Hello, my name is Piriye and I'm a personal finance consultant. I am passionate about financial literacy and I want to use my knowledge and experience to teach young Nigerians how to start their journey to financial stability and then freedom by applying tested and trusted methods. I'll be updating this thread regularly with personal finance lessons and industry events, so follow the thread and feel free to ask me any questions about your personal finances.

Forget your financial mistakes of the past, start now to sow the right financial seeds for a prosperous future.
Regardless of how much you earn, there is something you can do to make your finances better, even slightly. I know the gap between where you are and where you want to be may seem very large but it is not IMPOSSIBLE to close that gap. Start from where you are, use what you have, do what you can.

What exactly is personal finance management?

Personal finance management is the activity which a person performs to make efficient use of money over time, taking into account various financial risks and future life events.

It's not just about saving or investing. It's about understanding the impact of inflation on your savings. It's knowing your risk tolerance and investing accordingly. It's planning for your retirement waaay ahead of time.

Personal finance management includes everything money related: financial planning, saving, investing, budgeting, banking, insurance, debt management, retirement planning, estate planning, etc.

Are you ready to start your PFM journey? You'll get valuable knowledge on how to achieve your financial goals regardless of your current position

Let's talk about INCOME.

Income is simply money coming in as a form of earning, gift, interest, etc. An inflow of funds.

One of the most important factors in your personal finance journey is your income.
Your total income will determine your spending, saving and investing power. Your first goal should be to spend less than you earn but if you find that impossible to do, then you have to increase your income.

Now let's look at some income terms you need to know:

Your total income from all sources is your GROSS INCOME

Your gross/total income minus taxes is your DISPOSABLE INCOME

Your disposable income minus necessities and fixed expenses is your DISCRETIONARY INCOME

Income received in exchange for your time and efforts is your EARNED INCOME. Examples are your salary and pay from freelancing.

Income earned by your savings and investments is called UNEARNED INCOME. Examples are capital gains, interests, dividends, etc.

Earned income is ACTIVE and requires constant effort to generate while unearned income is PASSIVE and doesn't require as much effort.

Do you currently spend less than you earn or have you committed your personal finances into the hands of the Lord?

What is Financial Literacy?

ARE YOU FINANCIALLY LITERATE?

Financial literacy is the ability to understand and effectively use various financial skills including financial planning, budgeting, investing and other personal finance management skills.

In simpler, shorter words:
Financial literacy is the ability to know and make sound decisions concerning your personal finances.

I personally feel it is a key life skill that should be taught in schools from an early age. An increase in financial literacy will make individuals more money conscious and have a positive impact on their ability to provide for their future.

One book I love and will always recommend is The Richest Man in Babylon by George S. Clason. It's beginner-friendly but has a wealth of knowledge.
Have you read this book?

Why is Financial Literacy important?

Now we know what financial literacy is, but why is it necessary?

1)There are too many people that just don't know that they can and should be managing their money better. They keep having financial issues and don't know how to solve them.

2)Dreams without plans will fail: everyone that has a dream needs to know how to break that dream into smaller, achievable parts and take action on them. When people don't have access to the right financial information, they will find it difficult to achieve their dreams.

3) What's your retirement plan?: many people plan to grow old one day but a good number of them don't know how to prepare financially for their older years. How will you feed, pay your bills, or travel when you can't work anymore? The more financial literacy is taught, the more people realize that they have to put certain systems in place as early as possible.

4)The world is changing: everyday we hear of one new invention or opportunity....everything is moving rapidly. And with these changes come lots of money-making opportunities. But one has to be financially aware to be able to identify and then take advantage of such opportunities.

Financial literacy is so important on an individual and economic scale. That's why we at PFM Babe are committed to our mission of ensuring that we make relevant information about personal finance management easily accessible and understandable to all!

Appreciate where you are in your journey, even if it's not where you want to be. Every season serves a purpose!


The major reason why you need Personal Finance Management skills regardless of your pay range

BUT I EARN A LOT!!!

A broken drum will always leak, regardless of how much water you pour into it. If you leave it under a running tap, and the tank (its source) dries up, it’ll eventually go back to being empty. It doesn’t matter how many figures you earn monthly, if you don’t have PFM skills, you’ll definitely go back to not having enough.

