How to be Smart about Income – What Every Entrepreneur Must Know.

Why Entrepreneurs must place premium on Human Capital for Sustainable Growth
March 25, 2018

Almost everyone who earns is bothered with the primeval and inherent dilemma of how best to save, how much to save, where and who should savings be entrusted with. The challenge of being accountable to oneself and responsible with earnings can indeed leave individuals and business owners asking the question: is it about my income or am I being careless with expenses? Most individuals cut down on usage of basic amenities and supplies just to save something tangible for the rainy day but are confronted with yet another bitter truth; that the shortest period in time usually lies between the moment you decide to save some money for a rainy day and the unexpected arrival of a rainy day. With all this happening, one might feel it is neither here nor there and probably conclude that there’s no way out of this. Certainly, there are smarter and better ways to save. In this piece we concisely explore a few.

The cardinal rule in budgeting and savings is this: pay yourself first. Next, you may want to put restriction on access to your savings. This leave us with the question – is putting all the money earmarked as saving in a single account smart? I will advise otherwise. Smart saving entails letting your money yield high return while you save. These savings pattern exist, they are usually more restrictive than regular savings and pay a lot more interest. Of course, by giving your money the opportunity to grow over time, you also take on the risks that there will be some dips and losses along the way. This is certain. Nevertheless, experienced individual know that saving must be split 2 or more ways – risk/contingency and investment account. With investment note, equity, stocks, bonds, etc., you are having the money work for you, whereas with regular savings account, you are letting someone else use your money to work for them. Finance, Equity, Insurance and Mortgage house now offer better ways to save and earn big time, even on autopilot mode and a few of these options are accessible online. The fact remains most individuals are too tired and busy to explore these options.

 

During my time working with an insurance company. I made a cold call to the manager of a company trying to have him sign up for a product that provide cover for children education. He invited me to his office for a chat. After much discussion, he said:

 

Manager: I know much about insurance and the benefits, but what happens when you leave the company or how do I know you are not just here to scam me?

 

I paused for a moment and tested him with the worst-case scenario just to let him understand he has the answers to his problems or fears.

 

Nicholas: Very well then, let us believe I walked in here and after few talks unexpectedly points a gun at you and cart away N2,000,000.00. What will be your reaction?

 

Manager: I will report to the police and with detailed description and investigation we will get you, no matter how long it takes.

 

Nicholas: I will expect that naturally. You probably will start by searching my profile and my relationship with the company. Sir, I asked that question to let you know you have both time and resources to secure the future but just too tired to make the move and you just need be struck by something really bad to help you realize that and make that move eventually.

It is very typical of people, especially in Nigeria to take reactionary step and this hampers the progress of individuals.

In Nigeria, entrepreneurs are faced with the herculean challenge of raising capital to kickstart business idea. Savings seems to be the first and probably the only option as Finance Houses will scarcely put money on ideas with nothing tangible to back it up. Consequently, it becomes imperative for would-be entrepreneurs to master the art of saving and doing so the smart way. They would need this forever. Even as successful entrepreneurs they must understand the reason not to spend all earnings but invest into other high yield venture. Fact is, the high net worth and talked about entrepreneurs are not those who kept earning in regular saving but invested. Hence, their net worth is quoted in shares, equity, real estate and not necessarily cash at bank or in hand.

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki.

Let’s not forget, the reason for this write up is to help the average and low-income earner understand and learn how to manage income. Truth is, you never know how careless you were with fund until you are empty or in dire need of it. Imagine the case of an individual who needed our Company (FODDS Capital) to assist his business procure an asset. As required by the company, I asked that he make the 20% contribution for this. He was downcast and said, “Sir, that’s a big problem right now. If I were to be working this would not be an issue at all. This amount of money is what I burn in one sit-out with friends on drinks alone.” I am sure he learnt his lesson, albeit the hard way.

There are ways to save. You should be smart about income as you would with expense. A little hole if left open can sink a ship. You need to save? Here are some useful tip how:

  1. Spilt savings two ways – risk/contingency and investment account.
  2. Make a budget
  3. Always record expense
  4. Choose your priorities right and cut impulsive spending
  5. Look out for vendors with best offers and discount on products you buy.
  6. Never try to impress and live above your means.
  7. Have something in mind to save for.

 

Always remember – the quickest way to double your money is to fold it in half and put it in your back pocket.

 

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