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  1. onomewrites

    investment

    INVESTMENT Investing is actually pretty simple; you're basically putting your money to work for you so that you don't have to take a second job, or work overtime hours to increase your earning potential. There are many different ways to make an investment, such as stocks, bonds, mutual funds or real estate, and they don't always require a large sum of money to start. STEPS TO TAKE TO INVEST · Get your finances in order Jumping into investing without first examining your finances is like jumping into the deep end of the pool without knowing how to swim. On top of the cost of living, payments to outstanding credit card balances and loans can eat into the amount of money left to invest. Luckily, investing doesn't require a significant sum to start. · Learn the Basics You don't need to be a financial expert to invest, but you do need to learn some basic terminology so that you are better equipped to make informed decisions. Learn the differences between stocks, bonds, mutual funds and certificate of deposits. You should also learn financial theories such as portfolio optimization, diversification and marketing efficiency. Reading books written by popular investors is also a good thing. · Set Goals Once you have established your investing budget and have learned the basics, it's time to set your investing goal. Even though all investors are trying to make money, each one comes from a diverse background and has different needs. Safety of capital, income and capital appreciation are some factors to consider; what is best for you will depend on your age, position in life and personal circumstances. A 35-year-old business executive and a 75-year-old widow will have very different needs. · Determine Your Risk Tolerance Would a small drop in your overall investment value make you weak in the knees? Before deciding on which investments are right for you, you need to know how much risk you are willing to assume. Your risk tolerance will vary according to your age, income requirements and financial goals. · Find Your Investing Style Now that you know your risk tolerance and goals, what is your investing style? Many first-time investors will find that their goals and risk tolerance will often not match up. For example, if you love fast cars but are looking for safety of capital, you're better off taking a more conservative approach to investing. Conservative investors will generally invest 70-75% of their money in low-risk, fixed-income securities such as Treasury bills, with 15-20% dedicated to blue chip equities. On the other hand, very aggressive investors will generally invest 80-100% of their money in equities. · Learn the Cost It is equally important to learn the costs of investing, as certain costs can cut into your investment returns. As a whole, passive investing strategies tend to have lower fees than active investing strategies such as trading stocks. Stock brokers charge commissions. For investors starting out with a smaller investment, a discount broker is probably a better choice because they charge a reduced commission. On the other hand, if you are purchasing mutual funds, keep in mind that funds charge various management fees, which is the cost of operating the fund, and some funds charge load fees. · Find a broker or Advisor The type of advisor that is right for you depends on the amount of time you are willing to spend on your investments and your risk tolerance. Choosing a financial advisor is a big decision. Factors to consider include their reputation and performance, how much they charge, how much they plan on communicating with you and what additional services they can offer. · Choose Investment Now comes the fun part: choosing the investments that will become a part of your investment portfolio. If you have a conservative investment style, your portfolio should consist mainly of low-risk, income-producing securities such as federal bonds and money market funds. Key concepts here are asset allocation and diversification. In asset allocation, you are balancing risk and reward by dividing your money between the three asset classes: equities, fixed-income and cash. By diversifying among different asset classes, you avoid the issues associated with putting all of your eggs in one basket. · Keep Emotions at Bay Don't let fear or greed limit your returns or inflate your losses. Expect short-term fluctuations in your overall portfolio value. As a long-term investor, these short-term movements should not cause panic. Greed can lead an investor to hold on to a position too long in the hope of an even higher price – even if it falls. Fear can cause an investor to sell an investment too early, or prevent an investor from selling a loser. If your portfolio is keeping you awake at night, it might be best to reconsider your risk tolerance and adopt a more conservative approach. · Review and Adjust The final step in your investing journey is reviewing your portfolio. Once you've established an asset-allocation strategy, you may find that your asset weightings have changed over the course of the year. Why? The market value of the various securities within your portfolio has changed. This can be modified easily through rebalancing.
  2. STEPS ON HOW TO BECOME AN ENTREPRENEUR 1. Take a Stand for Yourself. If you are dissatisfied with your current circumstances, admit that no one can fix them except you. It doesn't do any good to blame the economy, your boss, your spouse or your family. Change can only occur when you make a conscious decision to make it happen. 2. Identify the Right Business for You. Give yourself permission to explore. Be willing to look at different facets of yourself (your personality, social styles, age) and listen to your intuition. We tend to ignore intuition even though deep down we often know the truth. Ask yourself "What gives me energy even when I'm tired?" How do you know what business is "right" for you? There are three common approaches to entrepreneurship: Do What You Know: Have you been laid off or want a change? Look at work you have done for others in the past and think about how you could package those skills and offer them as your own services or products. Do What Others Do: Learn about other businesses that interest you. Once you have identified a business you like, emulate it. Solve a Common Problem: Is there a gap in the market? Is there a service or product you would like to bring to market? (Note: This is the highest-risk of the three approaches.) If you choose to do this, make sure that you become a student and gain knowledge first before you spend any money. 3. Business Planning Improves Your Chances for Success. Most people don't plan, but it will help you get to market faster. A business plan will help you gain clarity, focus and confidence. A plan does not need to be more than one page. As you write down your goals, strategies and action steps, your business becomes real. Ask yourself the following questions: - What am I building? - Who will I serve? - What is the promise I am making to my customers/clients and to myself? - What are my objectives, strategies and action plans (steps) to achieve my goals? 4. Know Your Target Audience Before You Spend a Penny. Before you spend money, find out if people will actually buy your products or services. This may be the most important thing you do. You can do this by validating your market. In other words, who, exactly, will buy your products or services other than your family or friends? (And don't say. "Everyone will want my product." Trust me --they won't.) What is the size of your target market? Who are your customers? Is your product or service relevant to their everyday life? Why do they need it? 5. Understand Your Personal Finances and Choose the Right Kind of Money You Need for Your Business. As an entrepreneur, your personal life and business life are interconnected. You are likely to be your first -- and possibly only -- investor. Therefore, having a detailed understanding of your personal finances, and the ability to track them, is an essential first step before seeking outside funding for your business. As you are creating your business plan, you will need to consider what type of business you are building -- a lifestyle business (smaller amount of startup funds), a franchise (moderate investment depending on the franchise), or a high-tech business (will require significant capital investment). Depending on where you fall on the continuum, you will need a different amount of money to launch and grow your business, and it does matter what kind of money you accept. 6. Build a Support Network. You've made the internal commitment to your business. Now you need to cultivate a network of supporters, advisors, partners, allies and vendors. If you believe in your business, others will, too. 7. Get the Word Out. Be willing to say who you are and what you do with conviction and without apology. Embrace and use the most effective online tools (Twitter, Facebook, YouTube, LinkedIn) available to broadcast your news. Use social networks as "pointer" sites; i.e., to point to anything you think will be of interest to your fans and followers. Even though social networks are essential today (you must use them!), don't underestimate the power of other methods to get the word out: e.g., word-of-mouth marketing, website and internet marketing tools, public relations, blog posts, columns and articles, speeches, e-mail, newsletters, and the old-fashioned but still essential telephone. If you take these steps, you'll be well on your way to becoming your own boss. It's important to remember that you are not alone. If you want to "be your own boss" but you still feel stuck, reach out and connect with other entrepreneurs in a variety of ways. You may be surprised by the invaluable contacts that are right at your fingertips.
