Financial Security At Retirement

Outline

· Introduction

· What Financial Security is not.

· What is Financial Security?

· When do you need to plan for Financial Security?

· How Important is Financial Security?

· Five Laws of Money

· Types of Investors

· Types of Income

· Pathway to Financial Security

· How to Manage your Finances

· Some Businesses to Consider

· How to ensure you have Financial Security

Preamble

George S. Clason in “The Richest Man in Babylon” gave the following words of wisdom among others as cure to a lean purse:

· control your expenditures

· increase your ability to earn

· accumulate your funds and

· then invest them very conservatively

Introduction

Financial Security is an important subject that everyone must relate with in life at a particular point in time or the other. So many people do not have a retirement plan in place to manage their finances when they get old.

There is need to determine how much money you need to support yourself early enough before retirement. It is imperative to take some decisive steps to manage your finances effectively so that you can embark on retirement without fears or tears

What Financial Security is Not.

Financial security isn’t making or having a certain amount of money. There are many people who have made millions of naira who are not financially secure. It is not just about being independently wealthy. A person who makes N5 million a year, but spends N6 million cannot be said to be financially secured.

What is Financial Security?

Financial Security is having the resources to do what you want and live where you want, while not sacrificing your future to do it- for the rest of your life.

Financial security consists of

· Being debt free

· Being in control of your expenses

· Consistently increasing your savings/assets/net worth on a monthly basis

· Not being forced to do a job you don’t like just to pay the bills

When do you Need Financial Security?

Begin early to plan for retirement. If you're getting close to age (45 or 50), and you haven't started saving for retirement, it's important to get started right away.

Make your maximum contributions every year; if you're older than 50, you can even make catch-up contributions to pad your retirement savings.

How Important is Financial Security?

· Takes care of your needs and those of your family,

· Comfortable lifestyle,

· Financial stability,

· Peace of mind,

· Good mental stability

Five Laws of Money

· Money comes to those who save

· Money multiplies for those who invest it

· Money stays with the person who entrusts it to wise people

· Money is lost when invested in things with which you are not familiar

· Money is lost at a fast rate by pursuing get-rich-quick schemes

Types of Investors

There are three types of investors namely Savers, Speculators and Specialists

So, which investing type is correct?

Each of the three investing types clearly has its advantages and disadvantages…

Types of Income

All investors want to make money and use the money they make to generate more.

There are three broad types of income you can generate:

> Earned Income,

> Portfolio Income

> Passive Income

Earned Income

Earned income is any income that is generated by working. It is taxed at a higher rate than any other type of income. Some activities that generate earned income include:

> Paid employment

> Owning a small business

> Consulting

> Any other activity that pays based on time/effort spent

Benefits of Earned Income

No start-up capital is required which explains why most people rely on earned income from the start of their working life. It allows you to save up cash that will help you generate the other two types of income.

Portfolio Income

Portfolio income is any income generated by selling an investment at a higher price than you paid for it. It is also known as “capital gains,” because that’s how the money is taxed by the federal government. Some activities that generate portfolio income include:

> Trading (buying/selling) Paper Assets e.g., Stocks, Treasury Bills, Bonds, etc.

> Buying and Selling Real Estate (specifically the profit from the sale)

> Buying and Selling of any other Assets — e.g. Antiques, cars, or other types of collectibles that have appreciated in value

Passive Income

Passive income is money you get from assets purchased or created. It is the key to long-term wealth. Some activities that generate passive income include:

> Rental Income or Income from Real Estate

> Business Income (assuming it’s not earned based on amount of time/effort spent otherwise that would be earned Income)

> Creating and Selling Intellectual Property — Books, Patents, Internet Content, etc

> Affiliate or Multi-Level Marketing

Benefits of Passive Income

· Recurring income

· Active control over the investment.

· Favourable tax treatment.

· Can be funded using borrowed money

Pathway to Financial Security

Being a Specialist is the best way to optimize for consistently large returns, which will ultimately lead to financial independence in the shortest period of time.

Becoming a Specialist investor takes time and study, but anyone willing to invest the time and effort can become a very successful investor

To become a Specialist investor:

Realize that all three types of income are vital to achieving financial independence.

Earned Income is vital to those who are starting with nothing (or in debt), to help eradicate debt and start building seed capital. Once some seed capital is available, use Portfolio Income and Passive Income to rapidly grow your capital and begin to generate recurring cash flow that can be continually reinvested.

