The Rules of Wealth
Olumide Ibikunle teaches basic financial management principles that would help you achieve your personal goals.
Recently, we had a tweet chat with Olumide Ibikunle, a Liquidity and Investment Product manager at Citibank, on the rules of Wealth. It was an insightful session which we believe no one should miss out on. Hence, this blog post.
Tell us a little bit about yourself
I am Olumide Ibikunle, a Finance and Investment Professional, but more importantly, a young Nigerian. I am fascinated by numbers, the economy and what role governance plays in national growth and development.
What does “The Rule of Wealth” entails?
The Rules of Wealth are essentially a base for anyone looking to achieve financial freedom. Time-tested principles on making money, financial management and using monetary resources to achieve your personal goals.
Incidentally, there is a book of the same title by Richard Templar who wrote the “Rules Series”. I think we should all take some time to study that book.
So are there actual rules of wealth, Please share them with us ?
Interestingly, these “Rules” are some of the most obvious things around us today. But as humans, we have a love-hate relationship with rules. We understand their relevance, but always break them. I’d highlight a few here;
“Make money, but keep most of it”- Olumide Ibikunle
1. Make money, but keep most of it.
Same thing as saying you should spend less than what you earn. However, credit has become so democratized these days that it is easy for people to live well above their means.
The key way to achieve this is to have one tool we love to hate — a budget.(We gave great tips on budgeting here) Obvious, but grossly underutilized.
Fun fact — I call my personal budget “Living in Lagos” . It is entire excel workbook with several sheets that not only tracks my spending, but also details all my income streams and their allocations into my various financial goals.
It is so detailed that I track expenses on a daily basis and have modeled it in such a way that I have a performance rating at the end of each month. “Superior Performance”, “In line” and “Below Expectations” defines how I rate myself on budget performance. Sounds obsessive?
But I assure you that this simple tool of discipline saves you a lot of money stress and sets you on the path of financial freedom. I tell people around me; you can’t even invest if you spend all your income. You’d only be stuck in a vicious cycle of living paycheck-to-paycheck.
2. Have money goals.
Very easily, with money goals comes the drive to earn even more. This drive pushes you to invest in self and develop new skills. Positive “virtuous cycle”. What sort of goals?
This is a young audience, I believe. Most of our aspirations are tied to the availability of financial resources. “I want an MBA”. “I want to buy my first house before 30”. I want my kids to access the very best education”. “I want to give my folks the best retirement”.
With clearly defined and documented money goals, you have an obvious rationale for saving and investing, and it is no longer a chore. My “Living in Lagos” doubles as my year-to-year Money Plan and I do annual reviews. I also forecast income for the next year.
I think it follows natural logic that if you have money goals, you’d be looking for ways to grow your money and make it work for you. Indisputably, the best investment you can make is in your earnings capacity, but also important to “Buy Income”
The concept of “Buying Income” is deeply rooted in the fact that your funds can earn you passive income. So many investment alternatives, but I’ll pause here for now.
Would these time-tested principles work for anyone regardless of their background, age, or other factors?
I like to think that these principles are universal because pretty much everyone can apply them, with tweaks to reflect unique circumstances of course… It’s why I’m never overly prescriptive when it comes to how much you should spend on what for instance.
I could say you should budget 20% of your income for feeding. But what if you earn #4m a month? I’m not sure how many young, single people spend #800k on food in a month. So, important to apply, considering your situation.
When do you propose is the best time to start saving and investing?
“Best time to save and invest was yesterday. Next best time is now”- Olumide Ibikunle
Best time was yesterday. Next best time is now. I already highlighted in an earlier tweet that the first thing to do is to invest in your earnings capacity. Perhaps, one of the most alarming things we’ve done is teach people to invest without emphasizing this.
If you’re not making decent money, you probably won’t be multiplying a lot of it, so aggressively pursue knowledge and skills. Leave no funds spared in doing this. It is the best investment. Do you need to take courses? Do you need to further school? An apprenticeship?
With higher earnings capacity, you can do so much more. However, this does not preclude you from making paper investments right now or buying real assets with excess funds. Build an emergency fund over time. Load up on fundamentally-sound shares over time.
“Build an emergency fund over time” –Olumide Ibikunle