  3. MUST HAVE FINANCIAL LITERACY SKILLS What is financial Literacy? Financial Literacy is the set of skills and knowledge that allow you to understand: · The financial principles you need to know to make informed financial decisions and · The financial products that impact on financial well-being. Things to focus on in building your financial literacy skill 1. Understanding the key financial product you may need throughout your life -- including bank accounts, savings plans, retirement savings plans, and basic investments like stocks, bonds and mutual funds 2. Understand basic financial concepts like interest rate, investment return, risk, diversification and so on 3. Understanding money and financial issues – even if you don’t really like to talk about them Sound Decisions -- You will have to make choices about saving, spending, budgeting, investing and managing debt throughout your life. Examples are getting education or another degree, starting a new job, buying a house, starting a family, getting ready to retire and living your senior years. Change Management -- You will have to proactively manage changes that affects your everyday financial well-being including events in general economy like recent collapse of financial markets, rising unemployment and the threat to high inflation. Some Basic Tips i. Identify ways to earn and save money. The rule of saving is “live below your means’’ in other words, do not spend every penny you make. ii. Create a realistic spending plan and stick to it. It may need occasional adjusting when a situation changes in your life, but practice discipline in sticking to your plan. Always have a budget iii. Reduce impulsive buying. Avoid buying anything until you’ve had time to determine how it will fit into your spending plan. If it doesn’t fit, don’t buy. iv. Don’t not make too many high risk investments -- when the promised reward is too good to be true, better to risk only money you can afford to lose. Also make your investments via a reputable investment firm/broker -- whether stocks, real estate or bonds. v. Let your savings work for you; leave savings in investment accounts that allow them to grow in a compounding way (the interest/gain earning extra interest/gain). vi. Shop for the best investments -- a proper mix of risk to reward. Don't put all your money in a savings account to earn a meager 3% annual interest rate when you can put in Treasury Bills that are just as safe (or even safer as it is backed by the Federal Government) and will earn you 16% annual return rate. vii. Diversify. Don't put all your eggs in one basket. Don't even listen to people who say you should put all your eggs in one basket and watch it. No successful investor puts all his investment in one asset class. A hallmark of proper financial literacy is a balanced and well-diversified investment portfolio.
  4. (Originally posted: 02/09/2013) Have you ever tried googling Personal Finance in Nigeria?Here is a screenshot of what you'll likely get - Nothing very useful or relevant. The seemingly relevant results Involve Your Spouse In Your Personal Finance by PM News and What You Need To Know About Personal Finance by Nigeria Village Square are ramblings. Nothing wholesome. So I decided make the ultimate Personal Finance guide for Nigerians living in Nigeria, like me. What is Personal Finance?Though I nearly always go with Investopedia's definitions, this time around I think Wikipedia is more on point. But we can always combine the two to get a more illustrative definition. And here it is -Personal Finance is the sum total of all financial decisions and activities of an individual (or family) in managing his financial resources, with a view of both the present and the future. It will include budgeting, savings, investment and provision for emergencies. The truth is we all do personal finance, one way or the other. We make money and we spend the money. But we are all faced with the challenge of making the most of every Naira we earn. We seek advice from friends, colleagues and strangers. We try everything we consider reasonable. And all we ever get is an improvement, not a solution. But I have found the solution, studied it and practiced it. And in this post, I'll be sharing it with you. The sure way to make your money work for you just as hard as you did for it. Know ThyselfMy favorite quote is by Socrates and it's - The unexamined life is not worth living.It's true not just for the entirety of our lives, but also for every endeavor we embark on. If you want to manage your finances well, the first step is examining your finances. Know all about it. Know how much you make and know how you spend over a convenient period. The period could be monthly if your main income is a monthly salary, and it could be quarterly if you run your own biz. What matters is knowing yourself, financially. In 2011, I had serious money issues. I got a dream job. I lost the dream job. I made over N12,000 per day + regular salary (~ N500,000/month) for over 2 months. I got robbed. I traveled for French language immersion. I got a new job. My living expenses were eating my salary. I was working and my bank account balance was de-growing month on month. I thought I needed deliverance, a special all night deliverance session preferably at Redemption City or Prayer City. I was working hard and had no money to show for it. I had been reading investment and personal finance books for a long time then, but I never thought anybody would experience what I experienced that year. That year I learned that experience is truly the best teacher. I had to translate all my book knowledge to working knowledge. I started tracking my expenses daily for months to get a good idea of my average monthly expenses; since I had just one income source, my monthly salary, figuring out how much extra I have left at month end was extremely easy. I proceeded to drawing up a budget, a monthly one. Be Your Own AccountantHere is another popular saying. N100 income, N99 expense; result is happiness. N1,000,000 income, N1,000,001 expense; result is misery.If you've ever been cash-strapped, you will better understand that quote. It doesn't matter how expensive your car or mansion is, if you bump into an egg seller and ruin a crate of egg, only cash can save you.While managing your finance, forget about your assets - how much you are worth, how much your car is worth or that project you're going to win. What matters most is what you have in cash now and making sure you don't spend beyond that. You have to be your own accountant. Make your own budget. Now that you know the average amount (you can never know the exact) you spend monthly and how much you earn monthly, note the extra, your real disposable income. I call this your free cash. If yours is in the negative (your monthly expenses are more than your monthly income) then get a new job or downgrade your lifestyle or do both. And if your run your own business and your income comes once in 3 months or more, make your budget period a quarter (3 months), so you don't get emotionally overworked when you see all the payments owed you monthly.Now that you have calculated your monthly free cash (income - expense). You will need to learn how to max out that free cash, reduce your expenses to a convenient minimum (I don't recommend cutting down on feeding expense or personal care, except you want to save for your grand-kids or the bank) and work on increasing your income. Growing your IncomeLet's start with the easiest way to accumulate wealth: Grow your Income.There are two ways of doing this and they are not mutually exclusive, you can do both. The first is to write your boss for a pay raise or get a better paying job. And trust me, asking your boss for a pay raise is much easier than you think. It starts with letting your boss know that you need a pay raise or more performance bonus in very subtle ways. In my second job, I was always making jokes about how broke I was and made sure my boss noticed. Later, he got sick of it and called me aside and gave me a very touching finance advice, how he started like me and had similar money troubles and steps I could take to better my situation. Though I didn't get a pay raise, I got a performance rating of 110% because he knew I seriously needed the performance bonus. Then I changed job. The second way is to get multiple sources of income. For some time, my only income source was my monthly salary. When I lost my job in 2011, I lost my only source of income. It was devastating. Since then, I made up my mind to have multiple income sources. I