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21st century poverty and how to overcome it

21st century poverty and how to overcome it (Part 1)

 by Grace Agada

The typical Nigerian family is “blessed” with liabilities but poor in assets. This means that by the time your working career is beginning to take off, there are more forces working to pull you down than there are those working to lift you up. To rise above these forces, you must resolve to fight against them and you must also decide to take a different path from that of your parents, which may not lead you to wealth.

Poverty in the 20^th century is different from poverty now. Back then, it was seen as a lack of education. Education was the golden ticket to a job, which was synonymous with financial success. If you wanted to be successful then, all you needed was an education, as the lack of one relegated you to lower sources of income. Hence, the lack of education was seen as the cause of poverty

Thus, in the 20^th century, traditional education was the gold standard, and it is still prioritized today. Parents sacrificed their savings to send their children to school with the hope that they would return the favour upon graduation. Children returned home to lucrative jobs with juicy benefits and packages, and parents seemed to be reaping the rewards.

 the 21^st century when it all changed. Today, parents are still sacrificing their savings to educate their children, so most families are now educated. But instead of prosperity increasing, poverty is thriving. Education is now more of a cost centre than a profit centre

Why is education no longer effective for success? And how can you achieve financial success in the 21^st century?

Follow my line of thought as today, I will show you what you need to know.

There are more people looking for jobs today than there are jobs available to cater for them. When job opportunities were more than the number of qualified people, it was ok to focus on qualifying more people through education. But as the number of qualified people now surpasses the jobs, the focus should no longer be so much on education.

The focus should now be on helping people develop the ability to produce income without a job, as this is where the future seems to be heading. This is not to say that education is irrelevant (people should go to school), but parents should stop sacrificing so much for education as it now has the least return on investments. Without a job, your education investment effort will go to waste.

To succeed in the 21^st century, poverty must be defined in a different way, and our approach to financial prosperity must change. If we keep applying the same principles and strategies that worked in the 20^th century for our parents, we will end up in the exact place as they did.

Research shows that 80% of working professionals are already heading in this direction and some may end up worse than their parents. This means that without deliberate planning and a different kind of approach, you will be no different from your parents when you reach their age. Prosperity today is not a guarantee for prosperity tomorrow.

To achieve lasting financial success, you must know what poverty means today and how to overcome it.

But before I delve into the meat of my message, let me first show you what we will cover in today’s article. This article is broken into four sections. The first is understanding 21st-century poverty; the second is knowing how to end poverty in your own life; the third is staying away from factors that perpetuate family poverty; and the fourth is knowing what to do next to elevate your life.

What is 21st-century poverty?

Poverty in the 21^st century must be defined differently if we are to end up in a better place than our parents. Before now, poverty was defined as the condition in which a person lacked the financial ability to maintain a certain standard of living.

So, if you were working and could maintain your living standard, you were seen as rich. But this definition is incomplete as it does not cover who you will be when your job is no more, and what standard of living you will have then. The old way of defining poverty is thus flawed and is the reason why many one-time vibrant working professionals ended up poor in retirement.

If you must succeed in the 21^st century, you must ditch the old way of defining poverty and embrace the new way. Poverty in the 21st-century is defined as the current financial state of a person, plus the future state, and the presence of certain risk factors that can take the person back into poverty. There are four such risk factors and I call them the 21st century Poverty Markers.

The first marker is the lack of income security (IS). This is the inability to control, protect or replenish one’s income and maintain the same standard of living in the event of a job loss.

The second marker is the lack of financial stability. This is the inability to maintain a smooth and stable current life, be free from emergencies, and invest without sudden financial distractions or urgent needs.

The third marker is the End Destination marker (ED). This is the inability to maintain the same quality of life, preserve purchasing power over time, and be free to spend money in retirement.

The fourth marker is Inheritance (I). This is the inability to leave assets behind, expand family advantage, increase family opportunities and decrease generational poverty.

