Put Your Money to Work Immediately

Paying yourself, for most of us simply means stopping what we are doing now, and doing it the other way around. Save first before you spend. It does not end there. You have to put your money to work immediately by moving your savings out of danger, the danger of your long-spending arms reaching out for it.

This means you have to move it into an investment immediately – an investment that will yield interest income, if you are just starting out. Examples are money market instruments like fixed deposits, treasury bills, bonds, etc. Just ask your banker and you will be informed what is available. Just start, then look for better rates to move your money to maturity.

The more knowledgeable you become, the better rates you find. As you gain the comfort level of knowing the Nigerian money market as the back of your hands, you can look outside Nigeria, Ghana for example. You can find even better rates, but you have to do your homework well before you make that move. Again, you don’t move everything, just start with a small amount as a pilot, and if it works fine, you can gradually restructure your portfolio. You have to factor in several factors like exchange rate risks, local taxes, regulations, etc. Do your homework well before you make this move, and also by starting small, if you make mistakes, your losses will be minimal, if any. Money market instruments are at zero risk, so having losses is unlikely.

This is what foreign investors do. They scour the globe for better interest rates, return on investment, etc, then they make a move. When Nigeria is the right place to be, returns-wise, they move their money here at the click of a button. When the rates drop and Nigeria are no longer attractive, they move their funds elsewhere. In stock markets with relatively low capitalization, the movement of funds can trigger a crash in the market. This was a factor in the last Nigerian stock market crash. Foreign investors read the handwriting on the wall and ran for dear life while ignorant Nigerians rushed in. The market has since recovered (not fully to the 2007 level) and the foreign investors are back.

The point I am trying to make is that you have to put your money to work immediately the moment you start paying yourself first, and if you have no clue what to do, then the money market where you get fixed returns at zero risk is a good place to start.

In the next post, I will discuss why knowing what to do is not enough. I struggled to save but could not break the barrier of my past habits for a while. I will save a month or two, then something happens, and I reach out for the money and I am back to square one. Someone said not to call your savings for the rainy day, as you are expecting the rain to come, and it surely will. Give it a more inspiring name. It comes down to does the words we say truly come to pass as a self-fulfilling prophecy.