.
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.
Nairametrics | Company Earnings
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- Tantalizers Plc reports a loss after tax of N422.05 million in FY 2020.
- NASD Plc announces admission of newly demutualized NGX shares.
- Lotus Halal Fixed Income announces dividend of N20 per unit for Q1 2021.
- Friesland Campina Wamco Nigeria Plc announces AGM, proposes dividend of N6.74 per share.
- ETI appoints Akin Dada as Group Executive, Corporate & Investment banking.