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Posted by Felix Okoli on Wednesday March 7, 2012 15:46:23:

Why do most people tend to get poorer when they are less active or older? This is quite a different scenario for rich people - They tend to get richer as they grow older.

Time value of Money
One reason why I've seen that a lot of people who were once millionaires in their youths tend to get bankrupt or poorer after a short while is due to their lack of investment in real assets. There is a place in the scriptures where it says, "There is a time for everything...a time to be born, a time to die". If you know the rules of being rich and successful, you should also apply such wisdom to your wealth. There is a time when you will make big money and they will be a time when you only would wish you still had money. But when you had such money, what did you do with it? The truth is, money tend to lose or gain value over a period of time and in an inflationary economy like Nigeria, it tends to lose value most of the time.

How do you use your money?
Some people when they get rich tend to keep spending their cash without thinking of tomorrow and for most of them, you can't really blame them because they are not used to holding onto money. There are also others who mostly thing of their tomorrow and that of their children and they tend to put aside money for the rainy day. They save and maybe also invest.
Let me give a scenario of someone who is used to earning maybe N50,000 per month and he only gets to have about N30,000 disposable income monthly after expenses. He may be a bit careful about how he spends his money especially if he is living in an expensive city like Lagos. But assuming he does a side job or contract that one day brings him N600,000 to N1m, what would he do? He's mostly likely going to be carried away. Why? Because he is not used to handling big cash and you can't really blame him.
If you really want to make money in Nigeria or sustain your wealth, they are two things you need to do: Save and Invest. Don't spend all your cash.

Real Assets vs Inflation
When I say real assets, I mean Long term assets rather than cash or other liquid assets which can easily be converted to cash. Real assets are what successful people use to get richer during an inflation. It is a form of hedging. Real assets include land, housing, bonds, long term loans, long term stocks and so on.
Inflation on the other hand has to do with the general rise in the prices of goods and services. One thing with inflation is that it makes people who have cash poorer since it gives you less for more money. So in essence, when there is inflation, your cash suffers most.

What to do during an inflation
Inflation in Nigeria is one major reasons why Nigerians tend to get less successful as they ought to and the only way to avoid this is to simply convert your cash to real assets. You could buy stocks, land, housing or other assets even if it is gold. Those things tend to rise in value as inflation affects the economy. Putting money in the bank would only make you poorer since you will still be holding onto cash which is not a smart move during an inflation.

Think of it. Why do you think fuel marketers tended to hoard fuel before the new year? They suspected that Jonathan would announce deregulation which would ultimately cause prices of market products to rise. They planned before the inflation and they made more money. Same goes for people who bought tangible items rather than holding onto cash. In times of inflation, it is better to hold onto tangible things rather than cash.
To get richer, it is always best to convert your cash into long term assets rather than holding onto it. You lose money when you hold onto money in Nigeria. Invest in something.

Conclusion
So what do you do when you have cash? Save and Invest. Don't just save but invest it as well. Take advantage of mortgage plans and housing schemes. Buy a land if you can. Buy penny stocks of promising companies. Avoid keeping cash in the bank for too long unless the bank pays as high as inflation rate.

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Comments:
Re: Invest in Assets: Avoid inflation induced poverty Reply by Ajamu Adedayo on Saturday April 21, 2012 at 20:9:14:

This is one great secret, many people are not used to this saving and investing habit. More grease to your elbow mr Okoli

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