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Many of us will have to re-orient ourselves on the way we think about the concept of money. Joshua Kenon (www.thebalance.com) stated that “money can work for you, and the more of it you employ, the faster and larger it can grow over a long time”. Today, I will be taking an unusual approach to achieving financial independence; the level where the returns on your assets (accumulated wealth) equal or exceed your annual salary.
One key to financial independence is to push beyond selling your labor (active income) to making your money work for you (passive income). During your working life, use your income to acquire productive assets often used by your family, friends etc. Look around, go to malls, what do you see people use every day? Invest in the companies which produce those things. We all use Apple, Google, and WhatsApp but how many Ghanaians consider owning shares of those companies. Hmmm? Do your relatives and friends drink milk, milo or eat chocolates, and do you have any investment in Cocoa Bills, Nestle or Barry Callebaut?
Financial independence is a by- product of consistent behavior patterns that allow for long-term wealth creation. You and practically anyone can replicate those behaviors and get wealthy as well. Let’s evaluate the below behaviors:
1. Decide how you want to earn income in your life; active income or passive income? Would have a side hassle? Etc.
2. Adopt a disciplined spending habit and save money.
Make a budget and use it in your everyday spending decisions. You will have to spend less than you earn and pass the excess savings into either paying off debts (if you have some) or investing in financial assets. Brian Tracy quoted W. Clarence as saying “if you cannot save money, the seeds of greatness are not in you”.
3. Keep a long-term perspective.
Robert Marshal Bennin, CFA, Chairman of Axis Pension Plan (the de facto leader in Personal Pensions in Ghana), as part of his remarks at a recent annual open forum stated,” no one can build wealth without consistently investing over a long time”. Small efficiencies everyday can compound in a surprisingly quick succession of years. Start saving and investing little amounts daily and focus on your goal of achieving financial independence. That takes discipline and avoidance of instant gratification, by some measure the two most important character traits leaders possess. As your investable assets grow, do not withdraw to spend but look out for more opportunities to invest.
4. Find a complementary wife or husband.
Marrying a spendthrift or experiencing a divorce are a drag on chances of building wealth and achieving financial independence. If you marry an abusive person, you will have psychological stress which will ensure you can’t focus and progress at work. I want to tell you something, close the door. ‘May be next time you are out looking for a spouse, ditch the vital statistics and include behavior and financial statistics if you consider financial advancement very important to you’.
5. Support your relatives.
Extended family. Surprised huh? Support your productive relatives instead of those not striving to make anything for themselves. George Clason wrote in the Richest Man in Babylon, that “If you desire to help thy friend, do so in a way that will not bring thy friend’s burdens upon yourself”. Whatever support you give should help them become financially stable themselves and not create a cycle of dependence on you. If you do not support them to be financially independent, every funeral, hospitalization etc. will all be on your head. They will go pick fights, get arrested and call you to bail them from cells. But if you have 3 others who can stand on their feet, they will help you spread the burden. Let me stay on this a bit. In Ghana, we make the mistake of providing cash gifts and support to poor relatives who are unable or unwilling to improve and are constantly in financial trouble. Do not neglect your relation who is an accountant because you think she or he does not need your support and channel the support to the drug addict or those who cannot eventually get free from depending on you. Take a moment to ponder what signals you have been sending. Don’t breed underachievers.
Try to rearrange your incentives so that they encourage people to grow up to be financially independent themselves and lessen your burden. The Akans in Ghana have a proverb which says” a child who climbs a good tree is the one we push up”. Heavens must help those who help themselves. Next time, consider providing a scholarship for those who achieve a certain qualification or joining certain professions, create a credit union that finances the launching of certain businesses. Over 20 years’ time, you would have lifted a whole generation above poverty line and acquired space for yourself to achieve your own financial independence.
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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.
What is wealth? Real wealth consists of equipment and software, privately held real estate, intellectual property, net international assets, land, roads, public infrastructure etc. As you would notice, most of the wealth is really held by companies, which are better placed than individuals to deploy wealth so as to generate income in the long-term. To have a share of the national wealth, most people have to do so indirectly through a financial claim on those assets by owning shares in the companies or buying corporate and government bonds. This concept gave birth to financial assets, which is a way for the masses to take part in the national wealth.