searched within me for skills I could monetize, then looked around for needs I could meet and charge for. It was extremely difficult. At first, instead of making more money to supplement my salary, I was losing money and getting broke. Somehow, this difficult period brought out the genius in me. I became the CEO of a startup, me. I started 4 businesses in less than 2 years and lost money printing biz cards and looking for clients. But my 4th business became the ONE. I found my ideal part-time biz, something I would gladly do for fun but I now charge for. Here is the story of my journey to this discovery. And like they say, fortune favors the dogged. After some time, I started getting paying clients and began earning a little here and a little there. You too can start a part-time biz, and increase your sources of income. Shrinking your ExpenseThis is the trickiest part. You can never feel you've done enough. But this is what I suggest you do. Look at your daily expense list (the one you made to get an idea of your average monthly expense) and strike out those recurring expenses you can do without or you are better off without. Try hard to avoid making such expenses again. Look at the expenses you can optimize, maybe stop drycleaning all your clothes and eat out less. And if you are the scavenger type (no offence intended) you could stop driving your car to work and hike, take your lunch to work and use your friend's call bonuses. You can get more tips from the NSD, LSD & HSD section of my Working your way to wealth post. Maxing out your Free CashNow you're working on growing your Income and shrinking your expenses, and want to know how to max out your Free Cash.This is the heart of Personal Finance, the making your money work for you part. This is how you max out your Free Cash, step-wise: Have an Emergency Fund. Investopedia is on point on this. This is a savings account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards or loans. It's recommended that you put 3 to 6 months living expenses in it. Now that you know your average monthly expense, half the job is done. In mine, I have my 4 months living expense. And I use Diamond bank's High Interest Deposit Account (HIDA) due to their above peer interest rate. You could use Standard Chartered too. Just make sure you use a bank, not an investment account or cooperative; easy accessibility to the fund is key. That's why it's called an emergency fund. I have had to draw from mine thrice -- when I changed job again, a serious family need and a sudden business expense. Each time I draw from the account, I pause all my other monthly investments and replenish the account. This is very important. Don't break the rule. Your emergency fund before any other, except debt servicing. Depreciation, Depletion and Amortization. You've always been the CEO of your life but from now on, you will also be the CFO. There will be some expenses that are not monthly, e.g. yearly house rent, wardrobe uplift every 6 months... You get the idea. You have to spread their cost over your budget period, monthly. Don't forget services you're enjoying that you will start paying for in the future, and plan for future one time expenses like buying/building a house. You can open a high interest savings account or money market account and save towards those expenses every month. Monthly Savings or Investment. Once your Emergency Fund is set up and impending future expenses are being saved towards. You can set up a direct debit or standing order to transfer a portion of your remaining free cash to a fixed deposit account, money market account, mutual fund account or brokerage account monthly. This will make saving/investing automatic for you, and in the finance world it is called Paying Yourself First. This is the crux of making your money work for you. And the investment vehicle you choose will be based on your risk tolerance and knowledge. I transfer money monthly to a Mutual Fund account and my brokerage Account. Don't Ever Run Out Of Cash (DEROOC). Definitely, there will months unexpected expenses will pop up or a financial emergency. Thankfully, you have an emergency fund. But the point is, those emergencies shouldn't be monthly. Don't put all your money, after building up the emergency fund and saving towards future expenses, in an investment account. Always have about 30% of your living expense as a reserve on top of the actual monthly expense budget. So if you earn 250k monthly, spend 100k monthly and you have 150k left, and assuming your emergency fund is already set up (500k); you may want to put all the 150k left in your special savings account and investment account, but that will be very bad. Because an increase in food price will become an emergency and you will have to start touching accounts you shouldn't. So have at least 30k out of the 150k left in your salary or regular account. Life will be easier, at least financially. And that's how to max out your free cash. We have come to the end.
  5. image: rd.com In 2011, I became very serious about being financially prudent. I had just gotten a new job after being laid off from one. The pay was split into a monthly fixed salary and a quarterly performance pay, the total broken down monthly was slightly more than that of my previous job and the guaranteed monthly portion was slightly less than that of my previous job. But the major difference was that in the previous job I was getting a handsome N12,000/day when sent for projects outside Lagos. Somehow, in 2011, that extra N12,000 per day ballooned my lifestyle. So when I lost the job an got another, despite having similar base pay, I was spending more than my monthly salary and having to dip into my savings from the previous job. I felt extremely bad about it and decided to fix it. I got a expense tracking and budgeting phone app. I began tracking all my expenses daily for a couple of months. The visibility into how I spent money instantly helped me cut out obvious frivolous expenses and with deliberate planning I began cutting down my monthly living expense. In a few months, I was able to bring down my living expense below my salary and now have something to put away monthly. In 2012, I opened a High Interest Deposit Account with Diamond Bank and put in it, over time, my four months living expense. Luckily, in 2011 I had opened an investment mutual fund with ARM and set up a direct debit mandate to automatically invest monthly. During my financial crisis period I was not able to keep enough in the account to execute the direct debit but from 2012 forward I was able to conveniently save monthly into that investment account and even have something left to put into my stocks brokerage account for directly buying stocks. I used to get my salary within the last three working days of the month and the first two working days of the new month. Once the direct debit executes, I take out whatever I need to pay for any professional training I am undergoing. And the rest, I take out any amount above my budgeted living expense and put it away into my investment account. So having just what I need for the month (gotten from tracking my monthly expenses for over six months) forced me into being very financially prudent. And that was how I developed a savings habit. Today, it is a lot difficult to budget monthly as my business expenses are unpredictable and often affect my personal expenses. However, that financial prudence I gained then is still with me and helps me to avoid frivolous spending. It practically turned me into a miser. Whenever I get a large amount of money, I immediately put a large chunk of it away in my investment account. Just that now I have to increase my emergency fund with Diamond bank from four times monthly living expense to six times monthly expense as I get bigger emergency expense spilling from my business into my private life. This year, on three occasions I had to draw from my emergency account -- one was to settle my company account auditing expense, the second was to secure the new rented house and the third was to settle the tax advisory expense. I am still yet to replenish the emergency fund and technically broke. If I have my savings/investments in a savings account I would be rich and not broke. Having them in not easy to access investment accounts forces me to be more hardworking and never having too much money to squander. My strategy in one sentence is: I put away upfront the money that is in excess of my living expense into a savings/investment account. In the investing world, it is called paying yourself first.
