Young and Focused
Abu is single, and 27 years old. As soon as he left University three years ago, he scored a job as a Banking Officer. The first thing he did was to rent an apartment close to his work place for easy commute, and then began to accumulate a significant amount of discretionary income from his employment.
While his mates – including his childhood friend, Hassan – were busy buying up every new tech gadget, Abu ignored the intense pressure to spend frivolously, and instead focused on his life’s objectives: buy a car, get married in the next few years, purchase a home, start a family, and possibly even plan for retirement. Like he did so many times in the past, he asked Hassan to straighten out his financial life, but his friend was too far taken with the good life.
Abu was now eager to begin planning for all his important life events, but did not have a formal financial plan. He had a big advantage, though: his parents had taught him and his siblings to budget and save, right from when they were 6 years old. Spurred on by his father’s anthem: “Great wealth builders focus on both saving money and earning more”, Abu imposed strict financial discipline on himself. He:
- Rented a house for the first few years after starting work. In the short term, renting offered far more flexibility than committing to a long-term mortgage, which he was entitled to, six months into his new job, subject to his position being confirmed. While renting, Abu would save on property maintenance, repairs, tax, insurance and any force majeure disasters, which were all the Landlord’s obligations. Abu’s dream was to purchase real estate, and build an elevated bungalow with a pool for his family. He felt he would be ready to handle the responsibility of a loan three years into working full time;
- Did a 10- minute commute to work. Because he lived near his workplace, he did a short, inexpensive ride-share to work with colleagues, and did not immediately have to worry about the costs of vehicle reliability, pricing or financing;
- Never bought what he didn’t need. Did he ‘want’ that sleek, supersonic Mercedes Benz that Yusuf had just bought? Of course. But he just didn’t ‘need’ it immediately.
It was now time to plot his future with more certainty, and Abu turned to a Robo Adviser – an online, automated investment service that reduces the complexity and lowers the higher costs associated with a human financial planner.
The low-fee,digital service made financial planning easy for Abu by first assessing his goals, current situation and risk tolerance, drawing up a budget, and then constructing an investment portfolio. For Abu, the recommendations were to establish a preliminary annual savings account, as well as a retirement fund. The plan was for him to save up to 30% of his income, if possible, so that he could aggressively put more of his wealth toward investments – short and long term – such as an emergency fund, mutual funds, Exchange-Traded Funds (ETF), and even a personal retirement account.
The high-tech Robo Adviser currently manages Abu’s accounts, and continues to support him in tracking, reviewing and re-evaluating his progress toward his specific goals.
Yusuf, on the other hand, made the terrible mistake of thinking that financial planning for the future was restricted to those approaching retirement. His preference for spending over saving hindered his life trajectory. While he now shares a small apartment with two friends, and is saddled with debt, Abu lives in his own house, is married, has purchased a car, and has comfortably risen in the ranks at work. Abu’s greater future orientation is a testament that starting life with good financial habits will inevitably bleed over into success in building wealth.
Prepare for That Rainy Day, Yesterday
Emmanuel and Ngozi Origomi are a young couple who think they will spend their lives living on love, fresh air, and what they breezily refer to as ‘cautious spending’. At 35 and 31 years old respectively, with two young children under the age of five, Emmanuel works as a full-time Engineer, while Ngozi is a freelance interior décor consultant. They earn substantial incomes, live in a huge house that Emmanuel inherited from his parents, drive two luxury cars, and are quite the socialites that everyone can’t get enough of – hosting lavish dinners, hobnobbing with business magnates on First Class flights to extravagant holidays, eating out at chic restaurants every other day, and assigning a uniformed nanny to each of their children (Bosah and Ifeoma). Status is everything to them.
Somewhere at the back of their minds, though, there was a nagging worry that just wouldn’t go away.
Having experienced a tough childhood in which three square meals were hard to come by, and often missing classes because of unpaid school fees, Emmanuel and Ngozi were anxious to begin planning future education expenses for Bosah and Ifeoma, who they wanted to attend the best private schools, and later on, an Ivy League college.
But both adults never managed to retain significant savings, thinking they had all the time in the world to deal with such a distant issue. Neither of them stopped to think how their high flying life was impacting their monthly cash flow.