It has been long established by economic thinkers that savings and investment are the foundations of economic growth and development. Adam Smith assumed this in his work “the wealth of nations”.Robert Marshal Bennin, CFA, Chairman of Axis Pension Plan (the de facto leader in Personal Pensions in Ghana), as part of his report at a recent annual open forum stated, “no one can build wealth without consistently investing over a long time”.
So, why should you strive to build wealth? Below are some reasons why. The wealth an individual or family possesses helps:
A. Send kids to school
How far one is able to advance in education is dependent on family wealth. I know of brilliant individuals who got scholarship to schools but could not afford the transport and clothing required to report to school. The quality of education one gets and the classmates one makes are by far a strong determinant of social mobility and economic opportunity. Just think Harvard, Stanford, Oxford, etc. One will often have to pay some top fees for the opportunity to attend such schools even though your GMAT scores may be pretty good.
B. Launch small businesses
You cannot launch a business without some form of capital of yourself. How can you build capital without consistent savings and investment? Your access to credit from the banking system will depend on your wealth or ability to provide collateral of some form. It will be much easier to prove to a bank you can repay your loan if you show an investment statement. Top it up with the reality that those from wealthy families are more confident to launch more businesses because if they fail, they have some wealth bringing them income to depend on.
C. Survive unexpected challenges
No matter how well we plan for our lives, we will still have to deal with catastrophic events like covid-19 pandemic, death of key family members, divorce, lawsuit, natural disasters etc. These unexpected events can sometimes force you to rebuild your entire life again from scratch. For many people, their only strategy is to rely on their church or family and friends to cope in such situations. Relying on charity can take you a very long time to recover. Take note your goal is to have financial ability to rebuild and recover speedily or to weather the storm with minimal alterations to your life and lives of those who depend on you.
Many people did not have enough savings to survive for 3 weeks during the recent covid-19 lockdown. Businesses in the most hit sectors who did not maintain enough retained earnings in prosperous years had to implement layoffs, cutting off career hopes of some workers. Compound this with the fact that some of the workers have no personal pension investments but rather had bank loans demanding on going repayment.
Jeff Bezos is still the top billionaire despite going through divorce. He could afford the best lawyers who negotiated much more reasonable terms of divorce. Some other people would have been completely devastated. The rich man’s wealth is his strong city indeed. Make a decision to improve your future financial opportunities by starting to build savings and investments. Open a Personal Pension plan account today, this is no joke my friend.
D. Stabilizes loss of income and consumption smoothening
Life is in cycles. In some years, many people earn more money than they would need to consume and other years they don’t earn enough to survive. One such period where income could be lost is retirement or permanent disability. But if wealth has been acquired during the high earning years through investments, then they could live off the income stream from those investment assets without significantly reducing their life style.
E. Increased capacity for helping others.
Culturally, funerals are a big thing in Ghana, as in many parts of Africa. Wealth can give you the power to organize a befitting funeral for your parents. For those who have had the opportunity to see your parents in their final years, having the financial means to assist them till death can be deeply satisfying. Wealth also gives you the ability to fund community events and public infrastructure that keep people together and strengthen cultural values e.g. a chapel, community center, school block etc.
Let me leave you with some questions to ponder about. When a rainstorm hits your village and NADMO is unable to send relief in time, how many blankets and medicines can you organize to support your village? Do you have the means to buy roofing sheets to re-roof your family home? Could you buy some nose masks for your home town or church during the covid-19 outbreak?
F. Live happier life
Wealth allows you live the type of life style you really want for you and your family without financial stress. I have heard that money does not bring happiness, but how happier is someone who cannot afford to do what they truly believe in or assist people they truly care about?
The list is endless and you can do some or all of the above someday by investing consistently over a long time. Open an Axis Pension Plan investment account today or contact any mutual fund provider and start right away. Now that you have some financial goals to start saving towards, start by taking actions today that will ensure you are financially “lucky” in future. George Clason, in the Richest Man in Babylon was quoted as saying, “men of action are favored by the goddess of good luck”.
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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.
How much loss can you afford to take? What kind of risks keep you awake at night? How much risk are you willing to take on? Finding answers to the above questions is part of the process we refer to as determining your risk tolerance level.
The willingness to assume risk and also potential for higher gains differ from person to person. Risk tolerance is influenced by a combination of factors, some of which are listed below.
I. Personal Circumstances and Nature
Personal factors such as your income level, sources of income, age, marital status etc. have a bearing on your risk tolerance level. While there are no universal rules on this, someone who has multiple sources of income has more risk capacity than one who has less. It is usually assumed that a 22 year old, starting to save for retirement has more room to invest in more risky assets than someone who is 50. This is because younger people have a long time to wait till stock markets or real estate prices recover without need to sell out.
