Ghana is facing what some economists term the worst-ever economic crisis since the 1980s. The country is engulfed with high inflation, cedi depreciation, high public debt rising to 95% of GDP, and on top of it all debt distress. What has even made greater waves and has been a major topic for discussion is the government domestic debt exchange program, which has been referred popularly as 'haircut'.

These issues have not only caused hardships for Ghanaians but have also affected investment and growth in the country. Despite these challenges, there are several important lessons that we can learn from Ghana's economic situation. In this article, we will explore key takeaways from the current economic situation in the country and how they can help us in making financial/investment decisions.

I. There is no Risk-Free Investment.

Most of us were taught in school that investing in government securities like bonds and treasury bills came with no risk. Almost every piece of literature on finance equates government securities to a risk-free investment. We were made to believe that government is the safest borrower. You will sometimes hear finance professionals saying that "when a current government borrows and is not able to pay another government will come and pay". The current economic crisis has "lifted the veil" on this assumption and highlighted the fact that every investment comes with a certain level of risk. That is why you receive returns on your investment as compensation for postponing your consumption. The government's Domestic Debt Exchange program means that investors will not be able to realize all the returns on their government bonds. What you should have in mind as an investor is that every investment vehicle carries a form of risk, no matter how juicy the returns may be.

II. Know your Risk Appetite

When it comes to taking risk to earn returns, different people have different attitudes. Investments giving lower returns normally come with lower risk. On the other hand, investment with higher returns involves taking higher risk. How did you react as an investor when you first heard about the government's debt exchange program or you saw a drop in your investment returns? This is the best time to understand your risk appetite and the kind of investment suitable for you. Every investor will either be a risk lover, risk averse or neutral to risk. A good understanding this will help you to choose a suitable investment portfolio that will give you financial peace of mind even in a period of economic turmoil. Speak to a trusted financial advisor to understand your risk appetite.

III. You MAY NOT always have Positive Returns.

Investing money can be both rewarding and risky. It can bring financial security and freedom, as well as a sense of accomplishment. Unfortunately, when it comes to investing, there are not always positive returns. Understand that the investment market can be unpredictable and the potential for losses is real. Even the most experienced investor can find themselves in a difficult situation if the market takes a sudden turn. It’s important to understand that there are no guarantees when it comes to investing and that it’s important to be prepared for a range of outcomes. Due to the country’s economic problems, a lot of investment schemes are making losses which are really expected in a period like this. However, it does not call for making panic withdrawals by liquidating your investment. Once the economy returns to normal and there is growth, your investment will start having appreciable returns. Knowing your objectives, the risks involved and having a strategy in place can help to minimize losses and maximize returns. Armed with this knowledge, you can make smart investment decisions that will help you stay on track to reach your financial goals.

IV. Diversify your Investment

The main objective for investing your hard-earned money is to create a financial cushion and build wealth over time. Ghana's economic woes have widened the need for proper diversification of your investment. You might have heard the popular saying "do not put all your eggs in one basket". You may have been a victim of the current economic situation if you had all your funds in one investment instrument. It is very important to diversify your investments to ensure that your money is well spread across different financial securities to minimize market volatility and potential. Diversifying can be one of the most important steps in successful investing, as it allows you to spread your money across different asset classes, industries, and even countries. With careful planning and research, a diversified portfolio can help you to reach your financial goals.

V. The need for Liquidity in financial planning.

Liquidity is an essential factor in investing, especially during challenging economic times. It helps investors to maintain flexibility and manage risk, ensuring that they are better equipped to navigate market uncertainties and make informed investment decisions. Liquidity simply refers to the ease with which an asset or financial instrument can be bought or sold for cash without affecting its market price. As the investment environment continues to evolve, the need for liquidity has become increasingly important for investors, businesses, and financial institutions. Whether it is for managing risks, meeting cash flow needs, or making investment decisions, the availability of liquid assets can play a crucial role in financial success. In uncertain times, the availability of liquid assets can help investors to meet their short-term cash needs, such as paying bills or covering unexpected expenses, without having to sell investments at a loss. One surest way to ensure you have liquidity in uncertain times is to have an emergency fund that is easily accessible.