If you have the opportunity to earn a stable income, you have the opportunity to save, invest and generally set your future self up for a life of financial stability. Savings can be #50 or #5,000,000 depending on how much you earn.

If you’re earning a medium to high salary, you have an even GREATER opportunity to build strong financial blocks to secure your future. Don’t be deceived by the guise of job security, and make SMART money decisions any and every time you have the chance to do so.

Does your savings and investment portfolio reflect how much you earn? If it doesn't then you definitely have to review the financial decisions you are taking.

Let's talk about INFLATION

Inflation is a rise in the general level of prices of goods and services in an economy over time. When the general price level rises, each unit of currency buys fewer goods and services.

For example, if #100 could buy 3 cups of garri in 2014 and now in 2020, 3 cups of garri cost #200, then it means that the cost of garri has increased by 100% between 2014 and 2020.

Inflation reduces the value of your money and it must be factored in when making plans for your personal finances.

So how does inflation affect your finances?

Inflation reduces the value of money and as a result our purchasing power. Remember our garri example? If my income in 2014 was #15,000 and now in 2020, it is still #15,000 then I am spending more of my income now to buy the same quantity of garri as I was buying in 2014. This means that I now have less money left over to spend on other needs and wants.

In even simpler terms, I can now purchase fewer items than before, since the prices of things have risen but my income remained the same.

The way to counter the effects of inflation is to have AT LEAST an equal increase in income as the inflation rate. So if the inflation rate is 13%, your income should increase by at least 13%.

When looking out for investment opportunities, you need to ensure that the interest or yield matches the inflation rate. Otherwise, the money you invested will have lost value over time.

Wealth is a power...With wealth many things are possible

Being wealthy is more than just having money. It’s having power, influence, resources, opportunities that would be impossible to access without wealth, etc.

So how do you grow wealth? By starting from where you are and efficiently making use of what is currently available to you.

What is an EMERGENCY FUND?

What comes to mind when you see or hear the word EMERGENCY?

An accident? Natural disaster? Health challenge? Whatever you may think of will definitely require one thing: MONEY.

An emergency fund is a safety net for urgent, unplanned situations. It is usually 3-6 months’ worth of living expenses set aside for emergencies, especially sudden job loss/unemployment.

Everyone should have an emergency fund. Your emergency fund is different from your core savings and investment capital and it is the first place you turn to in the event of an emergency

So how do you build an emergency fund?

1. Calculate your total monthly income
2. Calculate your total monthly expenses (if you don’t have a budget already)
3. Multiply your total monthly expenses by the number of months you want to plan for in your fund (at least 3 months)
4. Plan how you’ll save towards it, monthly, weekly, etc. with respect to your income.
5. Stick to the plan!

PAY YOURSELF FIRST!!!

Pay yourself first! When you receive your salary or whatever kind of income you get, that total sum is not yours to keep. You pay the supermarket for provisions, your electricity company for power, the boutique for new clothes, etc.

Before you make all these payments, you should separate a percentage of your income (at least 10% preferably) and set it aside as your own earnings. This is the money that will form your emergency fund, investment capital, etc.

Have you been paying yourself first?

ASSET

Hmmmm. What does that word mean?

An asset is anything that has economic value or future benefit. Your cash, properties and resources that you own are all assets!

Your assets can be sold and exchanged for cash and some assets can grow in value (appreciate) or lose value over time (depreciate).

Wow! I'm learning....Keep it up and keep 'em coming.

onlyhope:
Wow! I'm learning....Keep it up and keep 'em coming.

Thank you for the feedback! I'm glad you're learning. I have a lot more coming up!

Nice thread. I just finished reading smart money woman, although I am a guy, most of the things there are helpful in management of money. There are also align with most of the things you wrote here. Keep it up

Chidexthebest:
Nice thread. I just finished reading smart money woman, although I am a guy, most of the things there are helpful in management of money. There are also align with most of the things you wrote here. Keep it up

Thank you! I certainly will. There's a lot of wisdom in that book.

How do you plan for Tuition Payments?

This one is for the daddies and mummies in the house.