What would you advise someone who is the sole breadwinner of the family to invest in? If the investments fail, a whole family may be affected whereas a single person could manage for a longer period. If the consequences of a loss are dire or will affect a larger number of people, you should take less risk. Having said this, we find some high-income earners still very risk averse. Some people cannot just live with the possibility of loss even if the loss is temporary and will reverse.
II. Investment Objective
Someone who has been laid off and given package, may be not have another job readily available and so when investing, they may take low risk investment because they need predictable income from their investment.
If you want to invest to buy a house in ten years’ time and your income is low, you might want to take on more risk to grow the funds enough to buy the house. In this case, investors may invest in stocks consistently over the period and the investment gains can be significant to enable them meet their growth objectives.
III. Time Horizon
When you need to invest for a period less than 5-10 years, then it is advisable to take on moderate to low risk like government treasuries and bonds or mutual funds that hold government paper and other fixed income assets. Otherwise, you will be exposed to liquidity risk such that when you want to cash out and there are less buyers, you will be forced to reduce the price so low before someone else will buy you out.
I heard of stories where people went to make placements for 3 years maturity because the interest rate was 27% per annum. Nine months later, they came wanting to cash out and found they could not, and even when some could redeem their investments, they suffered 10% penalty. Don’t chase high returns (which also imply higher risk) if you will or might need the money anytime soon.
IV. Knowledge and Experience of the investor
Experienced investors usually take on greater risks than new investors. Good investors have access to quality research and rely on years of experience to evaluate the risks and can take other measures to protect themselves than new investors can.
You need knowledge about the market you will be investing in. In Ghana, we do not have well developed financial risk management products like swaps, options, futures etc. which one could use as a hedge against potential investment losses. In advanced markets these exist and so they may be more bullish on stocks because they can take counter positions as a hedge.
V. Size of your capital and the market you operate in
Take for instance, Axis Pension Plan or any other investor with GHS100,000,000 can diversify their investments and so can have some amount in equities and real estate which are relatively riskier. But if you are a small investor with GHS50,000 or less, you may not be able to diversify as wide as the GHS100m investor. So, a mutual fund is a low risk investment for you to start with while you buy time to learn the behaviors that are necessary to succeed as an investor.
There are online questionnaires you can take to assess your risk tolerance level but use it only when you know what you are doing otherwise consult an investment advisor or pension advisor to assist you when doing this for the first time
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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.
You might be worried about locked up funds, may be a financial institution you invested in closed down or yet still the caretaker of your side business bolted with your money. If you are anxious about these and more, then I invite you to read on. You will know why it is that funds get locked up and how to make money in future without locking up your funds.
Anytime you put your money into government bonds, treasuries, stocks, cash etc., you expose yourself to a certain degree of probable loss of capital and also potential for gains. In a previous article, we discussed the various sources of risks involved in investing in financial assets. Knowing the risks, how does one go about minimizing the impact on finances should the risks manifest? Below are a few risk mitigation techniques to aid you in your investment journey:
I. Avoid borrowing to invest (leverage)
Many people borrow to invest so as to maximize gains. They either borrow from banks, friends, their employer or actually borrow shares to sell and replace them later (margin trading). Those investors usually borrow more than they can afford, to buy shares, speculating on the rising stock prices on the exchange. When this happens, a temporary fall in stock prices will lead such investors to sell quickly to repay loans thereby abandoning potential opportunities for future gain.
II. Diversify
Spread your investments into different asset classes. For small investors, investment schemes like Axis Pension Plan and mutual funds provide this diversification for you. The principle of diversification ensures that when one investment does not perform well, the others do well to make up for any losses.
III. Invest Consistently
Investors who invest small amounts at regular intervals e.g. monthly or weekly do better than those who try to time the market. Sometimes you will buy at high prices and other times low prices, but in all cases a large portion of your savings is not invested at expensive times. We call this Cedi Cost Averaging.
IV. Keep a Long-term Horizon
Investors who invest for the long-term generate better returns than short term investors. This is because long-term investors have enough time to wait for the market to correct after prices fall than short term investors. Economies and markets don’t stay high or low continuously, they go in cycles of high years and low times. But in the long term (5-10 years), they usually go in upward trends. An investor with long term horizon is not pressured to sell during low market period and thereby avoid booking permanent losses.