These are the four poverty markers that let you know whether you are rich or poor; thus, a rich person in the 21st century is not just rich today, he is rich tomorrow and will be rich in the future. The four poverty markers thus divide the members of a family into three categories of people. The first category of people is the “poverty in-service” category. The second category of people is the “poverty in the waiting” category. And the third category of people is the “Prosperity aboard” category.

The poverty in service category is the group of people that are already in poverty. The poverty in the waiting category is made of working professionals who could go into poverty at any time. And the prosperity aboard category has those who have jumped the poverty ship, and are heading towards wealth and prosperity.

Only the third category of people will be wealthy in the 21^st century. And you must join this group if you want to be wealthy

So now that you know what poverty is in the 21^st century, let’s move on to the second component.

How to end poverty in your own life

Going by the 21st-century poverty markers, the majority of people are poor. To get out of poverty, you have to first recognize where you stand with each of the four markers, and what you can do to get out.

i. The Income security market

If you lack income security, there are only two things you can do. The first is to create your own income security fund through big portion savings, and the second is to develop portable high-income skills that can replenish lost income. To build solid income security, you must save big, make your savings fail-proof, and invest in safe investment vehicles. The income security fund you create will serve as a financial wedge that will sustain you in the absence of a job. You need it to be there when you need it.

To bring in new income and build solid cash reserves, you need portable high-income skills. And there are three portable skills to develop. The first is creativity: the ability to make your own ideas profitable with little resources and to turn nothing into something. The second is rich relationship building: the ability to connect with high achievers, grow a rich network and get other people invested in your success and advancement. The third is sales and marketing: the ability to command high and profitable income for your solutions and services.

Without these skills, you cannot grow rich, earn high income or replenish lost income. You also cannot leverage high-income earning opportunities and platforms. 

ii. The financial stability marker

Financial stability is the ability to enjoy a stable life, shield oneself from emergencies and invest long-term without financial distractions. To achieve financial stability, you need three things- A high earning ability, a disciplined savings culture, and a solid investment plan. If you earn low income or channel the majority of your income into expenses, you will be financially unstable, if you save less than 25% of your income you will be unstable, and if you keep making money and losing money through investing you will be financially fragile.

The key to achieving lasting financial stability is to invest your money in the direction of your dreams, never lose money, and to make your money work harder on your freedom than it does your expenses. This is because, without financial stability, you cannot achieve financial freedom.

True financial freedom is achieved through long-term investing. Wealth and financial success are all long-term games. But you can only put money aside for long-term investment if your current life is working and stable. Without financial stability, you will always abort your financial freedom effort for urgent needs. Your current life must work for your future life to work

6 things you must not do with your money

6 things you must not do with your money

Money can go as fast as it comes, but you might just get to keep it for a long time if you follow these tips.

Coming across this, you probably thought to yourself “what an interesting topic, I wonder what it has to say”. Well, we are right there with you. There are a lot of things you shouldn’t do with your money and even without reading further, you can probably outline about 20 things, (go ahead if you’d like to).

Trust me you’d have fun doing that because it was quite fun coming up with this list and we’d like to present to you the top 6 things we believe you must not do with your money. Have a fun read.

DO NOT BE UNINTENTIONAL WITH YOUR MONEY

Intentional living is important and it is something that has caught on over the years. To be intentional means to be deliberate in your actions and decisions. Basically, what you must understand from this is that you should not be impulsive with your money, whether in your spending, savings, and investment decisions, you must be deliberate. There is a popular saying that goes “failure to plan is planning to fail”.

It is necessary to always have a plan/budget for your money. Never leave your money to chance. Be intentional, be deliberate, and do not be passive with your money plans. To get started, you can focus on three steps; have a vision, create a plan, set limits. You can decide to be intentional with your impulse buying as well. When you create a plan and set limits and you do not go over that limit, even when you decide to splurge, you would still be on track to achieving your goals.