At the end of every year, Mr Mike and Mrs Jane Adebayo take out a few days to plan their finances for the new year.

The couple is blessed with 3 children, all in primary school. Each child’s fees per session is #45,000, this means they have to pay #45,000 * 3 = #135,000 every session for their kids. They know that fee payments are due every January, May and September, so they have 3-month breaks between each payment.

The Adebayos have done their calculations and know that they have to separate #45,000 from their income every month in other to have the #135,000 fee payment at the beginning of each school session. School fee payments don’t come as a sudden need for them because they have planned for it, as every parent should.

Looking at our case study above, we can clearly see that it is possible and necessary to plan for all yearly expenses at the frequency they occur.

When you plan ahead of time, you’ll be able to see if your income can take care of all your needs or if you’ll have to adjust your expenses. Adjusting your expenses, in this case, might be switching to a cheaper school, getting your kids homeschooled, etc.

As a parent, do you plan ahead of time for your children’s school fees?

School fee payments are not due every month, so they’re meant to be easier to plan for and pay. If you have a child or children, your monthly budget MUST reflect allocations for the payment of their school fees. When this is done properly, you won’t be ‘surprised’ when it’s time to pay as you would have already planned for the payments.

It's not the money I'm after, it's the freedom. My goal is to live life on my own terms.

Money is very important but it's not the end goal. Money makes it possible for one to have options. Money gives you the freedom to choose how to live your life. And that's what I'm after. I have big dreams...really big dreams and I'm doing what I can right now to ensure that achieving them is possible.

Don't wait till you have 500k before you start putting your finances in order. A few years ago, I was saving #500. A few days ago, I increased my investment capital by 100k without flinching. Start from where you are and you will grow to heights you didn't think possible.

What does it mean to COSIGN a loan?

When you cosign a loan, you assume the same level of liability and responsibility as the borrower!

This means that you guarantee the repayment of the loan on behalf of the borrower, so in the event that the borrower defaults, you are obligated by law to make the payments for the loan.

Even if you’re not the one using the principal or loan amount given, you have an equal responsibility to pay off the loan. If the borrower is unable or unwilling to pay, or if the person disappears or dies, the loan is yours to repay, no questions asked.

So before you sign that loan document as a cosigner, ensure that you’re willing to assume full responsibility in the event of a default by the borrower.

Have you ever cosigned a loan? Did it end in praise or tears?

I have never done this and I don't think I ever will. Not even for a loved one.

What are LIABILITIES?

We've discussed what ASSETS are, now let's talk about liabilities.

Liabilities are simply debts. What you owe and have to pay back at some time in the future.

That #2500 you owe you your customer at the junction is a liability. The #600 airtime you borrowed from MTN is a liability, that wig you collected from your friend with the promise to pay back at the end of the month, is a liability.

One of your major financial goals should be to get out of debt and have 0 liabilities. So that everything you own is yours to keep.

Now that we know what assets and liabilities are we can move on to the next step which anyone interested in making the best use of his/her finances should take.


How to calculate your NET WORTH

Your net worth is the difference between your ASSETS and your LIABILITIES.

Let’s say I have an emergency fund of #200,000 and my investments are currently worth #70,000. If all my furniture, appliances, jewellery and other belongings are worth #250,000 then the sum of all my assets is #520,000 (200k + 70k + 250k).

But I owe a balance of #1,500,000 on my house mortgage. This is the only debt (liability) I have.

My net worth will be my assets (#520,000) minus my liabilities (#1,500,000). My net worth will be a negative figure of -#980,000. This lets me know where I stand financially at a glance.

It’s important to know your net worth every step of the way as it will help you make better financial decisions in other to get better financial results.

Happy New Month!

Secured VS Unsecured loans

Secured loans are loans that are backed up or supported by collateral, i.e., something of value that can be claimed by the lender if the borrower defaults on the loan.
Examples of collateral can be land, a car, etc.

Unsecured loans on the other hand are loans that are guaranteed only by the borrower’s promise to repay the amount borrowed plus interest. Usually, unsecured loans charge higher interests than secured loans.

secured loans are harder to get and involve more checks than unsecured loans but they offer significantly lower interest rates than unsecured loans.