V. Set your Risk Tolerance Level
How much loss can you afford to take? What kind of risks keep you awake at night? How much risk are you willing to take on?
Individuals willingness to assume risk and also potential for higher gains differ from person to person. Risk tolerance is influenced by a combination of factors, some of which are listed below. Finding answers to the above questions is part of the process we refer to as determining your risk tolerance.
Risk tolerance is influenced by a combination of factors and knowing your risk tolerance will guide you in the investment opportunities you explore. It is important that investors apply the above mitigation measures in order to avoid exposing themselves to undesirable losses. Speaking to a financial advisor will help you assess your tolerance level as well as how to apply these mitigation strategies
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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.
You might be worried about locked up funds, may be a financial institution you invested in closed down or yet still the caretaker of your side business bolted with your money. If you are anxious about these and more, then I invite you to read on. You will know why it is that funds get locked up and how to make money in future without locking up your funds
You might have heard that Government bonds are considered risk-free, bank fixed deposits are low risk while stocks and real estate are high risk. At the end of this article, you may be able to judge for yourself if there are risk-free investments.
So, what exactly is risk?
It will surprise new investors that there is more than one definition of the concept of risk, and frustrating for many to discover that risk is often not quantified precisely. We shall discuss how finance professionals have tried to measure risks another day.
For purposes of this article, define is risk defined as the possibility that you may not get back some or all of the money you expect from an investment. It includes the chance that you may lose some or all of your original principal. This risk of loss is increased if the investor lacks sufficient knowledge and capacity to identify from where risks are likely to pop up and attack his or her investments. Let me state that when an investment promises high returns, it implicitly means high risk.
Where do risks come from?
It depends on whether one invests in financial or non-financial assets. Click here to read about financial and non-financial assets. Some of the risks are systemic and thus affect everyone in the economy while others are specific to the kind of investment you are holding.
If you invest in bonds, stocks, personal pension plans, mutual funds, currency, fixed deposits etc., below are some of the sources of risk and how they affect your investments.
I. Inflation Risk
Inflation reduces the purchasing power of your money. If your investments do not return above inflation, in the long term you will lose your economic position. For example, if inflation rate is 10%, it means in a year’s time, the money you have can buy 10% less than what you can buy with it now. As a systemic risk, inflation risk affects all investments whether government bonds or equities. The return above inflation rate is called the real return. For you to be making any meaningful progress towards your financial goals, you should aim to make positive real returns.
II. Interest Rate Risk
If interest rates rise, the value of your bonds will fall below principal if you try to sell on the secondary market. Its value will rise if interest rates fall. Let’s say you purchased 2-year treasury note at 19% for GHS50,000. Six months later, government is issuing new bonds at 21% and you are stuck with 19% bonds. When you want to sell your 19% bond for whatever reason, you will sell the bond for less than GHS50,000 for anyone one to be willing to buy your bond, if not they will abandon your19% bond and buy a fresh one at 21%.
This risk affects bond investors more directly than investors on the stock exchange. Anytime you make any investment that involves receiving principal and interest repayment in future, know that the chance you will gain or lose some will depend on future interest rate movements, and no one can predict whether in future interest rates will move up or down.
There is another related risk caused by interest rate movement called Reinvestment Risk. For example, you invest for 3 years at 26% pa. You may find that if you want to roll over at maturity, you can only do so at 18%, losing the opportunity to earn the higher returns.
III. Default Risk
This is the risk that the issuer (government or private company) may not be able to pay the interest and or principal to the investor(s) due to financial difficulty. Often, when you hear government treasuries are risk free, they mean government will not default (default risk free). When you are tempted to believe this, just remember Greece, even Ghana has defaulted twice in our history as a nation, the last default happened in 1982.
Ghanaian investors have had to grapple with massive default risk from placements with non-bank financial institutions (NBFIs) and pyramid like schemes. Some corporate bonds issuers have also defaulted on their principal and interest payments.
IV. Liquidity Risk
A security which can be easily sold without need to significantly reduce price is considered liquid. Some investments take a long time to sell and you if want to sell quickly, you will need to reduce the price significantly e.g. real estate, equities in Ghana and non-financial assets like piggery, farm, car washing bay etc. Those investments are illiquid and so have higher liquidity risk.
Treasury bills and bonds have a ready market in Ghana and have lower liquidity risk. I know some countries where private placements are more liquid than buying government treasuries, bizarre isn’t it?
