April 29, 2015

My Notes from the REDEFINING FINANCE Event

Good Morning/Afternoon/Evening Distinguished Ladies and Gentlemen!

All protocols duly observed, or whatever the heck they say, I'll proceed with some of the notes I took during the Redefining Finance event, put on by Glory Edozien of The Inspire Series. This is a long post, so I've decided to make it 2 different posts (this one is still long sha).

Glory introduced the event ON TIME (2:00pm meant 1:59pm), asking why some of us were attending. I mentioned that I was looking for PRACTICAL tips towards investing. Someone else mentioned that she had just lost her job the Friday before and just needed inspiration as to what her next step should be. Another person said that she doesn't know how to save - all she knows is she has money one day, and before she knows it, all the money's gone. These and more would be discussed through the event.

ARESE UGWU 

Arese is a Wealth Manager at a leading firm, and she came to talk to us about different aspects of personal finance. She said that a typical characteristic of Nigerian women is that they own ZERO ASSETS! We're working hard, earning an income, being amazing entrepreneurs, but hardly any of us is securing our financial future. Why? According to research she mentioned, a woman's assets are either tied to her father or her husband. Additionally, it's as a result of a woman's "Money Mentality."

MONEY MENTALITY
The typical single woman isn't saving her money for the future. She's spending her money on different things - travel, clothing, shoes, food, rent, etc. The typical married woman is spending her money on her children and on the household. While some of it is necessary, it's also imperative to "Save not just for a rainy day, but for a flood!" We hear stories of people who lost their jobs, lost their husbands (divorce or death), and feel pity for them, forgetting that you just never know what could happen to you. Arese said that you should have an Emergency Fund, which is equal to at least 6 to 9 months of your income. This is supposed to be a buffer for you, just in case something happens.

Another thing she mentioned was how people feel like they don't have money to save now, so they will save later. Like she says,
Source
No matter how little you're making or have, however you treat that money is how you'll treat money when you have more.

The way to have and keep money is by Spending Less than you Earn. It should be a no-brainer, but people these days want to live a Champagne-Business Class-Louboutin lifestyle, when they're making nowhere near that amount. Why have expensive shoes, purses, weaves, when you're not sure if you can pay your rent?

A tip Arese gave was to have only one account that you have access to. For instance, you might have 3 or 4 different bank accounts, but you should have an ATM card for just one. That way, you have limited access to all your money and can spend from only one account. (This is actually also a good security tip)

FINANCIAL SUCCESS
Arese also asked what we define as Financial Success. Can you tell whether someone is financially successful just by looking at them? No. Just because they're carrying the latest designer bags, or driving expensive cars, and living in fancy houses, doesn't necessarily mean they're financially successful. What is your NET WORTH? Financial success is not how much you earn. It is your Assets minus your Liabilities (Debts). 

LONG-TERM FINANCIAL GOALS
Another question posed was "What are your Long-Term Financial Goals?" Is it to own a house or houses that bring in rent? Is it to have enough money to live comfortably after retirement? Is it to be able to afford great education for your children? Is it to have a particular balance in your long-term investments? What are you doing NOW to realize those FUTURE goals?

A point that was made was that it's easy to look at some people (e.g. Kim Kardashian) and envy their lifestyle - people spending thousands of dollars (or hundreds of thousands of naira) on one thing or another. But it's also easy to forget that some of them have a HUGE Net Worth. Kim K is worth $65 million. Why won't she have the most expensive bags?! She can afford them million times over! A goal to aspire to is one where your "PASSIVE INCOME (e.g. dividends, rent collected on houses you own, interest paid, side hustle) DICTATES YOUR LIFESTYLE, and your ACTIVE INCOME (salary) is BEING INVESTED." 

SPENDING PLAN/BUDGET
There are different variations on this aspect, but Arese subscribes to the following ratios for your active income. (Read this on her blog for more information)

70% - Living Expenses (Rent, Day-to-day living, food, shopping, household stuff, charity, TITHES, etc)
20% - Long-term financial goals (e.g. Fixed Deposit account, Stocks investment, Treasury bills, Land, Savings that you CANNOT touch for a long period of time, etc)
10% - Short-term financial goals (New Car, Travel, Additional Degree, Savings Account you have some access to, etc - Basically Liquid Savings)

Source


INVESTING
Since you already know from the above point that you should be investing 20% of your income, one of the first things to do is look our for investment houses and dealers (Business Day posts the Top 10 brokers every week, so chances are they're a good place to start). For me though, one of the things I should have asked, but didn't was the minimum required to start typically. I once asked a friend of mine who runs an exchange outfit, and dude was talking about $25,000 or something ridiculous. It would be good to know how little a regular person can start off with.

Another thing to note is that what works for one person may not necessarily work for you. Warren Buffett, one of the world's richest men, invests only in companies whose products or services he would pay for.