3 Types of people that come into wealth

1) The ones who spend it all: these are the ones we call never see come see, LOL. They immediately buy 24 cars, 200 fancy shoes and start hopping from club to club buying drinks for everybody.

Few months after receiving such a large amount of money, they’re back to square one. Broke, with zero savings or investments, scrambling to sell off all their belongings so that they can buy food to eat.

2) The hoarders: these ones are scared that they’ll lose their money and go back to being poor so they dig a hole in their backyard and hide their money so no one can take it from them.

These set of people never enjoy their money, neither do they try to grow it. They are so scared of losing it all that they don’t even want to touch it,

3) The farmers: I call these set of people farmers because they try to grow their money. They know that there might be losses here and there but they try to reduce their risks and are more content with long-term growth.

They add to the money they received and ensure their future is financially stable while enjoying their newfound wealth.

The key to being among the 3rd set of people is knowing how money works and how to utilize it efficiently, to achieve your financial goals.

If you suddenly received an inheritance or gift of #50,000,000, what will you do with it?

There is infinite knowledge out there, don’t allow yourself to get comfortable in one place for too long.

Slow progress is still progress!!! Just keep moving forward.

It doesn't matter how 'little' your steps seem, as long as you're moving towards your goal!

If you haven't already done your Christmas shopping, you'd better start now!!! If you think prices of goods and services are high at the moment, just wait till late November. Your village people are planning to sell 1 live chicken for #15,000

Prices of everything will skyrocket in December….
Don’t wait till then before you start your Christmas shopping.

You can take little amounts out of your income and start buying the necessities that won’t go bad now, like rice, cooking oil, etc.

If you’ve been saving throughout the year, then you’ll be able to buy even more things ahead of time. Plan what you’re going to use during the festive season now and make those purchases now.

This doesn’t apply to only food items. Are you giving out any gifts? Are you buying new clothes? Are you getting a Christmas tree? Properly plan for and make a cost estimate of what you’ll need during the holidays and start purchasing them now while they’re still pocket friendly.

Go through your list and strike out things that you can do without. Ask yourself if you really need new shoes, or if the ones in your closet that you haven’t even worn will suffice.

Remember that January is one of the longest months in the year, so ensure that you don’t overspend and plan properly for the new year too.

Cost of Living

What is your cost of living?

It is the total amount of money it takes for you to survive and live comfortably over a set period of time.

If your income does not exceed the cost of living, you’ll either go into debt or face other financial challenges.

Your cost of living is determined by such things as your rent, food expenses, utilities, transportation, etc.

If you live in places where the cost of living is low and you earn a high salary or business income, then you’ll be able to save and invest more. The reverse is also the case.

Major urban places like Lagos, Abuja, Port Harcourt, etc. have higher costs of living than their less developed and popular counterparts.

Do you know that transportation costs in Uyo, Akwa Ibom state are waaay much cheaper than transportation costs in Port Harcourt? How about rent costs? Food costs?

These are some of the factors that determine the cost of living in whatever location you reside in. If you're thinking about moving to a different state, city, village,etc., you should absolutely calculate your cost of living in your current location and compare it with that of the new place you are considering!


On a scale of 1-10 where 1 is super cheap and 10 is extremely expensive, how would you rate your cost of living in your current city/state?

7 Cures for a Lean Purse culled from The Richest Man in Babylon

These are 7 VITAL things to do to change your financial situation and achieve financial stability.

1) Start fattening your purse: you do this by saving consistently, every time you receive income. At least 1/10th or 10% of every inflow you receive should be saved.

2) Control your expenses: you’ll never run out of needs and wants. If you don’t adequately plan for your expenses by drawing up and using a budget, then your expenses will always be more than your income.

3) Multiply your gold: invest your savings wisely so that it can yield even more money for you. When you earn interest or yield on your investment, reinvest it, so that you have even more money working for you.

4) Guard your treasures from loss: be wise about where you invest your money. Secure small amounts and learn to protect them before investing more. Do your due diligence and constantly get more knowledge before investing your money anywhere.

5) Make your home a profitable investment: owning your own home will greatly reduce your cost of living, work towards it.