Until a disheveled Chike paid a visit that shocked them back to common sense. .
Chike was Emmanuel’s peer and ex-colleague. He had gotten tired of a nine-to-five job, left his cushy employment and, relying only on a generous long-service bonus from his employers, lunged into what he thought would be an exciting life of freedom as an entrepreneur. His hastily put-together business plan told him he would be extra wealthy in 16 months, by exporting processed cocoa.
But he was blindsided by a huge unforeseen misfortune. In the space of nine months, Chike lost his seemingly healthy wife, Ebele, to an aggressive cancer. Their combined savings were wiped out on hospital bills and a funeral. His business never took off. And his only child, Phillip, was withdrawn from private school. Like Emmanuel and Ngozi, Chike and his wife were potential high net worth individuals, but spent money like it was going out of fashion, putting aside just enough for everything from house rent to school fees. With no concrete investments of any kind, and now living with his son at his parents’ home, 37-year old Chike had come to ask the Origomis for a small loan with which to start life all over again.
Emmanuel and Ngozi Origomi’s lives flashed before their eyes, and like lightning, they engaged the services of a financial planner who helped clarify their financial goals (an education fund for Bosah and Ifeoma, and a family emergency fund); analyse where they currently stood in relation to their goals; and draw up a plan to adjust their wealth in order to achieve what mattered most to them.
First, the parents were spending almost more than they made, and were advised to cut back on the instant gratification so they could realise significant savings. Concrete tips were given: they could perhaps do without two nannies, replace over-the-top dining treats with home-cooked meals, reduce lavish entertaining to very special occasions, replace First Class fares with Business Class tickets, and trim vacations to major holiday periods only.
Second, a custom investment portfolio was set up, consisting of an education savings plan, whose funds would be invested according to the age of their children. Given that secondary and university expenses were still far off, the financial planner advised an asset allocation plan that would focus more on equities when the children are younger, and a switch to a more conservative plan as they got older. Considering the skyrocketing costs of education, equities were an excellent investment option, as they are known to create wealth in the long term.
Third, the financial adviser recommended that Emmanuel and Ngozi immediately set up an Emergency Fund that was equivalent to three to six months’ worth of living expenses – and thereafter consistently build on it. This would cushion unexpected financial crisis, such as a job loss or large medical bills.
Without a financial plan, it is difficult to know whether you’re sinking or swimming when it comes to your finances. If you aren’t tracking your cash flow, your debt could be growing without you even realising it. Today, the Origomis maintain a reasonable social life, systematically save, and have finally secured the family’s future.
As American author Robert Kiyosaki puts it: “It’s not how much money you make, but how much you keep.”
Living a Full Life in Retirement
At 55 years of age, Tunmininu was Deputy CEO of an Oil & Gas corporation, with a wide variety of benefits accumulated over the years. As she was getting on in years, she began to think seriously about retirement. She had never married, had lost her only child 10 years ago in a terrible car accident, and her closest family was made up of her elderly parents, her brother Niyi, and his three daughters – Shade, Tolu and Funmi.
Tunmininu’s goals were to be able to retire from the company at age 60, work for a little while as a consultant, and then retire completely at 65 years of age. She would then spend her time getting to know her extended family better, travelling to destinations around the world that she had never been to, revisiting places that held fond memories, and enjoying her hobbies – from Formula 1 racing, to skiing on the Alps, and yachting on the Riviera. Some of her other goals included continued financial support for her parents (housing and daily living expenses), paying for her nieces’ undergraduate and graduate studies, and financing their weddings in a few consecutive years.
She would need substantial assets to fund her goals.
Tunmininu had already made plans for a financially secure future. She had a sizeable nest egg that included savings in cash and a pension. Considering herself financially savvy, she was also a strong advocate for investing in the stock market, and had spent the past five years managing her investment portfolio all by herself, following the traditional buy-and-hold approach.
Return on Investment (RoI) had been great.
In recent years, though, she began to get worried about the volatility of the local stock market, and feared a crash. To hedge against falling stock prices and losing her investment, she went for safety and converted her stocks to cash.
