It is often written and said that no man is an island. This statement, supported by the holy books, is perhaps very critical in our part of the world; i.e Africa where we believe in the extended family dynamics. Thus, today we will discuss how societal norms or culture affects the individual’s first salary, imbibing a savings culture and plans for the individual’s future.
Receipt of First Salary/Pay
After hard work comes reward, by means of a salary, and this typically occurs in the last week of the month (in some organisations it may take two or more months before the first pay comes). In our part of the world, fresh gradates that have been newly employed gift their parents/guardians a major portion or all of their first salary. This is done to express appreciation for all the love and care thus far, and to let them know you can start supporting them, and yourself now. It’s usually very emotional; the parents/guardians are overjoyed because this is an evidence that they have started to reap the fruits of their labour (which would have been a major prayer point over the course of their lives) and everyone is happy.
Some others also believe in tithing, which is where ten per cent of the individual’s salary is donated to the church for its activities.
The individual may also decide to support a charity, with a portion of the salary. Regardless of what the individual does, there is a need to have a plan for the first salary, and every other salary that comes after. One must learn to live within the income. Monthly income spending needs to be planned and one can allocate portions of the salary to the following: feeding, transportation, clothing, phone/ data bills, rent, charity, tithe, family, savings, etc.
Savings Culture
We all come from different backgrounds to include high, medium or low income earning families. Irrespective of one’s background, one must develop financial discipline, saving culture as well as have financial security as an important life goal.
A good way to be on the path to financial security is to imbibe a savings culture early in one’s career and start saving and investment. The portion of one’s salary allocated to saving does not have to be up 20 per cent, one can do more. If for instance, the individual still lives with the parents and thus does not pay for rent, he can increase savings portion. If the individual needs to rent accommodation, one may consider shared accommodation to reduce the financial burden and increase the savings. This is exactly what I did in 1988 when I started life in Lagos as a banker. I shared a flat with a friend called Bashir.
As a banker and a Chartered Accountant, professionally there are several mechanics of personal saving and investments. Some of these options and or methods are as follows; Viz:-
1) Setting up a direct debit with a bank: the individual approaches a bank to set up a direct debit from the account, such that a certain amount is deducted monthly, on a particular date, and this amount is credited to another Savings Account. To aid the savings, it is recommended that the individual has limited access to the savings account. For instance, the account should not have a debit card, so withdrawals can be restricted on the account.
2) Invest in money market securities: the individual can approach a bank where the savings are kept to invest in money market securities, such as treasury bills. These investment instruments typically have a lifespan of at least 90 days with a decent rate of return.
3) Invest in stocks: the individual would need to seek advise from stockbrokers on good stocks to invest in, for the short or long term.
4) Esusu or ajo: this is very common in our part of the world. The individual and a group of colleagues can create a scheme where they all contribute an agreed sum into a central pot, on a particular date, monthly. The group members take turns in collecting entire pot proceeds monthly. This savings mechanism should only be entered into, if the other members are trusted. There are several other means of savings such as the purchase of digital currencies (bitcoin), foreign currencies, metals (gold) etc. Savings alone do not create wealth. Savings must be followed with investment in order to create wealth
Future Plans
An individual must have a plan. This cannot be overemphasized. There is a popular saying that failure to plan is planning to fail. With a plan, the individual can make deliberate steps to achieve goal(s), and can stay focused. At some point in our lives, we plan to start work, get a car, house, further our education, get married, start a family, go on a vacation, and so on. The human being is also designed to desire these things at different points in life. Remember Mersey’s Law on hierarchy of needs! However, to actualize these, one must prepare and be ready. The individual needs to figure out at what point would these goals be achieved. In this regards one may get inspiration from family, mentor or environment. Friends may also be helpful just as colleagues at work.
However, some things may not go according to how they have been planned. Different instances may occur in an individual life’s journey that may affect one’s plan, such as health challenges, loss of a job, etc., and these will be discussed in forthcoming articles. However, having the knowledge to plan early in life helps one put things in proper perspective and gives one a good head-start.