DO NOT MAKE LARGE PURCHASES WITHOUT CONSIDERING THE FULL COST

Part of being intentional with your money is to avoid large purchases if possible. Things like buying a car or land/homeownership should not be taken lightly. Even if you can afford the down-payment at that time, you have to consider the other charges and fees attached. If you can meet up with maintenance and servicing then, by all means, go ahead. Otherwise, it’d be best to review that decision. One way to achieve such purchase though, if your current earnings aren’t sufficient to support an extravagant purchase is to have a savings or budget plan for it.

Even if you cannot afford a financial advisor, there is a good number of mobile apps that would help you make such a savings plan. If you are the type of person that whenever you come upon ‘windfall’ or unexpected income, you’re already thinking of how to spend it extravagantly, you need to have a change of perspective. Before you think of buying that private jet or getting that car, you need to ask yourself if you are fully capable of maintaining it. Making rash purchase decisions can lead to regrets later.

DO NOT CASH YOUR PAYCHECK RIGHT AWAY

With the advancement in technology, most employees have the option to have their earnings paid directly into their bank accounts, rather than collecting cheques or cash. But no matter the form you collect your money; you must make provision for part of that money to be saved. Do not spend it immediately. You can automate payments such that a percentage of your monthly income goes directly into your savings account.

This helps to avoid the temptation of dipping into that fund because, “if you don’t see it, you won’t spend it”. Some companies provide retirement savings plans for their employees, a system whereby a portion of their salaries are deducted and paid directly into their retirement account. One such plan is the 401k, of which the Nigerian alternative is the Nigerian Pension Scheme, governed by the National Pension Committee (PENCOM).

DO NOT PUT ALL YOUR MONEY IN ILLIQUID INVESTMENTS

While investments are fun, and a good way to build wealth, it is important to diversify and have variety. Remember the saying, “do not put all your eggs in one basket?”. The difference between liquid and illiquid investments is simply this; the ability to exchange something for cash. So the rate of liquidity is determined by how easily an investment can be converted to cash. Do not tie up your money by investing in illiquid investments. Your investment portfolio should be diversified.

DO NOT SHOP EMOTIONALLY

The fact that we are biological beings does not mean we should not make logical decisions. Do not fall prey to ‘retail therapy’. Retail therapy is a term that is used to describe the action of shopping to improve one’s mood. It is also referred to as “comfort buys”, often acquainted with individuals who buy during periods of depression and stress. You are allowed to get emotional and you are also allowed to deal with that emotion, but talking to a sales representative or clerk just to make you feel better is not healthy.

Their job is to make sales, not your welfare. This is not intended to paint anyone in any sort of way but rather, to educate you. Instead of making that trip to the store or browsing that online catalogue, it would be better for you to call up a trusted friend or family member and talk with them. You’ll thank me for it.

DO NOT SIGN A CONTRACT YOU DO NOT FULLY UNDERSTAND

A contract is an agreement between two people that is legally binding. Four essential elements that make a document legally binding are; an offer, an acceptance, an intention to form a partnership, and a consideration that usually involves money. It can be oral or written. When it is oral unless recorded, there is no solid proof that an agreement was made, but, once it is written there is enough proof.

So before you go ahead and sign that piece of document, you must be fully aware of the terms and conditions of your agreement. Yes, a contract may, however, be considered invalid for specific reasons, but the bottom line is that you should avoid any situation that would put you in any money problem. It is more rewarding to get professional advice than implicate yourself unknowingly.

With all that’s been said, the crux of the matter is that you must be intentional with your money. Only then, can you plan, only then can you learn from your mistake, only then can you track your money movements, be deliberate, make decisions and take actions with a purpose. Develop a relationship with it (a healthy one of course), get to know your money, go on money dates and your financial health will bless you for it.

 

How to improve your investing habit

Valuable tips to help you improve your investing habit and make more money.

By NM Personal Finance

The best route to financial freedom and wealth is by saving and investing your funds. With the rising inflation rate in the country, money saved in the bank is useless and would depreciate with time. The best thing to do as a smart person is to invest your money and sleep while your money works for you. Investment entails more than just knowing about the stock market and investing, it involves having a healthy investing habit. It takes a lot of study and growth to imbibe these habits. Keep reading for tips on how to improve your investing habit and make more money.