What should new investors do about risk?
Do not run. Being aware of your sources of investment risk and deciding how much loss it can bring should help you take some steps to minimize their likelihood and impact. So, I can infer that the real risk resides in an investor being either unaware of risk and/or not knowing the appropriate actions to take to minimize their impact.
Having followed me till now, do you agree that governments are “risk-free”? In future articles, we will tackle risk mitigation and risks of investing in non-financial assets as well as how to protect yourself from those risks.
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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.
This pandemic has reaffirmed that no one knows what the future holds and our capacity us humans to predict the future with certainty is “nil”. That said, whilst we cannot predict the future with certainty, we can prepare adequately for it by relying on our understanding and extrapolation of past patterns – with the knowledge and humility that those patterns may not be repeated in future.
Life before COVID-19
Prior to the economic disruption caused by the virus, Ghana had successfully completed a four-year IMF Extended Credit Facility (ECF) program in April 2019 and had since 2017 been implementing a home grown industrialization agenda seeking to return the country to a path of sustained economic growth. The combined effect of an economic shutdown and the closure of international borders has caused adverse demand and supply shocks to the Ghanaian economy.
As depicted in the table below the authorities forecast GDP could decline from 6.8% to anywhere between 2.6% and 1.5% whilst the fiscal deficit could increase from a planned 4.7% of GDP to 7.8% of GDP.
*forecast by EIU
Navigating the market in search of fallen angels
The Ghana stock exchange has recorded two consecutive years of negative returns and on a year-to-date (May 2019) basis is down 14% with investors loosing over GHS3billion in the process.
The recovery of risk assets especially on the GSE is expected to be a long and painful one because the drivers of the Ghanaian economy are largely represented in the informal sector which has been hardly hit by the virus. The announcement by the central bank suspending dividend payment by banks to shareholders will reduce liquidity and demand for stocks on the GSE which ultimately will lengthen the time for any recovery.
Healthcare, food, logistics, storage and Information & Communications Technology (ICT) rank as some of the biggest winners in this cycle - but the question is:
It is true the age old adage in investments says; “buy when others are fearful” – and with the market looking very attractive from a valuation standpoint it could be tempting to go treasure hunting. However, as advisors, our concern is on liquidity and the holding period.
The Hunt for Yield
Giving the economic uncertainty, the obvious choice for investors is to hold onto cash or relatively safer fixed income instruments. The combination of low oil prices, constrained government revenue, rising fiscal deficit, a vulnerable currency and rising inflation expectation suggest that the economics are ripe for interest rates to rally north. This is because authorities will need to borrow more to finance the rising deficit. However, the central bank has been on a dovish trajectory for some time as it seeks to provide the impetus for credit and economic growth.
The long walk to freedom
The post COVID-19 world will birth some new ways of doing business, new opportunities and new challenges. The 4th industrial revolution has been greatly accelerated as a result of this pandemic. It is important to remember that the world has been on this dark path before: Sars in 2003, the global financial crisis in 2008, Ebola in 2013 and Zika virus in 2015 – and yet economies still stand strong. COVID-19 will come and go and nations will begin their long walk to economic freedom. As assets look cheap and many opportunities arise, the one advice investors should hold to their chest; caveat emptor (buyer beware).
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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.
In our previous article, we discussed what net worth is and how it can be calculated for every individual. Net worth is simply the difference between the value of what you own—your house, retirement funds, investment accounts, checking account balance, etc.— and the value of what you owe such as the mortgage, car loan, other debts and so forth.
By knowing where you stand financially, you will be
Net worth is a robust indicator of your personal financial health. A positive and increasing net worth indicates good financial health and cushioning against financial setbacks. It is certainly cause for concern if your net worth is decreasing. However, it does not necessarily mean you are financially irresponsible.
With this in mind it is not only important for you to know what your net worth is but what your ideal net worth should be based on your current conditions. This allows you to set your net worth goal with a target in mind but more importantly knowing your ideal net worth places your financial progress in the proper context and provides a yard stick for evaluation.
To determine your ideal Net Worth, you can make use of the following
Approach I - The Catch-all equation
The use of an example will make this approach more practical. Assuming you are 37 years old, and you make ¢150,000 a year. Using the above equation, your ideal net worth would be ¢360,000.
