Everybody has to face the reality
that a time is coming when you will not be as productive as you are now in your
present vocation and yet there will still be needs to be met. This time may come as a result of age,
economic downturn, changes in technology, changes in choice and preference of
the market, just to mention a few.
We have noticed over the years
that very few artistes stay on the chart for more than a decade. Just like the sports men and women, they are
expected to take care of their future with the income that they have made in
their short work life. I know a lot of
people will argue that a singer can become a producer, or form a record label and
that sport men can become trainers. But show me how many world class producers
make as much money as the world class singers (only a few) likewise the same in
the sports world. Yet, every artiste
live, believing they will always remain at the top of the chart for ever. They live their lives as if there will always
be money to sustain their high profile lifestyle (reference to our ‘It can’t
happen to me syndrome’ write up)
I am not trying to discouraging
you from enjoying your life, but I want you to know that it will be wise to take
care of your future today. Every man irrespective
of his vocation has the same fear to contend with as it affect his future, this
fear includes and is not limited to the following:
1. His
health and that of his family
2. His
housing needs
3. Death
and its consequences as it affects the future of his household
4. Daily up
keep after retirement when the body can no longer earn income
This fear varies in magnitude
but remains the same. The man who has 15
children and 3 wives will have more to worry about than his colleague who has 4
children and a wife, where both of them try to maintain the same economic
status.
Having mentioned this, how do
we deal with these issues? Just like we have stated in our previous classes,
letting your money work for you still remains the best bet for the future. If we successfully carry out most of the
recommendation that we will be proffering, then these fear will be reduced to
the barest minimum.
Today, we will be looking at
ways of having our money work for us without primarily investing in a business.
Dealing
with unforeseen emergency expenses
It is always advisable for a
person with a high level of income generating ability to always set aside an emergency
fund. This fund is usually a stash of
cash or assets that can easily be converted into cash. This is necessary most times, as such
emergency comes unexpected. So if one is not prepared, the challenges of raising
cash can be very worrisome especially when you know that your worth is more
than the amount in question that is convenient to meet the unexpected expense
such as major repairs, period of job loss or drop in income, legal issues, etc.
This amount in the pool should be
determined by the life style of the person involved. Apart from the issue of
health, most of other liabilities can be estimated e.g everybody has an idea of
what he needs to go by. During this
period, you are not expected to stay ideal but finding a way out because as long
as you are not refilling, your pool will one day run out (that is if it’s an emergency
pool or retirement pool)
While emergency pool is good,
the rule of the thumb in issue like this is to get an insurance cover. Insurance as we said in our previous lesson is
a way of transfer of risk from an individual to a corporate institution, but
you will be expected to pay a little amount (premium) to them to agree to bear the loss
when or if it does occur.
Loss of income: this can be
managed by getting a pension fund management company who will determine the
value of the life style you want to live in the future and advice you on what
you should be contributing to the fund in their custody. On the maturity of the policy, depending on
the agreement, the company will start paying the amount needed to keep up with
that life style. This is the best way of meeting your need at old age without
the fear of “what if my children don’t take care of me?”
Life insurance: The issue of
insurance appeals to be strange in our society, yet it is the most popular way
of preparing for your future. The fear
of death for most people is not as worrisome as its consequences, as it affects
the life of their loved ones, most times financially. This fear can be taken
care of by obtaining a life policy in an insurance company.
This works like this, the
policy holder with the help of a professional puts value on the cost of
managing his family in his death and asks the insurance company to pay such
money in an agreed term to his trusted benefactor. He will be expected to pay the company a fraction
of that total (which is usually small). This agreement is time structured. That
is, if the man is still alive after the expiration (the insurer can say in case
I die within the next twenty years) of the contract, he loses the premium (money
paid to the insurance company). But by then, most of his fear would have being sorted
out, e.g children through with school, having a house of your own etc.
Apart from life insurance, you
can also take a policy of permanent disability so per-adventure you are incapacitated;
the insurance company begins to pay you a particular agreed amount which you
believe will be okay to meet your need.
Other insurance schemes you
should consider taking includes: car insurance, education insurance, fire
insurance, burglary insurance, professional risk ,etc. (we will be dealing with
this in the near future).
Health insurance: This is very
important. In a lot of countries, it is mandatory that everybody gets a health
insurance to cover basic sicknesses. This is the type of insurance where you or
your employer pays a particular amount to an insurance company who will now be
responsible for your health care need when you fall ill. This plan is usually in the category with a
list of illness that it covers and the class of service providers that you can
go to. In case, you can afford one, it
is wise you take one up immediately. But if you can’t, then join a group that
enjoys such services or take up a temporary job with an outfit that does. The more the members of the group, the less
the premium becomes.
Apart from insurance, it is
also advisable to invest in a project that is durable and has the capacity of
providing a regular flow of income with fear of stoppage as a result of poor
management. E.g. Building a tenement property whose rent value can serve as a
regular inflow.
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