Keep at it 

A good investor doesn’t start today and stop tomorrow. You have to be consistent with your investment plan and learn not to eat all your returns. Reinvest your interest and keep investing till your last breath, that is how you make more money. When Albert Einstein was asked what man’s greatest invention was, he said ‘compound interest’. According to him, “compound interest is the eighth wonder of the world, he who understands it, earns it; he who doesn’t pay it.” Imbibe the art of reinvesting today and keep at it.

Have a plan

‘A goal without a plan is a wish.’ Having defined your financial goals, you should come up with a plan on how to achieve your goals. Gone are the days when you just invest blindly. To improve your investing habits, learn to plan ahead. Decide what to invest in, look out for the risks involved in your investment, calculate your interest rates and see if it would benefit you, and track your investment.

Spend more time on research 

“It has long been the prevalent view that the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries”
An excerpt from the book, “The Intelligent Investor; The Definitive Book on Value Investing” by Benjamin Graham, updated by Jason Zweig.
The importance of research cannot be overemphasized. As a smart investor, you should do thorough research on the industries that have great potential and would give you better results. You should also do in-depth research on the risks involved in investing in specific industries. Arm yourself with enough data before investing.

Learn from your mistakes 

There is no successful investor that has not made a financial mistake or lost money due to some sloppiness. However, what makes you a better investor is the ability to learn from your mistakes and move on. This rule applies to all facet of life so it shouldn’t be new to you. If you make an error in your numbers or make some huge mistakes, pick yourself up and try again.

Wait on it 

You can not be an investor and not know how to be patient, disciplined and eager to learn. One of the habits of successful investors is patience. You have to learn how to let go of your funds and let it come back to you when it is ready. Also, the market won’t always be proposing huge returns or favourable investment plans; your patience will go a long way in helping you survive situations like this.

Be a copycat but also think for yourself 

Do research on successful investors, find the ones that have the philosophy that aligns with you and follow their steps. You cannot know it all. You should also learn from their mistakes along the line; that is the key to becoming better than them. You must also be able to harness your emotions and think for yourself as an investor. Don’t underestimate the power of your intuition.

In addition to the tips listed above, below is the Buffet approach to investment, extracted from “The Warren Buffet Way: Investment Strategies of the World’s Greatest Investors” by Robert G. Hagstrom.

1. Never follow the day to day fluctuations of the stock market.
2. Don’t try and analyze or worry about the general economy.
3. Buy a business, not its stock.
4. Manage a portfolio of businesses: Intelligent investing means having the priorities of a business owner (focused on long-term value) rather than a stock trader (focused on short-term gains and losses).

We wish you well on your investing journey.

 

 

Why your parents are wrong about money

Financial advice given by your parents may today no longer be workable since the world and activities have since evolved.

By NM Personal Finance

The desires, perceptions, and mindsets of people often change as the world evolves. In finance, this also plays out; certain financial concepts that had been successful in the past do not have a place in the financial scope of today. As a millennial, you are faced with technological innovation that has affected every area of life, including finance. Due to this, a few financial resources have opened up, while the economic environment has also shifted.

This means that, in this present financial climate, ideas that worked some time ago may have become outdated and ineffective. Many individuals develop certain values and mindsets that impact their financial lives when it comes to money. Because of the financial experience they have, the exposure or guidance they get about money from their parents, these values are created.

Many parents strive to incorporate skills and abilities into various areas of their children’s lives. Most of them, particularly advise their children in the area of finance, on how to make money and live comfortably, while others rarely address money problems with their children.  The advice or guidance provided by parents on money is focused on what worked for them, which may be incorrect or misleading based on the evolution since their time. Your economic growth cannot be assured by the notions your parents hold about finance. It is therefore important to recognize and replace these convictions with well-informed and timely decisions.

