Do you care to do financial check-up?

3

INVESTMENT TALK WITH EMMA

Emma

Emmanuel Ewumi

(Over 20 years investing experience in Nigeria’s financial markets)

This article was motivated by what I saw in the hospital on 20th November 2013. My father’s driver was out of Lagos for a week, so I had to take my father to the hospital for his routine medical check-up. During the exercise they checked the state of his kidneys, liver, prostate gland, heart, blood, lungs etc. At the end of the medical check-up he was given certain drugs, food supplements and also counseled on how his seventy one year old organs can function optimally for more years.

health1

As young people who are just starting our careers or those who are already established and are at the top of their careers, how often do we carry out financial check-up on ourselves? What plans do we have in place in order to exit the rat race as soon as possible? Do we enjoy our jobs? Are we achieving our financial goals? How long can our reserves take us if we lose our jobs?

It is not just okay to keep on working, changing jobs, or even acquiring more certificates without considering how to manage our finances and become investment savvy. How many assets have we acquired in 2013? I will not consider your car, clothes, furniture, and electronics etc as assets. From personal finance point of view an asset generates income and appreciates on the long run. It is when we need  a collateral in order to access fund from financial institutions that we will realise that some of the things we call assets are not acceptable to financial institutions.

Are we reducing our liabilities or increasing them through conspicuous consumption. Nobody can be wealthy or financially independent by increasing his or her liabilities and reducing his or her assets. If you do this, you will end up becoming one of the regular guys. The regular guys may have a good job and a good education, but they may never get out of the rat race. They will always blame the government, jobs, employers, economy etc for their financial status.

vi1

If we look at our net-worth as at November 2013, can we say we are making progress compared to what we had in January 2013? We can increase our net-worth on an annual basis by having a budget and adhering strictly to it, proper management of our cash flow, reducing our liabilities and increasing our bankable assets.

Although debt can be used by smart people to grow their net-worth, most people use debts for conspicuous consumption or to even pay for an outstanding debt. People who engage in this will definitely succeed in digging their financial grave.

Have we been able to create another stream of income in 2013? Having just one stream of income is highly detrimental to our financial well being, no matter the volume of income generated by that stream of income. We must endeavour to regularly increase our streams of income.

Do we have a financial plan? When do we plan to be financially independent? When you become financially independent, you become a member of the less than 5% of the working population who do the jobs they love not necessarily because of the money they will earn in order to pay their bills yet they are living the life of their dreams because they have created residual incomes and have income generating assets.

How many of us truly love the jobs we are doing? Do we really have genuine passion for our jobs? If a million pounds or more about N250 million or more hits your account today will you continue doing your job? If your answer is yes, that means you really love what you are doing.

debt

Three things will happen to every career person. The three things are;

  1. You will at a point in time leave your career or due to old age, medical fitness or to embrace entrepreneurship.
  2. Your employer will retire you.
  3. You may be competent, medically fit and yet lose your job due to economic realities.

No matter how creative, competent, intelligent or strong you are, you will get to a stage whereby you can no longer work. How are we prepared for this stage of our life? Do not make the mistake of thinking that your children will take care of you at old age. We have to take our financial destinies in our hands by making smart financial and investment decisions. We do not want to be like some retirees who had wonderful careers in the envied sectors of the economy, who later retired into penury due to financial and investment mistakes made by them during their careers.

As the year gradually comes to an end we should think about the points raised in this article and fashion out strategies that will enhance our financial fitness in 2014 and beyond.

………………………………………………………………………………………………………………………………………………………………

 

I wish you all a merry Christmas and a prosperous 2014. This column will resume next year by God’s grace.

 

3 comments

  1. Lanre Olokun 17 December, 2013 at 09:44 Reply

    Bookmarked & sharing…
    It takes a whole lot of self-discipline to make investments, striving to remain wise either in penny or pounds.
    Compliment of the season.

Let us have your say by leaving a comment below