To become a Specialist investor:

Use Passive income investments to generate recurring income to support you when you are ready to retire from your investing activities.

How to Manage Your Finances

· Make a Budget

· Differentiate between “Nice to Have” and “Must Haves”

· Study your spending pattern

· Spend your money wisely

· When you can borrow don’t buy

· Don’t just rent blindly, if you use an item for long enough, it may be best to buy.

· Spend what you have not what you hope to make, this should keep you out of debt

· Make smart investments

· Have a good insurance coverage e.g., Life, health, home ownership etc.

· Build Your Savings

· Cultivate the habit of saving at least 10% of your total earnings

· Start an emergency fund: an emergency fund can really help you out when it comes to saving money.

· Ensure what you have in your savings or emergency fund covers three to six months' expenses

· Begin paying off your debt once you're established

Some Businesses to Consider

Skill Acquisition

Hat Making, Cake Making & Confectionaries, Catering & Hotel Management, Event Planning & Decoration, Barbing & Hair Dressing Salon, Bead Making

Education

Preschool, Crèche, after School, Nursery, Primary & Secondary, Remedial/Tutorial Centres, Agents for Universities Outside the Country, Vocational School Operator

SMEs

Cleaning Services for Corporate Organisations, Security Outfit, Dry Cleaning Outfit, Real Estate Agency, Travel Agency, Restaurant/Canteen, Insurance Agency, Rental services, Transportation, Car Wash, Auto Dealership, Boutiques for Children/ Men/Women Clothing, Consulting (Management, Financial/Tax), Information Technology etc.

Property or Mortgage

Building of Shops for rent,

Let out part of your property to get annual income,

Block Making,

Sale of Building Materials e.g., Cement, Iron rods, Roofing Sheets, Tiles, Plumbing, Electrical and other accessories

Buying & Selling

Food and Beverages: Drinks, juices, water etc.,

Fast Moving Consumer Goods: Provisions, Flour, Butter, Vegetable oil, Rice, Beans (in Bags) etc. Poultry: (Eggs, Chicken, Feeds), Cooking Gas & Cylinders, Office Equipment & consumables

Farming & Agro Allied Products

Plantation: Plantain, banana, Cassava, Yam, Vegetables, etc,

Piggery, Poultry, Fishery,

Commodity Supplies, Maize to Breweries, Animal Feed, Fish Feed,

Food Packaging for Export, Garri, Yam Flour, Beans, Palm oil

Supermarket

Detergent, Seasonings, Beverages, Toiletries, Soaps, Perfumes, Household items etc.

Manufacturing

Soap/Detergent, Nylon bags, Water(Bottled &Sachet), Drinks, Bakery, Clothing & Wears, Bags, Shoes, Hats,

Talent

Acting, Music, Comedy, Writing, Dispute Resolution, Mediation, Arbitration

How to Ensure Financial Security @ Retirement

· Be humble

· Manage your time wisely

· Keep moving forward

· Think long term

· Master the art of selling

· Surround yourself with high frequency people

· Allow money to flow in and out

· Be conscious of your numbers

· Make a wealth study

Self Appraisal

· What is your financial net worth?

· What is your financial commitment?

· How much money do you need to save before retirement?

· How much debt do you owe?

· What is your repayment plan for the debt?

· What makes up your total monthly/annual expenditure?

· What is your annual income?

Conclusion

A proactive approach to successful retirement is not only important but necessary and should be adopted by everyone who wants to enjoy financial security at retirement.

Being debt-free, controlling your expenses, increasing your savings on a monthly basis, and doing what you love can lead to happy, fulfilling, and prosperous lives after retirement.

You can survive tough times after retirement for months, or even years, without a change in your lifestyle.

Recommended Books

· The Richest Man in Babylon by George S. Clason

· The Wealthy Barber David Chilton

· The Millionaire Next Door by Thomas J Stanley and William D. Danko

· Ten Golden Rules for financial Success by Gary Moore

· The 9 steps to Financial Freedom by Suze Orman

· Think and Grow Rich by Napoleon Hill

· Rich Dad, Poor Dad by Robert Kiyosaki with Sharon L. Lechter

· Before You Quit Your Job by Robert Kiyosaki

Contact Details

Kehinde Olubi

Amag Nigeria Limited

Email: amagng@gmail.com

Website: www.amagnigeria.com