Some of the misguided ideas parents have about money include:

It is not important to discuss money

Many parents rarely have conversations with their children about money or household needs and how they are met. They believe that it is not necessary to relate their income, expenses, and financial goals to their children. This leaves the children with little or no knowledge of how to prepare, handle, and use their money.

Having a degree signifies having a career

Quite a number of parents pressure their children to go to school on the grounds that this alone ensures their prosperity and financial success. Although it is valuable and laudable to obtain a college degree, it does not inherently guarantee financial stability for everyone. A college degree can offer a few financial advantages, but it should be seen as an opportunity to obtain profitable knowledge and experience, not as a key to a job. The chances of securing a comfortable and attractive career are getting slimmer with the growing number of college graduates. Accumulating sound knowledge of economic and financial management is therefore important.

Stick to a job and save up

The idea of making money for most parents is to secure a job that makes ends meet. They typically do not welcome or mention the concept of harnessing a diversified income strategy, as this is a sign of inconsistency for them. This attitude restricts the children from seeking jobs only to gain enough for survival without investigating the financial resources that are made available to achieve their financial goals.

Investment is risky, avoid it.

Most parents, for fear of losing money, will caution their children against investing in financial schemes or institutions. Here is the deal, investment is risky. An assessment of the feasibility of the investment program and the potential of a return is therefore required to be carried out by people before investing.

To gain financial stability you have to learn how to financially analyze your position and handle your money appropriately. This cannot be achieved by adhering to your parent’s loving but misleading financial tips or ideas. It can take a while to unlearn these values, but it is important to make your own decisions about your finances, as this will help you to remain responsible and accountable for your money.

 

Exchange rate falls across Forex markets despite improved dollar supply

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday.

September 24, 2020

By Chike Olisah

Forex turnover improved by 135% as Nigeria’s exchange rate at the NAFEX window depreciated after yesterday’s trading day gain to close at N386/$1 during intraday trading on Wednesday, September 23.

Also, the naira depreciated closing at N467/$1 at the parallel market on Wednesday, September 23, 2020, despite another round of forex allocation to BDC operators by CBN.

Parallel Market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N467/$1 on Wednesday, according to information from Abokifx, a prominent FX tracking website. This represents a N2 drop when compared to the N465/$1 that it exchanged on Tuesday, September 22.

Currency Developments

• The local currency has strengthened by about 7.8% within the last one week at the black market, as the Central Bank of Nigeria introduced some measures targeted at exporters and importers in order to try to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
• The CBN has sold over $200 million to BDCs since the resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
• However, the exchange rate against the dollar has failed to sustain the initial gains made after the CBN announced plans to provide liquidity.
• BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders as it was inadequate to meet their expenses.
• We also noted that forex traders monitored during the previous week appear to hoard forex as they anticipated further depreciation in the market.
• There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N386/$1.

• This represents a 20 kobo drop when compared to the N385.80/$1 that it exchanged for on Tuesday, September 22.
• The opening indicative rate was N386.44 to a dollar on Wednesday. This represents a 26 kobo gain when compared to the N386.70 to a dollar that was recorded on Tuesday.
• The N390.84 to a dollar is the highest rate during intraday trading before closing at the rate of N386/$1. It also sold for as low as N383/$1 during intraday trading.

Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window increased by 135.3% on Wednesday, September 23, 2020.

• According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $29.42 million on Tuesday, September 22, 2020, to $69.22 million on Wednesday, September 23, 2020.
• The CBN had in the past few weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
• The improvement in forex supply after yesterday’s drop reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
• The average daily forex sale for last week was about $34.5 million which represents a drop from the $58.52 million that was recorded the previous week.
• Total forex trading at the NAFEX window in the month of August was about $857 million compared to $937 million in July.
• The CBN in the latest report on Monetary, credit, foreign trade and exchange policy guidelines for fiscal year 2020/2021, lamented that forex market pressure which is as a result of speculative activities in the BDC and I & E segments of the foreign exchange market is expected to exert more pressure on the naira exchange rate.