Personal finance is not only managing your day-to-day financial needs but planning adequately for your financial future. The earlier you get a grip on your finances, the better your long-term financial prospects will be for things like investing and planning for retirement.
According to the American best-selling author of Rich Dad Poor Dad, Robert Kiyosaki, “financial freedom is available to those who learn about it and work for it.” So getting your financial life on track is an essential goal to pursue in 2023.
At the first edition of BDTalks in 2023, we focused on personal finance; “savings and investment opportunities for 2023” — where we explored strategies, frameworks, and actionable steps to build and manage personal finance and explore possible financial opportunities.
The workshop was facilitated by Oluwatosin Olaseinde, the founder of Money Africa and Ladda.
She later worked at an audit firm to qualify as a chartered accountant, in Johannesburg, South Africa. After that, she worked as a senior financial analyst with CNBC Africa in Lagos and then with Bloomberg TV Africa.
Thereafter, she worked with British American Tobacco as a commercial finance manager, managing $20 million. Over a space of 10 years, Oluwatosin worked in Finance, Corporate Finance and Audit space. Afterwards, she built Money Africa and Ladda.
From the conversation on the Twitter spaces, here are 10 financial lessons Oluwatosin shared guide your financial decisions for 2023.
1. Financial literacy is how a person understands money. How you can build wealth and financial independence in the long run. It's a personal journey for each person and to get to the destination you must with an end goal in mind. What does financial independence look like for you, and how can you get there?
2. Take advantage of insurance policies like car insurance, house insurance and health insurance to protect yourself from unexpected occurrences like theft, fire, and accidents. That way you won't lose everything because, with insurance, you'll get remuneration.
3. Invest aggressively in yourself. Find out ways to position yourself better. Position yourself better. Be intentional about improving your skills, knowledge, productivity and output.
4. Evaluate your own risk profile. The way someone in their 50s will invest is different from how a person in their early 20s will invest. There are three primary buckets of investing: low risk, medium risk and high risk. The job of low-risk is to ensure you protect your resources.
Under low-risk assets, we have high-yield savings, mutual funds, dollars denominated funds amongst others. Medium-risk assets are assets that could help you grow wealth in the long run. They include global stocks, real estate, ETFs. Assets like cryptocurrencies and Forex fall under high-risk assets because they are volatile.
5. Engage the services of a professional investor if you know you are not a good investor. A good rule of thumb is this; if you are willing to pay more than ₦30 million for a property, you should get a financial expert to crunch the numbers and ensure that you are making the right decision.
6. Determine your magic financial number. Your magic number basically means how much is enough for your living expense for an entire month. Your magic number is strictly focused on your needs, not wants. If you are not a regular 9-5ver whose income is stable, this number will help you plan for your lean months. When you have a large influx of cash, calculate your magic number for three months and keep it up somewhere.
7. Determine your investment percentage and regularly remove it from all of your cash inflows.
8. Always follow the 50-30-20 rule of budgeting for all your income. 50% of your income should be all essential expenses (rent, food, water, electricity). 30% goes to luxury such as night outs, support for relatives, and travelling. 20% is assigned towards investments.
9. If you are able to save more, especially as a young person, don't delay. Time is essential for investments.
10. Your money is your personal journey, don't stop learning about it. A great financial read is "The Psychology of Money" by Morgan Housel. Join financial communities of like minds and grow together.