6) Insure a future income: it will get to a point where you can no longer work. How will you take care of yourself and your family? Provide in advance for your retirement and the protection of your family.

7) Increase your ability to earn: the more knowledge, skills and competencies you have, the higher your chances of earning more. Constantly improve and update yourself so that you can create multiple streams of income.

The path to wealth becomes easier when you have the right knowledge!

These are the 7 cures for a lean purse, what do you think? How many are you already applying?

Whhat is interest?

Interest is the fee paid for the opportunity of borrowing money. It is the cost or price a person pays in order to have access to, and spend money that would otherwise take time to accumulate.

When you borrow money, you pay interest to the lender for access to the funds. When you lend a company, investment agency, etc. your money in the form of investments, they pay you interest for access to your money.

Interest is passive income because you’re not putting in any effort or sweat to generate it.

Do you currently earn interest income?

Case Study: Meet Ibiso

Ibiso is a 26 year old woman who works at a bakery as an assistant manager. She earns #70,000 a month and though she has been working in that role for 2 years now, she hasn’t set anything aside as savings or for investing.

Ibiso knows that the Christmas holiday is just around the corner but she doesn’t make any Christmas purchases ahead of time.

Two weeks to Christmas, she writes her shopping list and heads to the market. The prices of goods have skyrocketed and she’s only able to buy 40% of the items on her list. She’s very upset and blames the state of the economy for the unreasonable market prices.

Are you still waiting to enter December before you start making your Christmas purchases?

Everybody on this planet knows that prices rise during the festive season. If you have the funds to make your Christmas purchases now, please go ahead. It will save you a lot of money.

Have you started making your Christmas purchases? If no, what’s holding you back?

I totally appreciate this tips you shared here, also will like to add you differentiates your business account from your savings or day to day spending account.
I advice you open FCMB Business Account it is designed to cater to the day-to-day banking needs for your business. Start today. https://on.fcmb.com/online-account-business3

Risk and Return


Risk is the possibility that a situation will have a negative outcome. It is the probability of your investment losing value.

Return is the potential gain from an investment. The potential yield a particular investment can give you.

Risk and return are partners, they go hand in hand. The higher the risk, the higher the potential return and the lower the risk, the lower the potential return.

Every investment has a certain level of risk but of course, some are higher than others. Government securities such as Treasury bills carry the lowest risk while highly volatile investments such as FOREX, cryptocurrencies, investing in startups, etc. are some of the most risky investments one can make.

Are you a risk taker or do you prefer more conservative, safer investments?

What do we mean by Risk Appetite?

Your risk appetite is the level of risk you are able to handle with your investments.

In less serious terms, it’s the level of risk you can take that won’t give you sleepless nights and HBP.

It’s very important that you know what your risk appetite is.

Our next post will talk about how your risk appetite affects your finances and your investment decisions, so look out for it!

Do you consider your risk appetite before embracing an investment opportunity?

How your risk appetite affects your investment decisions

It’s simple actually if you’re on the conservative side, you’d lean towards safer investments such as treasury bills, money market funds, etc.

Investors with a low-risk appetite will take longer to achieve their investment targets, as their investment choices will deliver lower returns.

On the flip side, aggressive investors who take on investments with higher risks will have the chance to meet financial goals faster if their investments work out positively.

However, aggressive investors stand a higher chance of losing their investment capital, partially or fully. There is little or no preservation of capital in the opportunities they take on.

The key to having a reasonably profitable portfolio with relative safety of a good portion of your funds is to DIVERSIFY your investment portfolio.

Diversification is the process of dividing your investment capital across various asset classes, industries, etc. with different risk levels, in order to spread out your total risk.

What’s the most amount of money you’ve lost in an investment and what did that experience teach you?

It is better to WANT than to OWE


The keyword there is ‘WANT’. This does not refer to your needs, because if you don’t have enough income to cover food or housing expenses, then it is not unreasonable for you to borrow to meet up with such needs.

Taking a loan to buy a shoe, attend a wedding, go on a vacation, or buy 7 years’ worth of shawarma is not advisable…..AT ALL.

MORE Pls!!!!
GOD Bless you @PFM Babe