₦airaland Forum

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).

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?

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!

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.

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.

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.

Busy body lady here!

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!

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?

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