The country is going through economic challenges which has caused a lot of uncertainties especially in the investment space. These key lessons will help shape your financial and investment decisions. It is very important that you speak to a financial advisor to assist you make a well informed decision in this period of economic uncertainty.

---

Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.

The New Year brings an opportunity to reflect on the past year and to set new goals for the year ahead. Were you able to achieve your goals for the previous year? Looking at your current circumstance, do you think there are aspects of your life that need improvement? Answering these questions will give you a clear picture of where to focus and how you need to approach the New Year. If you are considering setting physical and mental wellness resolutions, consider adding financial wellness resolutions as well. On the other hand, if you never had a clear plan for the year, this is the time to plan because a sailor without a compass will always get lost.

Planning for the New Year can be a very tedious exercise and you might lose interest and leave your life to chance especially where the previous year did not gone as planned. You need to approach the New Year with high optimism and with the hope of getting the best out of it. A brand-new year is a great opportunity to build a new habit as well as improve upon old ones. You may want to buy a car or move into your own house. Regardless of your goals for the year, you will need a very well thought through plan and strategy to sail through.

One area you cannot ignore for the coming year is having a good financial plan. A good financial plan will ensure that you have financial security and peace of mind. This will mean you will have enough funds to cover your lifestyle, emergencies and future financial goals. Here are a few strategies to help you thrive financially in 2022.

I. Set Financial Goals

The first step you need to take is to set financial goals. In setting a financial goal, you need to assess yourself to know where you are.  To set a concrete financial goal, you will need to answer honestly the 3 questions below;

1. Where am I now (current financial situation);
2. Where do I want to be (financial goal); and
3. How do I get there (action steps).

 II. Live within Your Means

“Living within your means” is simply having your expenditure for each month be less than or at least equal to your income for the month. Remember, you are not in competition with anyone, and you do not need to impress anyone. The best way to live within your means is to set a budget. It is important to note that having a budget alone is not enough. To ensure you succeed, you stick to the budget you set.

III. Pay off your Debt

To achieve your financial goals, you will need to be very discipline about managing your debt, if any. Try to pay off your debt by first getting rid of smaller debts. This will motivate you to pay off larger ones. Avoid taking on new debt if it is not necessary.

 IV. Save and Invest

Once you know your income and you have reviewed your spending habits, it should be clear and easier for you to know how much to set aside every month to meet your future needs. The best strategy you can adopt for the New Year is to pay yourself first any time you earn income.

There are various rule of thumbs you can adopt to help you save and invest but the 10 – 90 strategy is recommended. That is, save and invest 10% of your monthly income and spend the remaining 90% on your needs and wants. Try as much as possible to automate your savings and investment by simply setting a standing order on your bank account or mobile money account.

 V. Plan for a Comfortable Retirement

Retirement is a period you cease to be actively employed. In retirement your savings throughout your working life should be able to cater for you. You need to be able to estimate the amount of money you will need during retirement. Apart from the mandatory schemes, you can enhance your retirement benefits by opting for a voluntary personal pension plan. In 2022, take the necessary steps to save towards a comfortable retirement. This will improve your overall financial wellness.

 VI. Stay Organized

Setting goals and having a financial plan is good but your efforts will be in vain if you are unable to stay on track. You will need time, consistency and discipline to achieve your goals. Try as much as possible to evaluate your financial plan at least every quarter to ensure you stay on track.

 Our financial planners are available to assist you to design and implement a good financial plan. Connect with an Axis Pension Advisor to discuss your financial goals for 2022 and more.

---

Axis Pension Trust partners workers throughout their retirement planning journey to ensure they are on track to achieve a dignified retirement. For more information on our services or general enquiries, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. or call 030 273 8555.