MWS 001: Money Wisdom Series with Jerry Afolabi

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Personal Financial Life

For many Ghanaians, financial concerns are a regular source of anxiety, which is understandable given the uncertainties of today’s economy. Majority of Ghanaians go through financial stress each passing day and this affects their decision making and even their health. It’s important to remember that worry doesn’t solve the problem, but rather compound the problem. Answering the question of how to overcome financial problems is what is critical. This is the more reason why Jerry J.Afolabi have decided to use the MONEY WISDOM SERIES to create the awareness, educate and provide the tools & resources you need to make sound financial decisions for a comfortable life.

Understanding money and how to manage it is critical to the kind of comfort you would have in your personal financial life and beyond.

The three basic money management principles;

Savings

The first principle is on savings; financial principle concerns saving money, setting something aside for a rainy day is crucial for financial freedom. There is treasure to be desired and oil in the dwelling of the wise; but a man spend it up.

Debt/Borrowing

The second principle is to keep out of unnecessary debt and thus avoid the debt trap. Borrowing for a house or car is one thing but taking on financial obligations one can’t keep, example is buying beyond the ability to pay is another. The minute a person goes into debt, he loses a portion of his freedom. The rich rule over the poor, and the borrower is servant to the lender.”

Budget/Records Keeping

The third principle is that of keeping records and making a budget. Buy the truth, and sell it not; also wisdom, and instruction, and understanding. Through wisdom a house is built; and by understanding it is established: and by knowledge shall the chambers be filled with all precious and pleasant riches.

If someone were to tell me that he’s going to run his business without keeping any records, I would say this is downright. And it is even worse for one who really wants to be a good steward of the master’s money.

Things to Consider Before You Invest

If you want to pay for retirement, college, or a home, you can invest your money to fund your goals. Before you invest, make sure you can answer all of these questions:

• What type of earnings can you expect on your investment? Will you get income in the form of interest, dividends, equity
• How quickly can you get your money, if you need to sell or cash in your investment? You can sell stocks, bonds, and shares in mutual funds at any time. However, there is no guarantee you’ll get back all the money you invested.
• What can you expect to earn on your money? Bonds generally promise a fixed return. Earnings on most other securities go up and down with market changes. It’s important to know that if an investment has done well in the past, it is not guaranteed to do well in the future.
• How much risk is involved? With any investment, there is always the risk that you will not get your money back or the earnings promised. There is usually a trade-off between risk and reward. The higher the potential return, the greater the risk. While the Ghana government backs T-Bills, it does not protect against loss on any other investments.
• Are your investments diversified? Putting your money in a variety of investment options, diversifying, can reduce your risk. Some investments perform better than others in certain situations. For example, spreading your risk in cash, shares, bonds and properties. When interest rates go up, bond prices tend to go down. One industry may struggle while another prospers.

SUCCESS; “IT DOES NOT MATTER HOW MANY TIMES YOU FAILED; YOU ONLY HAVE TO BE RIGHT ONCE”

There are financial principles that each person who wish to have a sound financial life must know and follow, especially individuals with little or no background in finance, accounting and management. In plain terms, there are firsthand information on the full spectrum of financial woes that can hopelessly trap people in a society victimized by the debt syndrome.

Some of us aren’t successful at managing money, or we just don’t have the time but whether you’re a financial person or a novice, there are some basic financial principles you need to know to be successful with money. Because you can’t achieve your goals or progress financially if you remain uneducated about your finances. Ignorance is not bliss in this case. You are the reason why this MONEY WISDOM SERIES has being initiated by Jerry J.Afolabi to create the financial awareness in our country for a sound financial life now and the future.

WHAT YOU NEED TO KNOW & UNDERSTAND WHEN IT COMES TO MANAGING MONEY

Gross Income; Your gross income is what you get paid from your job or your business before taxes, insurance, investments or any other expenses are taken out. It’s your base salary/hourly wage.Net income is what you receive after all deductions when you get your salary/income. It’s the income you live on, and have available for your household and living expenses.

Expenses; General expenses can be very broad and can include both essential and excessive spending. By dividing out the essential and non-essential expenses, you can see what you’re really spending your money on. In the event of a job loss or other life tragedy, you want to be prepared to live on the least amount possible. If you lump the figures together, you won’t know what you can truly live on in case of emergencies.

Debt Balances; you don’t need to keep up with your balances every day, but you should at least do a quick weekly checkup. It’s vital you understand the type of debt you have and how to properly manage it.You want to make sure your payments are being posted properly and that creditors aren’t charging you extra fees. Plus, seeing the balances go down every month is very motivating and will keep you on track toward financial freedom.

Assets; The value of your vehicles, houses, property,cash,capital & money investments and any other items of value are considered assets. Any cash in the bank, investments and other financial accounts are assets too. In the event that everything needs to be liquidated, it’s important to know the total value of all your assets.

Net Worth; this is one of the most commonly overlooked financial ingredient, but it’s very important. Net worth is determined by subtracting your loans (the debts you owe) from your assets (the valuables you own).If you have more debts than assets, you will have a negative net worth, and if you own more property than your debts, your net income will be positive. The last one is something everyone works toward!

Liability; Liability is a fancy word for debt, or something that you owe. Once you know your total liabilities, you can subtract them from your total assets, or the value of the things you own such as your home to determine your net worth.

Liabilities are a part of your overall financial health, but they might not be harmful as long as you keep them in check. Here’s what you should know.

A liability is money you owe to another person or institution. A liability might be short term, such as a loan balance, or long term, such as a mortgage. All of your liabilities should factor into your net worth calculation. Examples include; car loan, personal loan, mortgage and payday loan. Liabilities can become problematic if they significantly exceed your assets or interfere with your ability to pursue financial goals. Being successful with money management is a learnable skill and everyone can learn it if you so wish. It does not really matter what you learnt in school or your field of work, what is important is your commitment and resolve to sort for knowledge.

At the end of the day, knowing your financial standing can give you peace of mind and help you get a grasp on your money. Even if you only look at your finances every month or every quarter, you want to stay in touch with your money as often as possible. You don’t need to be an expert to handle your money perfectly. Just familiarize yourself with these basic financial figures, and you will be in much better financial shape going forward!

©Jerry .J. AFOLABI is a Financial & Economic expert who believes that ordinary people can do extraordinary things when given opportunity. Email; jelilius@gmail.com, Tel; +233541238987. #MONEYTALKGH SHOW#