Matters Arising: Save Money, Grow Wealth

One of the matters arising from my previous post on 'The Only Financial Rule You Have To Live By' is the issue of Saving.

What then is Saving?  Saving is:
a)  Income not spent or
b)  Deferred consumption


As a follow up to my previous blogs on 'The Only Financial Rule You Have To Live By (Part 1 & 2)', I would want to say that the first definition of saving is adequately dealt with there. For the purpose of emphasis however I would restate that Income not spent is money deducted from ones pay check or salary for the purpose of increasing your assets or net worth.  It could also be money kept aside for contingencies which were not used within the specified period which is laid aside for investment purposes. Read more about this on my previous write up.

Deferred consumption on the other hand is delaying the purchase of something (a car, a shirt, going out for 'point and kill', making your hair, sewing a new cloth etc) that you can afford today, save the income from the deferred consumption and invest the income. The reason for this is to enable have enough to buy more of the item deferred in the future.

I will give you an example to buttress this point. A man from eastern Nigeria in 1974 had N4,000 and wanted to buy a brand new Peugeot 504 (this was the definition of class then).  He already had a Volkswagen Beetle but needed an upgrade, a friend he entrusted with the information advised him to continue using the Volkswagen Beetle and invest the money he would have used for the purchase. This was a difficult decision for him but because he respected the source of the advice, he invested the money.

The Only Financial Rule You Have To Live By (Part Two)

By way of a reminder, I mentioned in part one of this series that the first simple financial rule to live by is to "Pay yourself first". This principle, as simple as it seems is the bridge between where you are today and where you want to be in the future financially. It is the only secret to generating seeds for your wealth garden (investment).

Put in another way, paying yourself first simply means, deduct the money you will save first from your salary (or income) before you start paying your bills. And make sure that the money deducted is invested appropriately. The second rule is:

2. Practice Mindful Spending: The mindset that I have the freedom to use my salary the way I want to is not guaranteed. I think however that many people have more room to joggle their decision to spend than they realize. This is what I mean when I say that I think N10,000 is a lot of money. When I decide to buy something, it's a decision, not an impulse buy. I want to spend my money on things that really have value for me, not just things that are convenient or appealing at the moment or what other want me to buy.

So while I can buy something nice once in a while - without guilt - I have a hard time going out for lunch or buying (you can guess what). Less expensive purchases are an easy mental hurdle to get over because they're so small it seems that they could hardly amount to anything. The truth is, these seemingly insignificant purchases can easily amount to, or exceed, that N20,000 you may be aiming to save for a project.

If I spend N100 every morning on a Bread/Beans (Tea, Pap etc), and N150 each work day for lunch, this adds up to N1,250 per week (of five days) - for a grand total of N65,000 per year (of 52 weeks excluding my feeding for all the weekends - Saturdays and Sundays  - in the year).

The Only Financial Rule You Have To Live By (Part One)

There's a lot of great advice out there to saving money. But if it overwhelms you, start with just these two simple rules and you'll be on your way to financial independence. When it comes to the way we think about money, I've noticed there are two kinds of people: those who think that one hundred thousand naira (N100, 000) is a lot of money, and those who think that ten thousand naira (N10,000) is a lot of money. I fall into the second category.

But I'm not especially frugal. I have a fairly nice car, I take a vacation every year, and it isn't too hard to convince me to drop a few naira on a great pair of shoes now and then. I've don't live on loans. But I've also managed my retirement savings, bought a house, and live without debt — all on an average salary for where I live. What I am sharing with you isn't extraordinary, but it does seem somewhat rare. That said, I think most people can accomplish this fairly easily. All you have to do is live and die by two simple rules (pay yourself first and practice mindful spending):

1. Pay Yourself First: "Pay yourself first" is a very common piece of financial advice. It's simple enough to follow, but that doesn't make it easy. If you can save N1,000 per month (that is invest N12, 000 in a year) at a 6 percent interest rate, you'll have approximately ten million naira (N10,000,000) in 30 years. 

The Great Foundations: What Have We Done With Them (Part 3)

6. The state Of Education In The South East: Before the Civil war, the ownership of educational institutions was not concentrated in the hands of Government. Government operated as a very strong and well organized regulator of practices in the field of Education. It spelt out the rules and had very well staffed Inspectorate Divisions with offices at the zonal levels. Before schools were approved, certain standards were insisted on. These standards were not limited to the quality of human capacity. Physical structures and expansive land acreage where practical agriculture could be practiced and play grounds for health and physical education existed were mandatory conditions for schools to earn approval. The visit to any existing school for inspection by inspectors of the Ministry of Education was usually regarded as very sacrosanct. The inspectors could recommend the closure of such schools if the standards were found to have been compromised in any way.

To demonstrate Government expectations in terms of standards, government owned a few model schools. In the old Eastern Region, the Government Secondary Schools were: Government College, Umuahia; Queens College, Enugu; Government Secondary School, Owerri; Government Secondary School, Afikpo; and Government Comprehensive Secondary School, Port Harcourt. Most of thre Schools at both the Primary and Secondary tiers were shared between the missions: Catholic Mission, Methodist, Anglican Mission, Presbyterian Mission, Qua Iboe Mission, Lutheran Mission. Other schools were owned by communities. Very few private schools but they were very high standards. These missions had their managers who supervised these schools and ensured that the standards set by the ministries were maintained.

The Great Foundations: What Have We Done With Them (Part 2)

3. POWER: I grew up to know of ECN. It even had a football club. It did not have so many power generating stations but it provided steady power. It had Afam. It also had Oji River Power Station. Then, great Nigerian with foresight emerged and developed the Kanji Dams. I think later too, these were further expanded to include Igbim and Sapele Stations and ECN became NEPA the acronym for darkness. It would appear to me that while new stations were built, old stations were left to rot. The turbines and other facilities at the Shiroro and other dams were hardly serviced or maintained until NEPA metamorphosed into an institution that withholds power. As we grew as a nation, no corresponding growth was recorded in this direction. Our sense of maintenance of structures leaves much to be desired. Today, numerous power stations are being built on the pages of newspapers all over the nation. Only God knows when they will be completed and made functional. Targets of Megawatts are continually being announced and re-announced with nauseating regularity. Everywhere, there is darkness; solid darkness despite the early foundations set up to avert this darkness. Why?