When you hear the word “retirement”, what’s the first mental image that comes to your mind? Is it a picture of you sitting in front of your apartment with your nice round pouch that was once a six-pack, your hairline battling with the economy for the prize of ‘who has the faster recession’…or is it a picture of you sunbathing at a beach in Spain, enjoying hot granny summer?
The truth is, both images would be accurate. There are a number of things that accompany old age like a starter pack: the back pain, asking your children to help you fetch the remote control even when it’s right in front of you, dozing off midway through the evening news, etc. However, like an alternative reality in the Marvel universe, our futures all unfold differently, and how you would be spending all that free time when you are older is entirely up to you.
I, personally, subscribe to the soft life. Like a ‘philosopher’ once said, “anything wey I get now, na enjoyment, no worry about my future, I go worry about my future next year.”
Hilarious, but time has a way of running faster than a hawker in Lagos traffic, and before you know it, you have witnessed twelve World Cups, all your favourite songs now get played on Throwback Thursdays, and you find yourself at the mercy of the Pensions Board. Trust me, you don’t want to be 65 and relying on allowances from your kids. Once they get a new boo, it’s over for you dear.
So how do you plan for retirement, you might ask, you have to invest early and think long-term. As a young working-class Nigerian, you can prioritise your future by doing the following:
Keep an eye on your expenses
Not every time ‘Flenjo’, Sure enough, you deserve to treat yourself to the finer things, but it wouldn’t be a bad idea to celebrate your 70th birthday on a yacht now, would it? Wouldn’t it be nice to be able to host outdoor cookouts when you’re much older, while your grandchildren run around your compound? The money you invest today guarantees that you even have a compound for them to play in the future.
Build an emergency fund
You never know what would happen when you wake up to start the day’s grind: your generator’s rope could suddenly cut, your phone could fall into the water closet, or your favourite aunt could swallow a needle by accident. You need a savings cushion to be able to cater to eventualities, without having to take out of your long-term investments. A good rule of thumb is to have six months’ worth of your monthly tucked neatly in a savings account.
Let your money compound
Take advantage of compound interest. Compound interest is interest you earn on interest. Let me explain – when you invest, you earn interest on that investment. Say you put N10,000 into an investment account that pays 10% interest per annum, you will earn N1,000 at the end of the year. By the start of the second year, your investing amount is now N11,000 and another 10% interest per annum will yield N1,100.
And just like that, your money begins to grow. Compound interest makes a significant difference over a long amount of time so it will pay you to start investing early and build an investing culture now.
Stay ahead of inflation
The Naira’s purchasing power is steadily declining. That’s why your university tuition was ten times what your parents had paid when they were younger. A 50kg bag of rice, which went for less than N8,000 in 2014, now goes for no less than N25,000.
Saving is nice, but simply dumping money into your account is just like running backwards. With all those hidden charges, you may never leave the trenches. To beat inflation, you need to invest at a rate that exceeds the rate of inflation. You need to invest in instruments such as mutual funds and stocks; foreign-denominated investments also hedge you from the volatile nature of the Naira.
Don’t put all your eggs in one basket
Whether it comes to daily hustles, job search or even dating, it’s always better to have other options you can fall back on when life displays what it does best: unpredictability. The same goes for your finances: you don’t want to tie your entire financial future to a single investment. When it comes to investing, it’s a lot better to adopt an investment strategy that tries to spread your investments across different assets and asset classes.
Products like Mutual Funds and Exchange Traded Funds offer inherent diversification benefits and save you the trouble of researching individual investments. You can also diversify across currencies by investing in dollar-denominated assets to protect against currency devaluation.
Whatever strategy you choose, staying consistent with your investments and retirement plans can help you develop excellent financial habits and work toward accumulating wealth for a prosperous retirement.
United Capital Asset Management provides top-of-the-line, tailor-made investment solutions for specific needs through our expertise in Portfolio/Fund Management, Mutual Funds, and Investment Advisory services, ultimately helping all our clients to achieve their financial goals.
With just N10,000 you can begin investing in a few of our mutual funds via our mobile investment platform, InvestNow. To get started, visit https://investnow.ng/ or download the InvestNow app on Google Play Store or iOS App Store.