No matter how hardworking you are, you may never be wealthy. No matter how consistent you save and invest, you may still die poor.
No matter how frugal you are, you may never experience financial freedom.
Until you understand how politics and policies affect your financial life, you may never know why you need to use your brain when electing leaders into government.
If your salary was ₦200,000 in 2017, it is now worth ₦112,153 in 2022. It has depreciated by 43.92 percent between 2017 and 2022.
If you had ₦10,000 in your account in 2013, it is worth only ₦5,000 in 2022. If you left ₦1 million under your mattress in 2015, it is worth only ₦500,000 today.
Fifteen years ago, an adult could lift ₦20,000 worth of groceries but now, even a 5-year-old can do it. As the value of money goes down, the prices of items go up. That is INFLATION.
When your monthly expenses increase but your income remains the same, you will struggle to save money and it will become almost impossible for you to save. If you cannot invest, you are not leaving the trenches anytime soon.
As of June 2022, every Nigerian was owing ₦200,000. E shock you? The government borrowed the money on your behalf.
Apart from the increased VAT and sinking GDP, yahoo boys have made the cost of living higher. Don’t ask me how. Go to the boutique.
Inflation is not just a Nigerian thing. Even the US experiences inflation.
The highest inflation ever recorded in the US was 29.78 percent in 1778. As of April 2022, the inflation rate in the US was 8.3 percent. UK inflation hit 9.1 percent in June 2022.
Ghana has an inflation of nearly 30 percent. As of May 2022, the inflation rate in Nigeria is 17.71 percent. It was at 18.72 percent in January 2017. It used to be 9.6 percent in 2015.
When you hear these figures, don’t pretend as if it does not concern you. What these double-digit mean is that you are becoming poorer every day.
You don’t need to be an Economist to understand that the price of almost every item has tripled. Except you eat manna from heaven daily or you were a delegate in the last party primaries.
Naira is becoming useless day by day. As of 29th May 2015, $1 was equal to ₦197. As of June 2022, the same $1 is equal to ₦417+ (official rate).
In other words, ₦500,000 in 1977 is worth almost ₦350 million in 2022. That is DEVALUATION.
The reason we always compare the naira to the dollar is that dollar is a higher-valued currency used to trade in the international market.
Inflation and Devaluation remain the biggest thief of wealth. They eat away all your hard-earned money. Unfortunately, they are not likely to go away completely soon.
Poverty is too stubborn, especially when it is inflicted by external forces beyond your control.
It is difficult to build wealth in a country where the political leaders are working very hard to crash the economy.
The question is, when your money is losing value, what can you do about it?
It is the duty of the government and the Central Bank to fight inflation and devaluation, but it is wise for you to protect yourself from these thieves of wealth.
The good news is that you can beat inflation and devaluation. Let me show you 9 ways to inflation-proof and devaluation-proof your money.
- Negotiate lower prices
When you go to market, don’t be afraid to negotiate prices. This will help you to reduce your monthly expenses.
An extra ₦100 there and another ₦200 tomorrow can amount to significant savings at the end of the month.
2. Budget and prioritize
The time of inflation is not when to spend carelessly. This is the time to postpone big purchases. Not everything will always be more expensive.
Some price increase is temporary. Why not wait till it becomes cheaper in the future before you buy?
3. Don’t keep your money idle
The most stupid thing to do during inflation is to stash your cash or save your money in the bank. The interest on a Nigerian savings account is around 1.25 percent per annum.
To beat the inflation rate of 17.71 percent you need an interest rate from an investment that is higher than 17.71 percent per annum.
4. Earn in high-valued currency
There is nothing as sweet as earning in dollars and spending in naira. To earn in dollars, you must be working for international clients or selling to a global market. Freelancers understand this better.
5. Save your money in high-valued currency
There is nothing patriotic about saving your money in a currency that keeps you poorer.
There are two ways to save in dollars; open a dollar account with your bank or create a dollar wallet with a fintech app from the comfort of your mobile phone.
6. Invest in high-valued currency
When you invest in dollars, you do not only receive returns on your investment, whenever the naira devalues, you also earn extra money.
Some people get richer whenever the naira falls in value. You too can join the league.
If you invested when $1 was equal to ₦85 in 1999, how much would you have gained in June 2022 when $1 was equal to ₦610?
7. Invest wisely
Ponzi schemes are common during difficult financial times. It is better to lose 8 percent of your money to inflation than to lose 100 percent of your money to stupidity.
The easiest way to go back to your village empty-handed is to invest in something that you do not understand.
It is true that as prices rise, so do property values, and so does the amount a landlord can charge for rent, so that the property earns higher rental income over time BUT should you buy a landed property to hedge inflation?
Well, every real estate company will tell you that real estate investments do not lose value, but if the value of your local currency is weak, it will also affect the value of your property.
Gold has a historical record of being one of the best inflation hedges, although it is not a perfect inflation hedge. As inflation rises, gold appreciates.
8. Negotiate a salary increase
If you are still being paid the same salary you received when you started the job or in the last five years, it is time to negotiate your salary (especially if you work in the private sector).
Your employer may never increase your salary if you do not make the first move. How do you negotiate your salary? Have a plan. Know your value as an employee, and demonstrate your track records.
You can also take the risk to hunt for another job with a higher pay (make sure that you have gotten the new job offer first before leaving your current job).
- Increase your income as often as possible
Working one job may not give you the income you need to stay ahead of inflation. You may need to take a professional certification. A professional certification can raise your hourly rate.
Learn skills in high demand. According to Warren Buffet, the best solution to inflation is to be exceptionally good at something.
Learn to sell more products and services daily or raise your prices strategically. You can also japa to a better country to increase your income.
© Kingsley Ndimele
Your Reliable Consultant