If you are a employee like I am, then you probably look forward to the end of the month when you’ll get paid your salary. Depending on where you work, what you do and what post you occupy, your salary will vary from several thousands to several hundreds of thousands and possibly several millions. Yeah, some are that lucky, but everyone still falls into the same category. If month end does not come, you don’t get your money. But hold on, did I say “Your Money”? I think not!
The truth is that for many people, their salaries don’t really belong to them. It belongs to other people. A typical employee’s salary would end up belonging to several people which might include a landlord, washman, shopping mall, market, fuel filling stations, auto mechanic, PHCN, and just about anybody who provides goods or services in exchange for money. Unfortunately, for many people, they think the money is theirs. Without meaning to, they unconsciously spend part of that money everyday on one expense or the other. Day in, day out, someone collects his own share of that money. Suddenly, 2 weeks after payday, they check their bank account and discover their salary is almost gone and they begin to wonder how, when, where, why ... the simple truth is this - it’s not their money.
Some people do better. They put aside a certain amount every month and save. If you fall into this category, I’ll congratulate you on a good initiative. However, I’ll still tell you that the money does not belong to you. Saving is good, don’t get me wrong, but it’s not good enough. Let’s take the case of a typical worker who is disciplined enough not to delve into his savings at the slightest sign of rain and he has managed to save N100000 over a year. If he saved this money in 2006 at a rate of 3% per annum (which is the best he can get from most banks), he’ll have a total of N103000 at the end of the year, with a “gain” of 3000. Now, a recent analysis showed that in 2006, the inflation rate of the Naira was 13.5%. Translation: Your money has increased by 3% but it’s value has decreased by 13.5%. In other words, what you used to buy for N100 now costs N113.5. Technically, he has gained N3000 through saving, but in the real world, he has lost (N13500-N3000) = N10500. Who now owns the money? The economy! - another money collector which collects it’s share of our money.
What then exactly is my money? My simple definition is this “Money that belongs to you means money that’s working for you”. Defining “Money working for you” brings me to the subject of Investment. Many people think investment is for the stockbrokers, business owners or people with large amounts of money, they’re wrong because everyone ought to be an investor. Before your money can start working for you, you have to be an investor. Now stop reading and think for a few minutes, because your next decisions might change some things in your life.
I assume you’ve decided to become an investor so you can have money working for you. Congratulations because that’s one of the best decisions you’ll make on your path to financial freedom. For you to succeed in this quest, note the following tips:
1. Start with a plan. Good investors always have a plan. Make it detailed but not too rigid. Ask yourself this question. How much will I need to survive each month if I want to live comfortably? This is the amount you’ll need per month in order to be financially free. Write down your answer. I’ll call this value the “break-out value”.
2. How much you can invest per month?: Decide on an amount of money you can set aside from your salary every month for the purpose of investment. You are not allowed to go below this amount, however, you can exceed it. Write down your answer. I’ll call this the “Monthly Contribution”.
For example of somebody who decided to contribute N5,000 to an investment that gives 20% per annum interest or returns and decided to continue doing it for the next 10 years, the final value will be N1,869,025.11. He will be able to pay himself N31,150.42 monthly for the rest of his life without having to make contribute any more contribution. While, on the other hand, if you contribute N10,000 monthly to an investment that yields 20% per annum and you decide to continue contributing for 10 years, then at the end of 10 years, you will have a total of N3,738,050.22 and you will be earning N62,300.84 monthly for the rest of your life without you having to make any more monthly contributions. (Note that this amount exceeds your initial monthly contribution).
The final value of N1,869,025.11 and N3,738,050.22 is what I call “Money working for you” to produce N31,150.42 and N62,300.84 monthly. What this means is that you can pay yourself a salary of N31,150.42 or N62,300.84 every month without having to work for it.
How can you find an investment that will gurantee you at least 20% per annum? The good news is that the Nigerian capital market can give you more than 20% returns. There are a lot of investment windows you can use to achieve your plan. You can invest in any of the mutual funds, invest in shares directly, or better still, join an investment club where you can make monthly contribution for the purpose of investing in stocks. Investment club, as I have said in this forum, give you opportunity to invest as small as N2000 monthly in stocks.
It is only when you invest that you can have money working for you. So, the time to start is now.
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