Sunday, 27 January 2013

Savings 201: What should I do with my Savings?

If you have read my Savings 101 article, you should remember I told you that a part of all you earn is yours to keep. It could be 10%, 30% or even 50%, you determine how much you can comfortably save.

 If you have not read it I will implore you to do so for you to fully grasp what I am saying. January 2013 will be dedicated to Savings.

 I have a short story to tell you. I have a friend that once saved from January to December many years ago. She did this cooperative society savings. The norm was to save for a year and receive your savings with little interest generated from loans given to people through that year.

 My friend saved N2, 000 (two thousand naira) monthly and ended up collecting around N26, 000 (Twenty six thousand naira) at the end of the year. That was good, she saved. The part I want to dwell on is what she used the money to do.

 After collecting the N26, 000, my friend went shopping! She bought clothes, shoes and accessories and down the drain went the savings for a whole year. This story takes us back to this write up’s title “What should I do with my savings?”

 The savings I asked you toset aside is not money for emergencies, no. It is not money meant for your children’s school fees, not meant for your house rent. It is not meant for medical bills and it is not meant for shopping. It is the money meant for you, money for your retirement, money towards your wealth accumulation.

 We will use a monthly income of N300, 000 as example, you can always slot in your own income value to do the analysis. If let’s say Mr. A earns N300, 000 monthly. Like I advised, he has to pay himself a part of what he earns. Let us assume Mr. A pays himself 10% that makes his savings N30, 000. If Mr. A is a Christian, he pays another 10% as tithe, which is N30, 000. Mr. A as a family man has a wife and children, he feeds them, clothes them, he pays house rent, school fees, medical bills, phone bills and any other bill. Deducting N30, 000 for savings and N30, 000 for tithe, Mr. A is left with N240, 000 to pay every other bill he has to pay including taking care of himself. This is where living below your income comes in.

 I know several times we are tempted to use part of our savings to sort out some needs, if you are dreaming of a future where you don’t have to wait till month end or a future where you don’t have to live on loans, you should never take from your savings. You will see reasons you should not do so.

 The savings I asked you to set aside is what I will call SEED MONEY. Seed money for what? It is for investment, for investing into a business venture that will provide you with the kind of future you envisage for yourself and for your family. This seed money will help you towards wealth accumulation.

Please note the size of your paycheck has little to do with your ability to accumulate wealth. What counts is your ability to regularly save your money and wisely invest what you have saved. It does not matter if you earn N80, 000 or N600, 000 monthly.

 The money you save is meant to be invested in any business venture where it will grow. It could be stocks, real estate or viable businesses. It will help you towards generating passive income. Active income is the one you collect monthly after working for a number of hours as agreed with your employer while passive income is the one you make even while sleeping. You don’t have to be actively present to make such money

 For the business people, you should also learn to save a percentage of your profit from each sale you make. You also need passive income. You need to move from self – employed to business owner.

 So we have established that you need to put aside percentage of what ever money you earn or you are given for investment purpose. You can’t spend all your money and expect to be rich without setting aside some for breeding purpose.

 Saving alone is not enough; you have to learn to invest it. Savings is what you have when you accumulate your cash while investing is what happens when you make the money work for you and thus earn more money. It is imperative you learn how to make your money work for you.

 You have a price to pay. You have to give up some of today’s pleasures and luxuries in exchange for tomorrow’s financial security.

 Look out for more on Savings Series.

Friday, 25 January 2013

Savings 101: A part of all I earn is mine to keep.

I will be dwelling on Savings this January. We all know about savings starting from piggy banks, you remember those days? That was when we were young and we had to save the kobos and the nairas. Those days were the foundation of our saving lessons.

Now we have savings accounts and a lot of other accounts specially designed by banks to help us save.

Do we really practice savings?What we set aside in our savings account, can we really call it savings?

OK, let's start

How much do you earn in a month? Two hundred thousand naira? Four hundred thousand naira? Fifty thousand naira? We need the amount so that you will know the amount to set aside each month.

Have you heard about the "paying yousef first" concept? Yes, paying yourself first. You worked for the money, you earned the salary but most times you end up paying yourself last or not paying yourself at all. You pay the bills, take care of the home, take care of the children and neglect yourself.

Last year 2012, how much did you save? how much were you able to set aside?

If you were to be sacked or retrenched, how long can you last with the amount you have in your bank account?

Are you living from salary to salary? How much have you spent out of the January salary you have not been paid? How many things did you buy on credit?

Now back to paying yourself first, it is the savings I am talking about.

No matter how little the amount you set aside, the amount you save, it should not be leser than 10% of your salary. For instance, if your salary is one hundred and fifty thousand naira, your monthly savings should be at least fifteen thousand naira.

No matter how tight the month is, get used to paying yourself at least 10% of your monthly salary.

That will be a start. Let us do the mathematics, if you do that every month, by end of this year, by December 2013, you should have One hundred and eighty thousand naira set aside as your savings.

You can say it is small but it is a begining, it is better than having nothing.

Who says it has to be 10%? It can be 30%, it depends on you.

New year is always full of resolutions, forget about this yearly ritual resolution thing you do, let's take the practical steps towards success together. Let us cultivate the habit of saving and paying ourselves first.

Also learn to do it with the cash gifts you get. If you are given ten thousand naira, set aside a thousand naira for yourself, let it go in to your savings.

It might be difficult at first but with time you will get used to it.

Follow me in this January series on savings and I bet you that your 2013 will be off to a good start.

If you need to ask me questions on savings, you can send me mail at or