5 things to consider before you start investing:

  1. Why are you investing? Is it because you think your money will balloon in 3 months? Nah bruh! This should be money that you will close your eyes to for the long run. Arese said 3 years minimum. The people who make the most money from investing are those who are in it for the long haul.
  2. You need money to invest. Obviously. So instead of spending money on that bag or shoes, keep it aside for now for investing purposes.
  3. Set your benchmarks. For instance, buy land... build house... buy more land... reach a particular milestone with your investment account, etc.
  4. Talk to a professional. Like mentioned above, Business Day lists the Top 10 brokers in Nigeria every week. Also look for companies that are registered with the Nigerian Stock Exchange as those companies are regulated and audited. (Erm, I've been looking for the NSE website, and I can't find a link. Does anyone have it?)
  5. Do your own research. Know which companies your stock portfolio carries - what's going on in those industries, or particular companies? Are they profitable? What's the risk involved, and the rate of return?

Something to remember about investing - this is not money that you have easy access to. One of the ladies who attended says she literally pays herself a salary FROM her income. Her agreement with the firm that manages the money was that she cannot touch it for 5 years!!! Think about what putting away 10% of your salary every month for 5 years will garner - and don't forget it will have accrued interest too!!!

HOW TO MAKE MONEY IF YOU DON'T HAVE A JOB
For those women who aren't employed, Arese says to find money in your PURPOSE. The way to make money from Purpose is combination of things.
  • PASSION - What are you passionate about? What can keep you up for hours and hours on end? What will you gladly lose sleep for? Cakes sacrifices sleep for his business because he is deeply passionate about baking and cake decorating.
  • SKILL - You need to have the skills to excel in what you're passionate about. If it means investing a large sum of money to improve your skills, do it! Elaine of ShoMya paid over $2500 for a makeup artistry class. See where she is now. 
  • WORK ETHIC - You have to put in the work. Intern at places if you have to. Shadow someone in your field of choice. Read! Study! PRACTICE! Do everything you need to do to succeed.
  • WHAT PEOPLE WILL PAY FOR - Whatever your passion is, it won't make any money if there aren't people willing to pay for it. I enjoy watching TV, but as of right now, I haven't found anybody that will pay me to watch it, so there's no way I can make any money from it. This reminds me of a friend whose uncle gave him a piece of advice: "Identify a need around you, focus on solving/supplying that need, people will pay."
Alrighty, I'm finally done. That was a lot to take in, wasn't it? I'll put up the next post another day, maybe Friday. 

Frances of Imperfectly Perfect Lives posted her notes on her blog too.

For more financial wisdom from Arese, visit her website here, and you can watch some of her videos here

Last year, she had a series on Nigerian Women and Money. Read The Stay At Home Mum, The Single Girl, and The Working Mother

26 comments:

  1. This was helpful...... I feel the determination welling up but I pray I'll stick to the plan....

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    1. The best way is that any money you earn, put 20 to 30% aside immediately. Use the rest for your expenses.

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  2. These are practical steps to enrich one's finances. I'll be saving this for later. Thanks for sharing Berry!

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  3. this is so nice, thank you so sharing
    new post:
    http://melodyjacob1.blogspot.com/2015/04/introducing-usgobuy.html

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  4. Great notes thank you for sharing.

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  5. This post is sooo for me. I'm reasonably frugal but investing is something I have zero knowledge on. Thanks for this Berry

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  6. Awesome notes. Excellent principles.

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  7. Thanks for the insightful tips...I need to seriously work on my saving habits...

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  8. Hi Berry, thanks for filling us in. This event was definitely for me unfortunately, I am in Abuja. I've learnt a lot from your notes. I have a blog also and I'll want you to check it out. www.barbysdiary.blogspot.com

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  9. Thanks for the notes. I'm a big proponent of saving something no matter how little you think it is. The thing that "Scares" me is stocks and bonds but as soon as I get a basic understanding of that, I'm going to try my hand at investing in those.

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  10. This is soo helpful. Thnks Berry I have always struggled with my spend save division method. The percentages she mentioned are realistic. I think i will work on implementing them.

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  11. Hi Berry, thanks a lot for sharing your tips. Much appreciated. Off to go and devour the links Berry put up.

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  12. Berry please dont mislead people, Rent comes under the 70% living expenses and NOT the 10% short term goals. Arese herself says this alll the time so please dont misquote her. Kndly correct this so others dont get misled. Short term goals is for things like travel, car troubles, etc) rent is part of living expenses and should not be more than 30% of your income (tip from Arese too).

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    1. Oops! This is why it's good to proofread! I mistakenly put it in the wrong section - thanks for catching it!

      And also for the additional tip!

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  13. Good tips, most of which I wish I had started 6 years ago. But the next best time is now. I follow Arese's blog also and she gives valuable tips.

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  14. Nigerian stock exchange site : www.nse.com.ng

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    Replies
    1. The page cannot be displayed. Same thing yesterday.

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    2. That's weird. I am currently on the site. Maybe you should try a different browser or internet connection.

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  15. Thanks for sharing
    That emergency fund tip is the TRUTH!

    BLEURGH - http://www.bleurghnow.com

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  16. Wow, great tips, though I am not sure I would want to spend 70% of my income on living expenses. I guess it is just a guide sha.

    Atilola's World

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  17. Wow Berry, your notes are sooo detailed!
    Everyone who reads this will definitely feel like they were at the event!
    Thank you.

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Reading your comments ALWAYS makes me smile. I hope you smile when I reply :)