Approach II - Annual Income Multiplier
Another approach to determining your ideal net worth to have a net worth of 2x more than your annual salary by the time you’re 40 years old and 4x your annual salary by the time you turn 50. Using our example above, if you are now 37 and your salary is ¢150,000, you should have a net worth of at least ¢300,000.
Tips on how to improve your Net Worth
Your net worth is a great measure of your personal wealth and you want that number to grow over time. Measures to grow your bet worth can be broken down into 2 main categories:
I. How to grow the value of your assets
II. How to reduce your liabilities
It may be difficult to improve your net worth in these times of financial uncertainty (COVID-19), however, you can protect what you have now by:
Above all have a personal finance strategy. Earning more is important but we must stop thinking that the solution to all our problems is more money. We are better off by creating a strategy that helps us to manage our money better. Your net worth will fluctuate. However, similar to the stock market, it is the overall trend that matters. Ideally, your net worth continues to grow as you age – as you pay down debt, build equity in your home, acquire more assets, etc.
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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.
At the beginning of the year we discussed a few tips that one can follow to ensure financial fitness in 2020. We are almost halfway through the year and as such we must use this opportunity to do a routine financial fitness ‘check up’. The purpose of this article is to present you with an approach for assessing your current financial situation with emphasis on your net worth. At the end of this article you should be able to answer one crucial question:
Are you financially healthy?
In the area of personal finance, there are a lot of different numbers that we are all concerned about. We regularly check the numbers in our bank account statements, investment accounts and retirement accounts. All of these numbers are critically important. However, there is one overarching number that fully captures the effectiveness of your personal finance efforts: Your Net Worth.
What is Net Worth?
Net worth is simply the difference between the value of what you own—your house, retirement funds, investment accounts, etc.— and the value of what you owe such as the mortgage, car loan, other debts and so forth. It is a powerful indicator of your financial health. Net worth is an important number to monitor as it is the most accurate measure of wealth and moves the financial focus beyond income alone. Even if your income is growing, your net worth could be flat or on the decline due to other factors.
Determining your Net Worth
Knowing your net worth is one of the most important aspects of personal finance. The following steps will help you determine your net worth:
Step 1: Add up the value of all your assets. This could be in the form of Real estate you own, Vehicles, Personal possessions, Investments, Provident/Pension accounts, Bank accounts. It is important to use the current market value of your assets in order to obtain a proper valuation.
Step 2: Add up all of your liabilities. This includes everything you owe or any outstanding obligations you have such as: Mortgages, Personal loans, Loans from family or friends, Car loans, etc,
Step 3: Finally, subtract the sum of your liabilities from the total value of your assets. For example, if everything you own is worth GHS 100,000 and you owe GHS 150,000 in loans, your net worth would be – GHS 50,000.
What does Net Worth indicate?
A positive net worth means that assets exceed liabilities, while negative net worth results when liabilities exceed assets. Positive and increasing net worth indicates good financial health and cushions you from financial setbacks because it means you have money to fall back on or assets you can sell to generate cash.
A high net worth is very essential if achieving financial independence is one of your life’s goals. It is certainly cause for concern if your net worth is decreasing. However, it does not necessarily mean you are financially irresponsible; it simply means that you have more liabilities than assets.
Once you understand how your net worth is determined, it is easier to see what you need to do to grow it. In the next article we will address how to increase your net worth and what the ideal net worth for each individual should be. Until then, the question still remains;
Are You Financially Healthy?
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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 Coronavirus Pandemic continues to threaten economic growth, business continuity and the livelihood of individuals across the globe. The pandemic has exposed the fact that most of us live from hand to mouth with nothing or very little to fall back on when an unexpected event happens.The situation calls for each individual to review his or her financial plan and employ strategies to survive this season and thrive afterwards. In our various engagements, reference has been made to the concept of an Emergency fund as a viable option to make up for income short falls. In addition to reviewing your budget, an emergency fund could be a vital part of your COVID-19 response strategy, assuming you already have one.
An emergency fund is simply money or highly liquid assets you have set aside to cushion you against life’s unexpected events such as the loss of a job, medical emergencies, a major repair to home or car. Having an emergency fund should be a key part of an individual’s financial plan. It ensures financial stability and peace of mind during turbulent times. An emergency fund also safeguards future security by helping avoid tapping into your long term investment (e.g. retirement fund) to address emergency needs. Here are 5 tips to help you build your emergency fund during and after the COVID-19 pandemic;
I. Stick to Your Budget: Make a budget and live by it. As discussed in an earlier article, list all your monthly income, discretionary and non-discretionary expenses. Cut out or reduce unnecessary expenses to make room for savings. This will also help you determine your monthly living expenses.