  6. Register on coursera for Personal & Family Financial Planning at https://www.coursera.org/learn/family-planning# About the Course Personal and Family Financial Planning will address many critical personal financial management topics in order to help you learn prudent habits both while in school and throughout your lifetime. Syllabus WEEK 1 Understanding Personal Finance Path to financial security and time value of money. 4 videos, 1 reading expand Graded: Time Value of Money Assignment Graded: Quiz 1 WEEK 2 Financial Statements, Tools, and Budgets Managing your flows and reviewing your statements. 5 videos, 1 reading expand Graded: Financial Record Keeping Assignment Graded: Quiz 2 WEEK 3 Managing Income Taxes Income tax basics. 3 videos, 1 reading expand Graded: Tax Planning Assignment Graded: Quiz 3 - Taxation WEEK 4 Building and Maintaining Good Credit Credit basics. 4 videos, 1 reading expand Graded: Credit Report Assignment Graded: Quiz 4 - Credit WEEK 5 Managing Risk Risk management basics and insurance overview. 4 videos, 1 reading expand Graded: Insurance Assignment Graded: Quiz 5 - Risk Management WEEK 6 Investment Fundamentals Rules of investing; Debt and equity. 5 videos, 1 reading expand Graded: Quiz 6 WEEK 7 Investing Through Mutual Funds Mutual funds and managed portfolios; create a personal investment plan. 3 videos, 1 reading expand Graded: Mutual Funds Assignment Graded: Quiz 7 - Mutual Funds WEEK 8 Personal Plan of Action Putting your personal plan together. 2 videos, 1 reading expand WEEK 9 Bonus Module 1 reading expand
  7. Michael Olafusi

    Getting The Best Out Of My Salary

    (Originally posted: 29/09/2012) I hope you've read my I need more money post, where I talked about how I live from payslip to payslip.You see, I'm one of those guys who find it nearly impossible to have a savings. I only save to buy some fancy gadget, I find it extremely hard to stash away cash just for the sake of having a savings. I can barely do that for more than two months, 'cos every night my mind will keep coming up with auto-suggestions of what to do with the money. What ruinous mind I've got! So, how do I get the best out of my salary?Well, everything with a bad side definitely has a good side too. Fortunately for me, my mind that makes it hard for me to have a savings also made it extremely easy for me to pursue a wholesome lifestyle, one that is devoid of (nearly) all bad habits I know. So, I end up spending money on just the real necessities of life and one luxury hobby (Swimming). The only time I spend money unwisely is when I have a savings.At the onset of my working career I tried saving and ended up plunged into a vicious loop of living frugal in the middle of the month and extravagantly after pay-day and the beginning of the month. And believe me, I really tried to break out of the loop but it seemed beyond me to accomplish. But with the help of my hard-working, though still ruinous mind, I found a great workaround. I found out that I love taking risks. My first swimming experience was in a big river; I put (nearly) an entire year scholarship grant into stocks (and happily lost all); spent my entire free cash after school on a DSLR camera right in the heat of my job search; went to Cotonou for a one-month French language immersion without having any contact there (and got robbed too)... And I'm mighty proud of taking those risks, without the tiniest feeling of remorse. So back to the main question - how I get the best out of my salary?It is very simple, yet powerfully more rewarding that saving. I surfed my risk-sea life, I opened a Mutual Fund account and automated a monthly contribution to it right in the middle of the Nigerian stock market crash. And you bet, I lost money again. But I won't trade it for a 12% annual interest rate savings account.And I didn't stop there, I bought books on financial investments and how to make a kill in the stocks market. So, now I have a self-managed stocks account where I put my extra cash. And believe me, just watching my portfolio go up and down has brought new delight to my weekdays. And I've been learning mighty fast about the investment world, in fact, I recently worked my portfolio up from a 10% loss to a 10% growth and in a bear market too.I invest based on Benjamin Graham & Warren Buffet's value investing principle. I went through all the companies listed on the Nigerian Stock Market, through their 5 years financial reports (couldn't get their 10 years reports) and sieved out the ones that kept growing their Equities, Earnings, Profits and Return on Investment Cash. Then I read extensively about their management, market position, industry trend and their future plans. I was able to narrow down to 4 companies (GTBank, Dangote Cement, UPL & Oando) in the entire NSE list at first, and now only 2 companies (GTB & Dangote Cement) are left standing in my value portfolio. I put 80% of my investment cash into my value portfolio and 20% in a speculative portfolio (Nestle & GSK). So now, I basically spend a fixed portion of my salary on real necessities and swimming, then put the free cash in my Mutual Fund account and Stocks Account. Problem solved.I recently sold one non-performing mutual fund I opened with Stanbic IBTC to cater for an emergency that arose with my job change last month. So, I still get the benefits of having a savings without the vicious loop it sends my mind on. Voila! That is how I get the best out of my salary.
