Sustainability of Income

When you put your income on a scale of 100%: 10% of your income should go into tithe, 20% should go into capital investments (or fixed assets) such as land, building projects etc.

The next 20% should go into floating assets: you buy stocks of 'blue chip' companies where you get dividends or you trade on the shares when they appreciate. Other examples in this category are treasury bills, treasury certificates, bonds which are disposable in the capital/money market for profitable values.

The next 25% should (must, in my own opinion) be in cash. This is cash in your bank account in form of fixed or call deposit. You should never touch this cash. The palliative function of this cash is to quash your blood pressure when condition becomes bad and/or almost unbearable. You either grow the cash by way of re-investing both principal and interest or you plough it back to service your waste. Waste expenditure are expenses you incur to service yourself and families. Examples are bills incurred on GSM/telephones, satellite/cable, Internet bandwidth, diesel for generating sets, gas etc.

The last 25% should be on waste assets: these include cars, clothes, shoes, phones, rent and so on. This is the actual part of your income that you expend to service yourself.

Based on the assumption that you earn =N=1million per annum, numerically, your spending pattern should be as follows:

• Tithe - 10% =N=100,000
• Capital Investments - 20% =N=200,000
• Floating Assets - 20% =N=200,000
• Liquid Cash - 25% =N=250,000
• Waste Assets - 25% =N=250,000

Routinely, what we do is not far from the above income analysis, it is only that we are seldom serious and principled about it. You help yourself a great deal when you write or document your plan of action periodically especially when it has to do with money matters.

On practical terms, assuming you earn =N=4million in a year, at the end of the year, do you have up to a million naira as cash in your account? Do you have up to 1 million naira in fixed assets such as land or did you invest up to 1 million naira on that building project of yours? Do you have up to 1 million naira worth of share (in their net present value) in some blue chip companies? We just realise that you have spent the 4million naira on waste: buying cars, shirts, shoes, travelling abroad etc. I am not swanning that you should not service/enjoy yourself but when you spend the whole part of your income servicing yourself now, what happen to you when the job is no more? It is more tragic when most of the waste assets are serviced by loan or debt instrument.

You should attempt to build a comfort zone by putting most of your income in cash at bank (as investment), fixed assets and stock. These are your succour in time of difficulty. In Information Technology, we call it disaster recovery strategy. You can apply this strategy in your personal life.

Let me give you a typical scenario of an average banker. The man gets =N=1.5million in January; he remembers he has to change his car. He spends =N=950,000 on car, he uses =N=10,000 to celebrate "wash" the car for his friends, he spends =N=75,000 to buy tyres and overhaul the car for use. He is left with =N=665,000. He remembers he has to change his GSM phone and install DSTV, he spends =N=155,000 on all that. Do you know what this young man has done? He has gallantly spent 79% of his income on waste. This kind of person can not make it. No voodoo can do magic for him. He grumbles at the end of the year when he looks back. He has not achieved anything that year.

FOOD-FOR-THOUGHT
How many of us at beginning of the year draw a personal budget for the salary year? At this psychological moment, pick up a pen, paper, calculator and look at your expected income and 'royalties' and distribute them according to the above cardinal points. Remember, when you fail to plan you have definitely planned to fail.

Ponder on this and see it as a challenge. Stop trading blames with your destiny... you can still make a whole lots of difference with the token you earn today. Yes, you can.

...I know a word is enough for (only) the wise.

WHAT IS POLITICS?

A little boy goes to his dad and asks, "What is Politics?"
Dad says, "Well son, let me try to explain it this way: I am the head of the family, so call me The President. Your mother is the administrator of the money, so we call her the Government. We are here to take care of your needs, so we will call you the People. The nanny, we will consider her the Working Class. And your baby brother, we will call him the Future. Now think about that and see if it makes sense." So the little boy goes off to bed thinking about what Dad has said. Later that night he hears his baby brother crying, so he gets up to check on him. He finds that the baby has severely soiled his diaper. So the little boy goes to his parent's room and finds his mother asleep. Not wanting to wake her, he goes to the nanny's room. Finding the door locked, he peeks in the keyhole and sees his father in bed with the nanny. He gives up and goes back to bed.

The next morning, the little boy say's to his father, "Dad, I think I understand the concept of politics now." The father says,"Good, son, tell me in your own words what you think politics is all about." The little boy replies, "The President is screwing the Working Class while the Government is sound asleep. The People are being ignored and the Future is in deep shit!"

Courtesy: A learned friend.