II. Assess your need: Determine how much you need to save in your emergency fund. The general rule for building an emergency fund is to set aside 3 to 6 months of your living expenses. However, the ideal amount is dependent on your personal circumstances .i.e. job security, number of household income, nature of employment, income stability, medical condition etc. If you are more likely to have emergencies, you may need to set aside more than 6 months of your living expenses. For an individual who is less susceptible, 3 months or less may be fine.
III. Set a periodic savings goal: Based on your level of need, plan to save a specific amount of your weekly/monthly/quarterly income towards your emergency fund. However, if your income is irregular, try to set aside as much as you can as soon as possible. Regardless of the regularity of your income, saving should be carried out with the total amount needed in mind.
IV. Automate your savings: Set up a savings account or money market mutual fund account. The account should be easily accessible at no cost and should be separate from a bank account you use daily (e.g. Current account) so you are not tempted to dip into your reserves. Automate your savings into your emergency fund account using standing orders or direct debits. You may speed up your savings by saving windfalls, 'left-overs' and proceeds from selling something you do not need.
V. Review your plan: Financial planning is an ongoing process. It is important to review your progress towards building your emergency fund regularly and adjust if necessary e.g. if your circumstances or living expenses change (marriage, childbirth etc.)
Building an emergency fund is one of the first steps towards achieving financial peace of mind. Whether you are able to do so immediately or after the pandemic is over, adding an emergency fund to the list of your financial goals is a must. It is important not to save above what you will need at the detriment of achieving other financial goals. Once you are able to build your emergency fund to the level you need, channel your savings towards other financial goals such as achieving a dignified retirement.
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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.
Investments provide an avenue to grow your savings. To ensure that you invest the appropriate amount of money to the right asset, you must first take the key step of looking at your unique situation to identify your objectives (click here to learn how). It is possible to invest in financial assets and non-financial assets. Financial assets are instrument such as listed stocks on the Ghana Stock Exchange, Government Treasuries and Bonds, Corporate Bonds, Fixed Deposits, REITS, Gold and Cash (yes, cash is also a financial asset). There are also non-financial investments e.g. house for rent, operating a barber shop, car wash, farming, block factory, operating a school, Uber cars, taxis, the list is endless. You will need to commit time on a daily basis to personally manage non-financial assets if you desire to see meaningful returns. If run well, the rewards can be significant.
The proportions of your money invested in a combination of each of the above assets is referred to as Asset Allocation. Approximately 85% of your returns and losses will be determined by the asset allocation policy you choose. Stretching the logic, 85% of your investment success will be determined by who you are as a person, the other 15% are due to other factors and so let’s call those other factors ‘luck’. Man, know thyself i.e. your personality. Are you fearful or greedy, do you seek information and advice or rush in making important decisions, can you stick to your promises, can you sacrifice now and enjoy in future etc. All of these personal traits have a way of translating into your investment objectives and asset allocation, which then determine your outcome.
Next time you make a wrong investment decision (lose money), look carefully at your personality and learn what you can do better. Do not decide to quit investment altogether. Proverbs 4: 23 says, keep your heart (character, personality), for out of your heart springs the outcomes of your life. My dad, Daniel Kpapu Mani, once told someone, that “when you fall, stop looking at the spot where you fell but look back at what and where you stumbled”.
Some investments promise high returns but low liquidity, either due to the nature of the underlying economic activity or there is a default investment period (locked up funds). Some also promise access to your money at anytime (T-bills, bank FDs come to mind) and for that promise, the returns are relatively lower.
Get Professional Advice or Do it yourself?
Many people believe they can manage their money better than professional money managers. Some of those people have read widely on investment management, others even studied finance at universities. A wise man once remarked “if you think you can and if you think you cannot, you are probably right”. My advice is that unless you have a very large portfolio and or access to quality investment research at your disposal, then you should let regulated professionals help you. There are enormous costs involved in researching many companies and their investment propositions. To properly analyze even the Government of Ghana bonds, you will need access to Bloomberg terminal license at a cost (in dollars). How much less the cost of researching over 30 companies listed on the stock exchange?
You should heed the advice of the legendary Warren Buffet and join an investment like Axis Pension Plan or any of the SEC licensed mutual funds unless you have a whole research department at your disposal to help you understand what you are doing.
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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.