  8. Michael Olafusi

    Working My Way To Wealth

    (Originally posted: 10/02/2013) After reading lots of books on Personal finance and Investment, I decided to put my vast knowledge to work. I currently work at a job I love but which leaves me with little money at month-end. I daily take a record of all my expenses; I know where every single kobo of my salary goes. I know exactly how much I spend in a month. The following are the Personal Finance measures I implemented – 1. Pay myself first In 2011, I set up a direct debit order in my salary account to transfer a certain amount of money every month to a Mutual fund account. Now I plan setting up two others to transfer some cash monthly to my Brokerage account and quarterly to my Fixed Income fund account. 2. Have an Emergency fund I currently have the cash equivalent of my three months living expenses stashed away in a High Yield savings account. I have lost my job once and resigned from another too. In both situations, I encountered numerous unplanned expenses and ended up spending a lot. Having an emergency fund can greatly help to tackle unforeseen emergencies. I never touch it unless there is an emergency, and I replenish it as soon as I can. 3. NSD, LSD and HSD Increase your No Spending Days, never reduce your Low Spending Daysand reduce your High Spending Days in a month. I try to achieve this by staying home on most holidays to increase my NSD, cut-back on unnecessary daily expenses like chewing gums and in between meal snacks to increase my LSD, and I only buy necessities to reduce my HSD. Recently, my Sony VAIO laptop motherboard went bad and I couldn’t find a replacement. Rather than buy a new laptop, I bought a similar but dead Sony VAIO laptop and replaced the bad parts with the ones in mine that fitted and bought the other parts that needed fixing. I ended up with another Sony VAIO that cost a fraction of the new one. Anything I can do without for a month, doesn’t make it to my list. For instance, a new suit, an iPad, another wrist watch and movies. 4. 70 – 30 investment rule Since, I’m investing for the long term (over 30 years horizon), I put 70% of my investment cash in stocks and 30% in Fixed Income and bonds. As a small investor, I rely on fixed income fund. But I follow the stock market like a true Chelsea FC fan follows his club, I know nearly all the important figures and trends. I research stocks, burrow through financial statements from 7 years back and make some crazy financial calculations. I manage my own brokerage account without any professional help, I buy stocks of companies I’m convinced (after my calculations) will grow at over 15% year-on-year and sell the ones I believe have derailed (regardless of their stock price movement). Result: Though, at first, I lost money after money, I have recouped all my loses and have found an investment style that works great (so far). 5. Delay my big expenses I don’t plan buying a car anytime soon. 6. Create multiple income streams Though I make money from my investments, I run 3 monetized blogs and have a part-time consultancy biz. Currently, my blog is yet to generate a profit and my consultancy biz is still in its infancy, but I know that with time and efforts invested I will be able to cover my living expenses from their earnings. 7. I’m my biggest asset The premium on skills (hard and soft) is huge. That is why our parents make us start school as early as possible, knowing that one day someone will be willing to give us a fat pay slip just to have us around him. Though I consider MSc and MBA luxuries, I have been reading several MBA course materials. I spend a lot on books, very expensive books too, on everything that interests me – swimming, business analysis, java programming, php and sql programming, MS Excel and VBA, French, Linux, Personal finance, Investment, Self development, Spanish, German, novels… Last year, I took an online diploma course in Stress Management by a UK school. And this year, I have already enrolled for a Finance course, Data Analysis course and History course via Coursera. I just recently concluded my video classes on History of the world since 1300AD, and learned that there was a time when skilled workers were kidnapped. This reinforced my decision to become skilled in as many things as I can. While at the university doing my degree in Electrical Electronics Engineering, I spent most of my library time reading books on Psychology. I discovered that the brain doesn’t function like a bag, in which you’ll have to push some things out to make space for new things. The brain simply doesn’t get filled, the more you use it the logically bigger and more intelligent it becomes. That was why Leonardo da Vinci could become an expert in nearly all the known human disciplines of his days. He used his brain. Since I discovered this, I stopped trying to focus on only just one field of knowledge.
  9. (Originally posted: 20/5/2013) I hope you've heard of Warren Buffett and that he is the first guy to kick Bill Gates off the No 1 spot on World’s Richest list. Anyway, I will be telling you how I have been emulating his lifestyle right here in Nigeria. Warren Buffett made all his money from investing, initially, in the stocks market in the 1950s, then later from buying out other companies. I have read a lot about him, read his annual letters to his partners dating as far back as 1959. His secret weapon is growth, compounded. That is why he keeps saying – “Never lose money!” If you invest in Nigeria Money Market with a return of about 12% annualized rate, each million naira you invest now will become 2 million naira in 2019. So you know that every 50,000 naira you put into the investment is actually 100,000 naira in a few years’ time. And if you’re young like me, that million naira will become 32 million naira in 30 years’ time! But the issue is if you put that same million naira in the Nigerian Stock Exchange, and it goes up 30% this year, then goes down 50% next year, and goes up 60% the following year, and keeps doing that till 2019. Your million naira will keep bouncing up and down, will be less than 2 million naira in 2019. That is the logic behind Warren’s “Never lose money”. The same compound growth effect that turns 1 million naira to 2 million naira in 3 years at annual rate of 24%, and 500 million naira to 1 billion naira in 2 years at rate of 36%. That same effect will make your 1 million naira turn to 500,000 naira in 3 years when market dips at an annual rate of 24%, and your 1 billion naira will turn to 500 million naira in 2 years if market dips at annual rate of 36%. Now you can see why that former governor said he’ll never touch the NSE again after his money evaporated (just like that). So Warren Buffett makes sure he never loses money. Because as long as you don’t lose, even a mediocre annual rate of 10% will work wonders. Even Albert Einstein claims that Compounded Growth Rate is the greatest human invention. So how do I live this lifestyle? Easy. I just avoid losing money too. I live on a monthly budget, a very elaborate one. I split my monthly income into two categories – Monthly expense and Investment. I have a record of all my daily expenses from as far back as September last year, so I know my average monthly living expense. I took that figure, added a monthly depreciation for expenses I make a few times a year, and voila, I came up with a very generous monthly living expense allocation. And I’m yet to overshoot the allocation till date, in other words, I have only been having Budget surplus. Then the rest, I put in my investment accounts (not really much). But as long as I don’t gamble away the investment cash, every naira now will become 10 naira in a matter of time (years). Finally, I don’t play catch-up. I don’t buy what I don’t need. I do extensive cost-to-benefits, opportunity cost and delayed gratification analysis on all my CapEx. Most of my expenses are OpEx.
  10. (Originally posted: 20/5/2013) Two days ago I had a training appointment with a client, so about an hour to the appointment I called him. Guess what? He suddenly wanted the appointment shifted to the next day, without prior notice and without calling me. Again, yesterday I had another appointment with my most valuable client. Well, due to the illusion of communication between us I met an empty rendezvous. Had these happened last year, when I hadn’t taken my Coursera course on Corporate Finance, I would have felt really bad like I had wasted two days in a row. But thanks to my knowledge of Corporate Finance theories, especially that Promised return is hardly Expected return and you have to figure out the default risk. So, right from the start I knew every arrangement with my client is the “Promised” and I have to (over time and interactions) determine the “Expected”. So, I have been expecting a day when one of us will breach his own side of the agreement, temporarily. Now that is one simple example of how knowledge of Corporate Finance concepts helped me in my day-to-day living. Also, I have been trying to get secondary income sources that have zero beta relation with my day job and one another. In non-finance terms, getting secondary income sources that won’t be affected by job loss and issue with any one of the secondary sources won’t affect the others. And the fact is that I have even managed to get a secondary income source whose beta is negative in relation to my day job, if I lose my day job, the income from that source will soar. That’s another cool example. In Nigeria, inflation has been hovering above 11% for years now. And the risk free rate (rate I’ll get if I invest in Nigeria T-bills) is just above 10%. Meaning without doing any hustling or brain work, I can grow my savings at 10% annualized rate. In 7 years, 1 million saved this year will become 2 million (if the 10% rate stays so throughout those 7 years). And that’s more profitable than Total Nigeria PLC, Julius Berger PLC, Mobil Nigeria PLC and Cadbury have been in many years now. And they have several MBAs, expatriates and industry veterans working there. Heck, I won’t mind working their too. This just shows that running a biz isn’t as easy and profitable as we all think. We see the big money splashed here and there by companies, and think the owners must be minting cash. The truth is, most of those monies were borrowed cash – from shareholders, retail banks, investment banks and bondholders. It doesn’t mean that they can double those monies faster than a street smart guy like me. Hence, my knowledge of Corporate Finance has helped me make better money (investment and spending) decisions In Nigeria, the middle class has been aggressively expanding and lots of foreign direct investments are pouring in. I believe that my generation will be Nigeria’s baby boomers – enjoying the post democracy boom. I know that this boom won’t be forever. I see lots of people who have a single income source (working for one big multinational) and they go on vacation every year; they know very little about personal finance, business cycles, retirement plans and life insurance/annuities. They act very pompous, spot the latest gadgets and change cars frequently. Sometimes, I wonder if they are not conscious of the fact that they are that rich just because they are working in that particular coy, which to me is like putting all your eggs (and your children’s eggs) in one basket. The very people who will have bank accounts in 3 or 4 banks, just to avoid being stranded when one bank’s ATM card is non-functional, will not consider building income sources that will prevent them (and their family) from being stranded if the company downsizes them or their pay. For me, armed with ample knowledge of Corporate Finance & Macroeconomics, I am living a financially well planned life.
