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| Personal Financial Security in turbulent times |
Financial Security
Everyone deserves the best from life and a key component of a good life is financial security. As you get older, your financial safety becomes more important for reasons such as a shorter career horizon, more health concerns, higher tastes and lifestyle expenditure requirements, more dependants and of course more social engagements and other commitments. Financial security has become even more critical given the unstable economic environment with collapsed commodity prices, massive currency devaluation in many emerging markets, weakening Euro and Sterling and global markets losing USD3Tr post Brexit.
Your financial security depends on the extent to which immediate and future financial needs have been provided for by a combination of your long-term savings and future earnings. Future earnings should preferably be Passive Income rather than Active Income. Passive income refers to earnings from investments rather than from work you hope to do in future which represents Active Income. This is because as you grow older, your remaining work life is much shorter and employment options typically narrow. Another consideration will be how stable your investments are to assure you of steady income.
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Investment Assets that can earn passive income include houses rented out, shares of quoted or unquoted companies earning dividends, Treasury Bills, Bonds and Bank Deposits and units of Mutual Funds and other Collective Investments. It does not include your Owner-occupied house (unless you intend to move out), your personal car, no matter how valuable, or your beautiful collection of jewellery. Such property may actually be Liabilities if instead of earning from them, you expend significant funds maintaining them. However, your investment assets may include your Art collection or other such valuables if they are kept as a store of value or as tradable assets.
Financial Independence refers to the extent to which your financial provision and well-being depends on your own self rather than other persons such as your Spouse, your Employer, your Parents (ridiculous at this age but it still happens!). The earlier you achieve financial independence, the better for you and the more secure your finances are, the more peace you will experience as you contemplate old age which is characterised by the reduction/end of active income amidst a need for better and more frequent health care. Stability
Financial Security also measures the stability of your finances in the face of changing macro-economic factors like foreign currency exchange rate hike, equity price crash, rising inflation and volatile interest rates as we are experiencing now. This speaks to how diversified your investment portfolio is. This can only be done through prudent financial planning as early as possible.
A financial plan is an articulated path to move you from one point to another point over a period of time stipulating the resources to be deployed and steps required. Your plan need not be complex or sophisticated but it must disclose a clear objective, the time involved and means of achieving it. It will take dedication and some sacrifice. Periodic Milestones and Rewards for achieving them are advisable components of the plan.
Simple Plan
Your simple plan will disclose your current networth, your target networth, the time-frame, current income, your expenses, your planned savings & investments (at a tolerable risk level), expected return, key milestones and the rewards/incentives for yourself as you achieve them.
Tools
Your tools will include Budgeting, Emergency Savings, Bank Accounts, Reasonably diversified investments, Advisers and Insurance which will all be discussed in subsequent articles.
Summary
To summarize, financial security is especially important as you advance in age and particularly in the current global economic environment. To achieve it you must have a realistic plan which will include an assessment of your current financial status, clear objectives, time horizon, bugdet, savings plan and how to gradually acquire a balanced mix of assets to generate stable passive income over time at a tolerable risk level.
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Toyin Sanni was declared the All African Business Woman of the year 2017 by CNBC Africa, & Nigeria's CEO of the Year 2017 by Pearl Awards. In 2020, she has been named one of Africa's Top 3 CEO Influencers on LinkedIn. A prominent Investment Banker, Public Personality & Speaker, she derives satisfaction from grooming future leaders and proferring capital solutions for financing & investing challenges of African governments, businesses & individuals. Toyin leads a multiple award winning group who provide advisory & capital raising solutions for infrastructure & development across Africa to achieve sustainable economic growth.
Toyin has written three published books - Yes, you too can maximize your life, Yes, you too can Get to the top and Riding The Eagle- A Guide to Investing in Nigeria. With a background in securities law and extensive experience in corporate finance, trusts & asset management, she leverages networks and relationships across markets & her extensive experience working on leading transactions to achieve development goals.
Now Founder and CEO of the Emerging Africa Capital Group, her past roles include GCEO, United Capital Plc, CEO, UBA Trustees & UBA Global Investor Services, CEO, Cornerstone Trustees & AGM, FBN Trustees, a part of the FBN Holdings group. She has built Trust, Asset Management, Leasing, and Pension Funds, a regional custody business and an Investment Banking Group.
Her roles have included President, CIIA, President IAPM, Chair WIFNG, Chairman, Financial Literacy Committee, Chair, Annual CMC Retreat (2012-2014), President, Association of Trustees, Chairman, CMC Committee on Custody of Securities, Member, National Bond Steering Committee amongst others.
She has spoken at conferences such as the Howard University USA & Imperial College, UK African Business Conferences, the Global Custody Forum, Network Managers Conference, World Intellectual Property Organisation African Ministerial Conference, Austria Connect SSA etc.
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