Investment: … a young person’s path to financial independence

As young people we always fantasise about living great lives in future, which usually includes having flashy cars and sprawling mansions. However, for a young man/woman to acquire such assets, he/she has to attain certain heights of financial independence which can only be achieved through investment.

Financial independence refers to the ability to live more or less as one wants to, within reasonable limits. Contrary to popular opinion, hard work alone does not guarantee wealth. Wealth is a culmination of the skills, knowledge and timing with which a person manages and invests his current inflows and overall hard work.

One of the regrets of many a middle-aged man/woman is his/her inability to have started saving money at an earlier age. Saving involves putting away a part of your current income for future use. Saving can be understandably very difficult sometimes, especially at an older age when a person has numerous responsibilities to fulfil. It is therefore ideal and advisable for young people to cultivate the habit of saving.

Saving requires planning, such that there is a fixed amount of money that has to be saved per day, week, month or year depending on one’s individual goals. Every young person should therefore have what I call “savings goals” or “SG’s” for short. In order to set a savings goal, you have to assess the frequency of your inflows and the time-frame of these inflows so as to tailor your savings goal to your own capabilities. Savings goals should also not be overly difficult to achieve or overly easy to achieve. Consistency is also an important element of saving.

A habit refers to an activity that is performed continuously; saving should therefore be done continuously so as to achieve maximum results in future. Saving is the first step on the long and daunting road to financial independence. Start saving now and your future self will be forever grateful.

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After saving, it is very important that a young person invests. An investment is the commitment of savings to any venture with the hope of receiving interest in future along with your initial savings. Investment is very necessary because as one saves money without necessarily receiving any interest on the amount, the savings slowly begin to lose value – mainly due to inflation.

This phenomenon is referred to as the time-value of money. It is due to this phenomenon that, for example, GH¢10 cash-in-hand used to buy a certain amount of goods now will not be enough to buy that same amount of goods in about three (3) or more months. Investment is therefore of great importance because it hedges against inflation. Investment also rewards the individual for the duration within which his/her savings has been committed.

Savings can be invested in the money market, equities market, real-estate, or any undertaking that is seen as a means of earning profit. Investment is usually a dicey affair, because any wrong decision could result in the total loss of one’s savings – which is why it is usually left to the experts who have been trained and accredited by the Securities and Exchange Commission of Ghana. For safe investment, it is therefore advisable to entrust your funds into the able hands of accredited investment banks and companies such as Databank, Gold Coast Securities, FirstBanC, IC Securities and Beige Capital.

The experts at these firms help you to assess your level of risk aversion and fashion out a portfolio of investments to suit your individual interests. This portfolio could include money market instruments such as Treasury bills or certificates of deposits. It could also include investments in the equity market through the purchase of shares, and also include investments in real estate or any other profitable venture. If properly set up, a portfolio can generate interest for the investor for a very long time, and also go a long way to securing a young person’s financial independence.

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As young people, we tend to over-depend on the funds made available to us by our parents or guardians – thus blinding us to the opportunities all around us. It is important for us, as young people, to always be on the lookout for opportunities that will help make society a better place and also serve as a means of generating income.

Sometimes these opportunities are few and far between, so when they do come around it is important that one invests his/her time, resources and energy to make sure the opportunity blossoms into something one can be proud of.  Not only does taking advantage of opportunities lead to pride in one’s accomplishments, but it also results in self-sufficiency – which, at a young age, is a huge step to becoming financially independent. Due care must however be taken in assessing the viability and authenticity of any opportunity so as to avoid wastage of resources.

In as much as young people should chase financial independence, it is crucial that we recognise that there is no easy way to riches. Rome was not built in a day, neither can your bank account be filled in a day. Financial independence requires commitment, honesty, hard work, dedication, confidence, determination and intelligence. These traits will be your armour in your battle against mediocrity and poverty so as to achieve financial independence.

We should therefore vehemently reject ‘get rich quick’ methods such as Internet fraud and the use of rituals. There is no greater feeling than the satisfaction felt from achieving financial independence through honest means. As the saying goes, “hard work never killed anybody”.

The writer is a level-400 student at the University of Ghana Business School.

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