  11. (Originally posted: 27/7/2013) Yesterday, I scrolled through my electronic library comprising the eBooks I bought on Kindle store and the audiobooks I bought on Audible; I was amazed.Though I have all sorts of books in my e-library, in this post I will share with you my collection of Personal finance and self development books.1. Securities Analysis: The classic 1940 edition by Benjamin Graham and David DoddI bought this book solely on Warren Buffett's recommendation. He never stops recommending the book, with statements such as "No one ever became poor by reading Ben Graham", "I have read hundreds of investment books, and Securities Analysis by Graham is the best", "Graham's daughter sent me Graham's copy with annotations and that is the best gift I have ever received", "I have read the 1940 edition at least 4 times" and "It is the roadmap for investing that I have been following for 57 years"Though I am still reading this book, I have no doubt that it is the best investment book I have.And about the author? Graham was regarded as the Dean of Wall Street, that before him there were no Securities Analysts (full-time) and after him, Securities Analysis became a profession.And as evidence of the effect his book is having on me, I now have a folder on my tablet containing the Annual Reports of companies listed on the Nigerian Stock Exchange. I read them like I've got an exam on them to study for.2. The Warren Buffett Way by Robert HagstromAccording to reviews, this book is the most objective in giving you an in-depth look at the innovative investment and business strategies behind Warren Buffett's spectacular success. I have read Warren Buffett's annual letters since 1959 and already familiar with his personality and investment style. And I can say the author tried hard to be objective, following Warren Buffet from start of his career and detailing the investment decisions he made, the principles he adheres to and his view of the investment world. After reading this book, I decided to become a sworn focused investor.But if I were to re-read this book, I will skip the foreword and author's comments.3. The Autobiography of Andrew CarnegieAndrew Carnegie is one of the 3 people whose lives greatly inspire me. The other two are Steve Jobs and Leonardo da Vinci. I hold dear his life principles. He is an icon of a truly self-made man, the kind of man I hope to become.4. The World is Flat by Thomas FriedmanReading this book re-enforced my believe that once you have the skill, the market will find you. And now, I have put my Excel skills on steroids, someday the market will find me.5. The Presentation Secrets of Steve Jobs by Carmine GalloSteve Jobs is a legend and an inspiration to me. I have decided to not to do a Masters or any formal education higher than my B.Eng because of his influence on me. He changed our world forever, built the world's once most valuable company and succeeded in an industry where your first degree is not enough to get you a great job. All without getting a first degree. He was ordinary like most of us but gave a face to the word, PERSEVERANCE."Do you want to sell sugar water for the rest of your life or do you want to join me in changing the world." Steve Jobs to Pepsi Vice President, John Sculley."When I wasn't sure what the word charisma meant, I met Steve Jobs and then I knew." Larry Teslar6. The Personal MBA by Josh KaufmanThe title is descriptive enough. This book aims to safe you millions of naira and still get you an MBA education, if you care more about the education than the certificate. Obviously, that is a tall claim but the book is way worth more than the price.7. Outliers by Malcolm GladwellThis book was recommended to me by two senior friends, an Indian Telecoms expert and an American professor. It's really a strange book, you and your friend can be diametrically apart on every issue but will find yourselves agreeing with Gladwell.He explains in a delightful way that successful people have a strange kind of luck, one that forces them to work much harder than the rest of us and not the other way round. 8. A Random Walk Down Wall Street by Malkiel BurtonThough I consider this book to be useless, investment wise, as you will only end up doing nothing after reading the book. The real value the book produces is to reveal to you that you can't game the system.9. Too Big To Fail by Andrew Ross SorkinI bought and read this book solely on Ivo Welch's recommendation. Ivo Welch is the author of Corporate Finance, and is such a kind soul, he made the entire book available for reading online, free. And that book is the only MBA text I have read from cover to cover. He is a wonderful author and has the rare gift of writing academic text in an easy to understand way. In the book, he said Too Big To Fail is his favorite book on the 2008 financial crisis. Who am I not to read it?And true to my expectation, the book is a great read.10. Five Rules for Successful Stock Investing by Joe Mansueto & Pat DorseyMorningstar is the leading securities analysis company in USA and this book was written by their staff and endorsed by the company. And true to its title, it teaches the ground rules for analyzing stocks. It teaches you what to watch out for in a stock and by industry. It's a reference material.11. 7 Habits of Highly Effective People by Stephen CoveyI don't need to write much about this book, it's so popular you'd have heard/read it. It's fame is rightly earned.12. Dig Your Well Deep Before You Are Thirsty by Harvey MackayThis book will change your life! And it is no exaggeration.Though I still struggle (and have given up) implementing some of his advice, it's because of my extreme introversion. But if you are an extrovert, you'll have little/no trouble following his advice and greatly improving your life.13. Start Something That Matters by Blake MycoskieBlake Mycoskie started the revolutionary company that makes TOMS. And the history of TOMS is the most inspiring story behind any product (that I have read about). And in this book he shares that very touching story, then goes the super-extra mile of teaching how to start a company from just an idea and very little resources. And that is great value for someone like, who's always full of ideas.14. Think and Grow Rich by Napoleon HillLike every classic that not only made it to this millennium but also flourishing, this book is filled with timeless advice to not just becoming rich but living a wholesome life. You might need to skip some parts of the book.15. What Every Body is Saying by Joe Navarro This book is arguably the best book on deciphering body language. Joe is an expert and used to work for FBI. Since reading this book, I have been taking special delight in noting where my audience' legs are doing. If you put the content of this book to practice, you will find people very consistent and plain to read.16. The Success Principles by Jack CanfieldJack brings new life to the American Dream. Though I'm not an American nor live in America, but the success principles that Jack laid out in this book will enable even the poorest chap in Ethiopia to grow into a rich successful man.17. Make Yourself a Millionaire by Lynn Chen-Zhang & Charles ZhangActually, the title is misleading. This book is written by two CFAs. To become a certified CFA, you must believe that there are no quick rich schemes.This book will teach you all you need to know about managing vast wealth, so it's actually for the millionaires and not the aspiring millionaire.18. The Lean Startup by Eric RiesThis book will teach you valuable skills needed in growing a startup with minimal resources.19. The Steve Jobs Way by Jay Elliot & William SimonYeah, it's another Steve Jobs book. The guy was simply phenomenal.20. The Intelligent Entrepreneur by Bill MurphyThough the author spent too many pages promoting Harvard Business School, you'll learn invaluable lessons about being your own boss in a grand and intelligent way. It's a very practical book.21. Jim Cramer's Real Money.I wouldn't recommend you reading this book, but nevertheless it's a great book for stocks day traders. And reading it won't do any harm as long as you don't intend to practice the contents or become a stocks speculator.Those are my personal finance and investment books.Mind sharing your list with me?
