Dear Speculators,
Many a times individuals believe that the only way to build wealth is to own a big business or to have a high paying job. This is not always true as even a man so far back on the earnings tree can build his wealth and be richer than his peers. Some big businesses like Twitter, Whatsapp and The New York Times are actually multi-million dollar loss making firms in America. Sometimes we read the news and see multi-millionaire celebrities like Kanye West and 50 cent become heavily swamped in debts. So even those who are rich don't know how to stay rich. I want to teach you all an easy risk free formula to becoming rich and conserving that wealth.
Warren Buffet once said the only way to build wealth is to live beyond one's means. He also advised that we save before spending instead of saving what is left after spending. That way you can control yourself from binge spending. Savings is very important. As we grow older, we move from being net spenders to small income earners and then to high income earners. Keynes' fundamental law of consumption states that a man is disposed as a rule and on the average to increase his consumption as his income rises but the growth in his consumption should be less than proportional to the increase in his income. This informs us that it is absolutely normal to spend more when our income rises but we must not spend the added income completely. Something must be saved! How much of a person's income should be saved? Well that depends on several factors like a person's needs, income size, family size, etc. However we advise that a thrifty individual should save between 20-40% of his/her salary every month. It may be too large or too small for you but that's our opinion. Pick a number and stick to it. It will help you save in times of windfall and help you cushion the effects of a job loss.
The next question is where should all my savings go? Well most people advice you to save with the banks, I think we should save only precautionary cash in the bank and the bulk of your savings should be invested in government treasury bills. This form of investment is very liquid, risk free and the reward is higher than what can be obtained in a bank. For investors with higher risk appetite, we advise buying the index fund. This reward is higher than the two previously mentioned but is a risky investment. Timing is of the essence.
We advise savers to commit a certain amount of their monthly income to buying treasury bills or other tax deductible investments. We also advise savers to reinvest all the returns obtained from the investment. This behaviour will compound your returns. Albert Einstein once said there is no greater force in this world than the compounding interest rate.
So if you earn 100,000 naira per month, we advise you to save 40,000 naira monthly. Use the money to buy the quarterly treasury bills and reinvest all the returns. If you do that for a year, your total savings instead of being just 480,000 naira will be considerably higher. If you continue to do that year after year, in no time you will be a multimillionaire and your saving habit will keep you rich.
Anything saved today increases your spending power tomorrow and anything borrowed today reduces your spending power tomorrow. You should only spend from what you earn and you can only accumulate wealth from what you save. Save something today!
Signed:
Emeka Ucheaga,
Managing Partner,
Emeka Ucheaga Advisory
Many a times individuals believe that the only way to build wealth is to own a big business or to have a high paying job. This is not always true as even a man so far back on the earnings tree can build his wealth and be richer than his peers. Some big businesses like Twitter, Whatsapp and The New York Times are actually multi-million dollar loss making firms in America. Sometimes we read the news and see multi-millionaire celebrities like Kanye West and 50 cent become heavily swamped in debts. So even those who are rich don't know how to stay rich. I want to teach you all an easy risk free formula to becoming rich and conserving that wealth.
Warren Buffet once said the only way to build wealth is to live beyond one's means. He also advised that we save before spending instead of saving what is left after spending. That way you can control yourself from binge spending. Savings is very important. As we grow older, we move from being net spenders to small income earners and then to high income earners. Keynes' fundamental law of consumption states that a man is disposed as a rule and on the average to increase his consumption as his income rises but the growth in his consumption should be less than proportional to the increase in his income. This informs us that it is absolutely normal to spend more when our income rises but we must not spend the added income completely. Something must be saved! How much of a person's income should be saved? Well that depends on several factors like a person's needs, income size, family size, etc. However we advise that a thrifty individual should save between 20-40% of his/her salary every month. It may be too large or too small for you but that's our opinion. Pick a number and stick to it. It will help you save in times of windfall and help you cushion the effects of a job loss.
The next question is where should all my savings go? Well most people advice you to save with the banks, I think we should save only precautionary cash in the bank and the bulk of your savings should be invested in government treasury bills. This form of investment is very liquid, risk free and the reward is higher than what can be obtained in a bank. For investors with higher risk appetite, we advise buying the index fund. This reward is higher than the two previously mentioned but is a risky investment. Timing is of the essence.
We advise savers to commit a certain amount of their monthly income to buying treasury bills or other tax deductible investments. We also advise savers to reinvest all the returns obtained from the investment. This behaviour will compound your returns. Albert Einstein once said there is no greater force in this world than the compounding interest rate.
So if you earn 100,000 naira per month, we advise you to save 40,000 naira monthly. Use the money to buy the quarterly treasury bills and reinvest all the returns. If you do that for a year, your total savings instead of being just 480,000 naira will be considerably higher. If you continue to do that year after year, in no time you will be a multimillionaire and your saving habit will keep you rich.
Anything saved today increases your spending power tomorrow and anything borrowed today reduces your spending power tomorrow. You should only spend from what you earn and you can only accumulate wealth from what you save. Save something today!
Signed:
Emeka Ucheaga,
Managing Partner,
Emeka Ucheaga Advisory
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