Naomi started her teaching career in 2008. Very quickly, she understood how to make money in the profession. She started having lessons for parents who were interested in after school activities for their children. She was making money apart from her salary which eventually covered up for her expenses yet had some for savings. Five years later, she started to feel dissatisfied. It was no longer about the money but she knew she just couldn’t attend to so many students at the same time. Moreover, going from house to house, teaching students privately wore her a lot.
After saving up some money, she retired from teaching home lessons. Naomi only kept one so it could continue paying her bills. Then she set up a business around something she loved and considered her hobby. That way she has a place where her clients can come to, instead of her going from house to house looking for them.
Naomi’s story has some lessons that salary earners and self-employed individuals can learn. Early enough in her career, she was able to discover (and deal with) something that could be a ‘bottleneck’ and can affect her financial future. Due to the rat-race, many sincere and passionate employees don’t pause in life to ponder the path they are taking towards their financial future.
There are two important factors that determine whether or not you will enjoy financial security and peace of mind during your retirement. First, do you have income from one or more sources – a job, business, investments. The second factor is the principle of savings. If you don’t know how to use both in your working years, you will be broke during retirement. You can quit your job or self-employment, but your income must never retire. It must be working for you in the places you’ve chosen intentionally.
Now, the question is, where is the best place to save money for retirement? How can I grow my investments such that after 30 or 35 years of working, my money will still be active and generating income?
1). Invest in Mutual Funds
At Femme Minty, we teach a lot about Mutual Funds. That’s because it gives you an opportunity to invest in meaningful assets – real estate, bonds, stocks, treasury bills – at the same time.
If I have to start investing all over again I would do it differently. Rather than buy individual shares of companies, I would begin investing with stocks/shares Mutual funds, like index funds. Why? Investing in Index funds means you buy all shares within an index. You get the benefit of diversification across a basket of shares rather than individual stocks or shares. You stand to enjoy low fees and cost and get exposure to a range of stocks, rather than individual shares. Index funds will not make huge gains but will definitely not experience large risks such as when you go for individual stocks/shares.
Another thing to note is that with index funds you won’t get rich off quickly. They are good vehicles for long term growth over the course of your working life to ensure you have a safety nest egg in the future.
2). Invest in Stocks That Pay Dividends
Investing in stocks means that you purchase some amount of shares of a company. This makes you an owner of part of the company’s assets and revenue. Stock is a good form of investment for any ‘soon-to-be retiree who needs a constant flow of income to meet basic needs.
Every investor knows how stocks change rapidly. So before you commit your money make sure you examine the stock market properly. A good strategy is to focus on companies that have consistently paid dividends for at least 10 years.
3). Invest in Treasury Bills
Treasury Bill is a short-term investment asset with maturity periods ranging from a few days up to 52 weeks (one year). When you buy a Treasury Bill, you are simply lending money to the government which it uses to fund its debt and pay ongoing expenses such as salaries and military equipment. Treasury Bills are sold through a bi-weekly auction conducted by the central bank of any nation. You are usually required to quote bids following which the average minimum bid is selected. They can be bought through any official dealer like the Bank (using a treasury bill mobile application). In Nigeria, a typical example is Sterling Bank’s i-invest.
4). Start an Annuity Plan
With an annuity plan, you can retire and keep getting monthly or quarterly income for life. This is guaranteed for a period of 10 years. The 10-year guaranteed period means that if a retiree dies before its expiration, monthly annuities will continue to be paid for the remaining period up to 10 years, to a designated beneficiary. Only the companies that offer life insurance sell an annuity plan for people who might be interested.
Before You Start…
Due to risk and other factors that control the investing world, there is no safe or best place to grow your money. You can only make the best investing decisions. Before you set out to invest, you must do two things; get your finances in order and increase your knowledge about investing. This can mean determining your risk tolerance and also learning How To Make More By Risking Less.
Experts advise that new investors define their investment goals. So before you do an in-depth research about a particular asset you’ve chosen to invest in, make sure you outline your financial goals. Also choose which route you’d like to take – whether you want to invest and monitor your portfolio yourself or indirectly by paying an agent to help you. When these things are in place, then can you consider the above kinds of assets.