  12. Michael Olafusi

    Personal And Family Budget Worksheet

    (Originally posted 29/10/2013) I want to say a BIG thanks to everyone of you that read my family budgeting post on BellaNaija (http://www.bellanaija.com/2013/09/18/let-your-money-work-as-hard-as-you-did-for-it-read-3-tips-on-how-to-make-family-budgets/) and sent me a mail. You gave me just the push I needed to see that there is immense joy in sharing. And till today I keep getting mails. Unfortunately, I was more concerned with making a Budget sheet that will capture any expense type you make and give it a descriptive category. For the very Excel savvy ones, you would have noticed that I edited a very generic Excel template to make this budget sheet. So, it's more like an output of several people's efforts. Back to the unfortunate part. Some of you were immediately overwhelmed by the amount of information (expense categories and items) and didn't know how/where to start. I considered making a simpler version, but I realized that it would only look simpler than this, but in the long run, this one would be more beneficial and intelligent. The truth is most useful things take a little effort to get used to. Some of you will remember how you were frustrated while typing your first document in Microsoft Word. Then how you avoided using Microsoft Office 2007, as you found it a pain to use compared to the Office 2003. Well, that's how most things in life are. And I am better off making a useful tool than just a fancy tool. With just a little effort on your part, you will find it very easy to use and more importantly, very intelligent. It puts you right on top of your income and expenses, gives you all the valuable details you need to make informed personal finance decisions. It is automated, so all you need is to fill for the expense categories that apply to you. Leave the ones that do not. The summary parts at the top of the sheet will automatically calculate. It's only the Projected Monthly Income and Actual Monthly Income you need to fill in the top segment. Here's how I recommend you use it Download the Family Budget Sheet here (https://dl.dropboxusercontent.com/u/28140414/Family Budget Sheet.xlsx). It will also work for single guys and girls, just that you'll have to ignore more expense categories (especially children) Fill in your estimated/projected income for the month. You'll see the section on the top right. Fill in the current month. You'll see the part for this on the top left. Fill in the budgeted cost for all expense items you find relevant. As the month progresses, fill in the actual cost for those items. Keep them updated till month end. At the end of the month. Ensure that the actual costs are updated. Then fill in the actual income you got for that month. Voila! All the other parts will automatically calculate. Here's how to make sense of the whole intelligence report. The part above, shows you how you fared compared to your budget. If your actual expense exceeded your budgeted expense, you'll get a deficit and if not, a surplus. Your aim should be to have none, zero difference between your budgeted and actual cost. Though this is close to impossible, but it's the goal of budgeting. Just aim for close to zero, that would do. Whenever you have a surplus, try budgeting more for savings and investment. And whenever you have a deficit, find the implicating expense items and work a fix. Now, this is the Reality part. The Budget Income - Budgeted Expense is equal to your Budgeted Savings and Investment. While the Actual Income - Actual Expense is equal to your Actual Savings and Investment. This is where you know your true financial state. Maybe you've been running your finances at a month-on-month loss. So that's how to use the Budget worksheet, whether you've got a family of 5 or a family of 1 (yourself).
  13. Michael Olafusi

    Practical Way To Make A Budget

    (Originally posted: 20/01/2014) Whenever I tell people that I have a record of everything I have bought since September 2012, most are amazed and others just give me a "this guy must be crazy" look. Today I'm going to share with you the practical tips that put me on top of my money. image: dailypracticeblog.com Making a budget is not as tough as most people think. A budget is simply an estimate of the income and expenses for a particular period of time. In our case, a month is good. And you don't need a fortune teller to help you forecast you expenses, there is the amazing "miscellaneous" to help. So how did I become good at monitoring and managing my income and expenses? And how can I help you overcome the initial frustration? To have a budget, you need a estimate of your income and your expenses. And it's much better if you have actual past records. And that was where I started from. I started taking down my expenses everyday. I didn't need any special trick to remember my income, the huge expectation that builds up before it finally comes makes it impossible for me to forget my last month's income. And if you have the habit of paying 10% of your income as tithe or donation, you won't have trouble with the income part of your budget plan. After taking down my daily expenses for about 3 months, I had a good idea of my monthly expenses. Then I moved on to making a simple budget. One that is so simple I'm yet to break it. I took the average of my monthly expenses for the past 3 months, removed all bad expenses I want to get rid off (buying Orbit and DSTV subscription), then I multiply it by 1.30. That is the money I set aside for the month. The rest I funnel into investment accounts or a project. Warning: I already built an emergency fund that has my 4 months living expense in it; I use this for emergencies that pop up, large unplanned expenses. And that's the first investment you should make: Build a solid emergency fund. If you have a family, put between 6 to 12 months living expense in it. Finally, I make it a habit. I have formed the habit of recording my daily expenses before I sleep, I make sure my emergency fund is robust enough, I avoid expenses I'll be ashamed to record, I move out all the money planned for investment the week I get my income (pay myself first), and then I try to grow my passive income sources. And it's that simple. Nothing complex. And it works.