She realised that a large holding in cash was not a wise investment strategy, mainly thanks to inflation, which one of the world’s wealthiest investors, Warren Buffet, had described as “a relentless force that destroys purchasing power, like rust gnawing away at an unpainted bridge.”
But Tunmininu was no longer confident enough to ride the stock market on her own, so she turned to a professional financial adviser for help. At this point, she was open to spreading risk among various types of investments.
To conserve Tunmininu ‘s wealth (increasing expected returns while taking less risk, and avoiding large losses), the Adviser established a diversified portfolio of high-yield bonds, foreign stocks and commodities for Tunmininu. Before this, he had explained the concepts of asset allocation to her, showing her how to maintain an appropriate investment mix of stocks, bonds and cash that would support her financial goals of retiring to an extravagant life.
And to improve the risk-return profile of her mixed-asset portfolio, Tunmininu was also advised to seek international diversification in the form of Real Estate.
Finally, to ensure she realised the retirement of her dreams, the financial planner established a solid Emergency Fund that would release liquidity in the event of any short-term financial challenges.
Ayuk Elias is a self-made Ultra High Networth Individual (UNHWI). And, typical of people who belong to this category, he doesn’t focus just on earning, but also on enjoyable wealth-generating activities.
One of the smartest strategies of this group of people is that they do what they love, and find a way to get paid for it – Ayuk converts a keen eye for real estate into property speculation; turns a passion for beautiful paintings into investment art; and applies his gift for number crunching into buying and selling securities.
To anyone looking from the outside in, it looked like Ayuk had it all made. Indeed he did. But also weighing on his mind were concerns about the future of his Estate, the plans he wanted to make with his wife of 10 years about it, and the legacy he wanted to leave for her children and his.
Her children, because it was a blended family.
Mrs. Ufuoma Elias had two children from a previous marriage, when she met and married Ayuk , who had one son. They did not have any children between them.
The couple had been delaying this conversation about their future estate planning needs for a while, but it was like an elephant in the room, and even though everyone got on famously, it was beginning to cause some undeniable friction
Ufuoma and Ayuk were both very successful financially and enjoyed the finer things of life, zipping across continents on their private jet, and paying courtesy visits to Heads-of-State, many of whom were old acquaintances of their parents.
However, Ayuk was a little stressed: in the event that he pre-deceased his wife, he was anxious for his son, Bassey, to be well taken care of in his will and final testament. Not surprisingly, Ufuoma mirrored the same sentiments regarding her children.
It was therefore crucial for Ayuk and Ufuoma to find a Wealth Manager they could both trust – and be open with – so that their concerns could be shared, while also reinforcing their strong love for each other.
The couple met with estate planning advisers and, together, tackled a wide range of estate preparation issues. Without the proper documents in place, the couple feared their estate could be cannibalised if either of them passed on.
The questions came fast and furious: Should their assets be outrightly distributed to the children or left in a Trust (which would provide protection from creditors in case of a future divorce)? Is it a good decision to keep the holiday homes in the family and if so, should the property be placed in a Trust to minimise probate expenses? Should any monies be left to charities, or a gifting program established for the children? Do the children have any health issues that should be addressed?
At the end of several meetings, over many months, a detailed yet comfortable plan was arrived at for the Eliases: new wills were drawn up (which addressed future disposition of assets); and estate taxes were reduced to a minimum. To prepare against any future incapacitation, Power of attorney documents were updated, and revised advanced directives were completed. The couple’s vacation home was placed in a Trust to help avoid double probate. Assets were consolidated in brokerage accounts for simplification and ease of passing them to future heirs.
All issues sorted out, the Eliases are now happy to resume their globetrotting, and seek the thrill of out-of-this-world adventures. They spend time with the children in their various locations across the world – and continue to provide financial support, while also meeting their own personal goals. Last but not least, they are grateful to have a plan that protects not only them during their lifetimes, but also the heirs that are important to each of them.
Sound investing is enhanced by professional financial planning expertise. With the right financial adviser, life can be brilliant – for everyone. If you would like to know more about a broad choice of investments including savings, stocks, options, mutual funds, bonds, pensions, wealth management, trust services, Real Estate, private equity, and much more, please visit: www.arminvestmentmanagers.com | firstname.lastname@example.org