Did you know that everyone has a financial lifespan? And that if you don’t do what is required in each life financial block you, you could be setting yourself up for ruin? David Tanki, a financial expert and strategist explains.
The three blocks of destiny
These are blocks 4, 5 and 6 of a person’s life between ages 23-46. “Naturally, the closer you are to 23 the better it is from a finance perspective. The intention is that by the age of 46, you need to be earning more from investments than from a salary.” The trouble is almost 95 – 98 per cent of people are not living this reality at 46 because most don’t know how to number their days right and therefore do not apply their lives and attitudes towards financial wisdom. So with the excitement of their first jobs, people go on spending sprees and make decisions that catch up negatively with them when they reach 46 and beyond. “The problem with most people is that they operate individually especially when they are younger. It is important to start establishing networks with different people whose interactions stretch your thinking especially in financial matters.”
BLOCK 4: AGES 23-30
Chances are that you have just gotten your first job.
·Do not fixate on getting income solely from formal/white collar employment. Be willing to put aside your pride and degrees/certificates and actively seek creative ways to earn a living on a daily basis as these are your strongest years. The truth is, there are more blue collar or non conventional ways that a person can make daily wages that surpass the average first time white collar salary per month – in the city and in rural areas.”
·Your minimum target for savings should be 20 per cent of your salary, the midpoint is 30- 35 per cent and the highest target is 50 per cent.
·Minimise expenses as much as you can. This is the time most people are single, living with guardians and have no immediate dependants. Demands on your income are therefore less stringent and by making smart decisions such as staying at home with guardians, buying groceries in bulk, managing unnecessary expenses like upmarket expenditure or cost sharing affordable house rent with your peers, you will be on a confirmed wealth seeking path.
·Think beyond putting your money in a bank. This is the block in which you should begin to learn about potential investment areas such as the stock market, agro-based enterprises, government bills and bonds and successful business models.
·Begin meeting with entrepreneurs that you could potentially partner up with as an investor while you are still in employment. However, always ensure all investments have a legal paper trail in case a seasoned player tries to take advantage of your youth or inexperience in a certain field.
· Try as much as possible to invest in land during this period. Find affordable land away from the city. It may not help you in the short term but it will serve either as a security or as a long term payoff. This learning and research introduces you to the discipline of saving, investing and growing money.
BLOCK 5: AGES 31 -38 (family block)
Most people are beginning to have children at this stage.
·You may not save up to 35 per cent at this stage, but you can only drop it to 25 per cent.
· Work with your partner in order to consolidate and grow your finances as a unit; therefore trust is a requirement for married couples. Working together with a spouse will shorten the time required to get to your financial goals.
·Many individuals tend to have external parties depending on them such as younger siblings. While you must support them, you cannot cripple your finances. A balance must be established during this block.
·This is where you perfect on the investments that you learned about in block 4.
· Emphasise on living practically rather than lavishly.
Some people get to this block without having made any income previously. They have to tighten their belts, set strict financial goals governing everything they do in life and sacrifice even more in order to catch up to the block. Goals must be ambitious, realistic and smart as they will determine your actions financial or otherwise.
BLOCK 6: AGES 39 – 46
·Minimal risk. This is the concentration block. This is not the time to experiment with new projects; you should have identified areas where your wealth can grow with minimal risk by now.
·All your resources are marshalled into two or three areas that you are well versed in because you no longer have the luxury of time to make any mistake. Concentrating your money within these tried and tested investment projects will ultimately yield benefits.