  14. Michael Olafusi

    How To Become Rich

    (Originally posted: 3/3/2014) You don't need to be rich to know how to become rich. And that's my excuse for writing this post. image: emirates247.com There are a lot of ways to become rich. But I will be listing the only two legit ways I know of: You can work with a company like Shell, Mobil, NLNG or Total, and save/invest more than half of your salary. You can be like me, and try to give life to every business idea that hops into your head. Obviously, you know I have no credibility as regards number 1. So the rest of this post will be on how to become rich by working your butt off. And here are the steps: Know where you are. You have to do a personal inventory. Write down what you are worth (what you have minus what you owe). Write down your age on the next line. Write 1 billion naira on the third line. Ask yourself, "If I continue the way I am, how many centuries will it take me to make 1 billion naira?" Trust me, there's no easier way to know where you are, financially. But don't take this too seriously, being a billionaire is not the only way to live a fulfilled life. Have a Budget. And follow it. Having a budget is not hard. You just document every expense you make on daily or weekly basis. Then compare it with a threshold you have set for the month. It's that simple. And the ways you can do this are numerous. I follow a simple method. Some people prefer having a budget worksheet. I have a phone app I use daily to log my expenses and categorize them. I have been doing this since 2011. And consistently, every day, since Sep 2012. If I resign my job today, I know just how much I need to survive every month. That's the beauty of tracking your expenses. Then a budget takes it one step further, you not only track your expenses, you set a threshold for them that you work towards and also plan your savings/investment. This is going put you on a good standing to begin growing your income consistently and pursuing big financial goals in a predictable manner. Have an Emergency Fund. Having a good budget and following it will mean that you don't leave much money in your regular bank accounts. You have everything so well planned out that you end up with almost nothing at the end of the month (before salary comes in). But there will always be unpredictable expenses that a budget does not factor in. Expenses like helping a friend with part of the bill for a urgent life saving surgical operation. Or a sudden house or car repair. This is what having an emergency fund caters for. Have between 3 to 12 months living expense equivalent in a special savings account. You only use the money in it for emergencies. And you replenish the account as soon as possible. I have mine in a high yield savings account with Diamond bank (HIDA account). Having this prevents you from derailing from your long-term financial plans. You won't have any reason to liquidate your pension fund account or investment accounts prematurely (before they mature in your original plan). If you can, have a health insurance. In countries where it works very well, it's a necessity. It saves life, physically and financially. Don't buy what you don't need. It's said that if you keep buying what you don't need, someday you will have to sell what you need. I didn't buy a new laptop for 5 years because I followed this rule. It's sometimes hard and following this rule will make us look frugal. But it's necessary if you want a great financial future. I struggle with following this rule, but I still fair better than most of the people I know. I can pack all my valuables into one bag. One BIG bag. The aim of this rule is to make you develop the good habit of a moderate lifestyle. A lifestyle that doesn't keep ballooning with every salary or income increase. Invest, invest and invest. If you did that exercise in step 1, you will know that there's no way you can save your way to 1 billion naira. Even if you save all your income. The only way to make true wealth is by investing, investing and investing. First invest in yourself, increase your market value. Second, invest in sound relationships; network with the people who can become future business partners. Finally, invest all of the money you can spare; invest them in your own business ideas, in solid stocks and in other people's great ideas. And this is how Dangote likes to explain his wealth. And I believe him. Don't lose yourself. Don't trade one poverty for another. Don't be so poor that all you have is money. Don't be a slave of your own money. Be like Richard Branson, do all the crazy things you've always wanted to do. Inspire others with your wealth. Finally, start today. Yeah, start today. It's going to be a long journey; you have no time to waste. Or as my friend would say, "No time to check time." All the best! See you at the billionaires club!
  15. (Originally posted: 30/03/2014) I had to help a friend figure out the details of a bank loan. Honestly, it's a lot different than what's in the finance books. Banks have an ingenious way of twisting the simplest things. So I had to help my friend replicate the repayment sheet and calculate the real interest rate she's paying. In the end I saw an awesome template online that puts mine to shame. I modified it slightly because it was perfect already and very beautiful. It will adjust dynamically to the payment period specified. Just open it to see what I'm saying. The template is from http://www.excely.com/ and the source download link is Loan Calculator (http://www.excely.com/template/loan-calculator.shtml) But my modified version (mostly making it show in Naira; you'll be amazed by how well it does that) can be downloaded at Nigerian Loan Repayment Calculator (https://dl.dropboxusercontent.com/u/28140414/Loan Interest Calculation.xlsx) The only issue is you have to key in the management fee and VAT payment yourself. The way the banks calculate them is not consistent. So I didn't want to lock in any formula for it. And I hope you won't need to use this. The loan rate I saw for one the banks is 23.99% and with this repayment plan (monthly withdrawal) it's not even good for business use. Any business that can generate enough to service that kind of loan is worth patiently building/growing without the loan. But if for a valid reason you are considering taking a loan of this type, especially mortgage loans, then this will help you do the maths in less confusing way and show you the sum of all the extra payments (interest, management fee and VAT) you are paying the bank.
  16. Michael Olafusi

    Planting Trees: Longterm Planning

    (Originally posted: 29/04/2014) In life, the most important metric/KPI is steady long term growth. It applies to every aspect of our lives. The richest farmers are not the ones cultivating maize and beans, plants that produce quick gain and finish their life-cycle in a year. No. The richest farmers are the ones cultivating Cocoa, Rubber tree and Palm trees. Trees that grow slowly and almost forever. Even in the finance and investment world, it's also true. A microfinance bank invests in opportunities that will produce gains in 1 to 3 years. Commercial banks invest in opportunities that will produce gains in 2 to 10 years. The big investment banks focus on opportunities that will produce gains in 10 to 100 years. Time is the greatest resource. And the best way to use it is in spending it on things that will outlive you. In planting trees. Trees of quality friendship your children and their children will benefit from. Trees of a solid financial plan that will make your money outlive you for the benefits of those you love. Trees of a healthy lifestyle, acorns of daily/weekly exercise, that will make you look and feel great till whatever age you wish to reach. Trees of goodwill and honesty that will inspire people long after you are gone. Trees of hardwork and focus that will get you more than all you need in life. We all need to plant trees more. To see beyond a week, a month and a year. To not just plant maize and beans. To stop starting all over every year, cultivating and harvesting. To cultivate more now, so we can spend the later part of our lives harvesting. I've come across people who are obsessed with immediate gain. They work harder than most of us but all spent in planting maize. And every year, they have to repeat the same amount of work. They compare themselves with others and try to match their harvest. They try to squeeze out the most from what they have, and now. They are always in a race, a sprint. Their long term plan is simply to repeat their short term plans more often. To spent less time reaching their harvest, and not to spend more time planting trees. Unfortunately, I'm like that. I don't even see beyond a month, except in running my finances. I honestly don't know where I'll be in a year's time. I don't invest in quality friendship, in fact, in any friendship at all. My financial plan is to not starve. The only parts I'm doing well in are daily exercises and honesty. And, thanks to my new entrepreneur status, hardwork too. But I hope to start changing slowly. To begin planting a few acorns in my fields of maize.
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