True riches come from your income source not how you spend your income. And investing is a function of how you spend your income.
My first salary when I relocated to Lagos was 70k/month. With such an amount, no matter how much I save, before I could have a million naira saved up, it might take between 1 year (if I save everything that I made) to 11 years (if I save just 10% of that income). That’s assuming of course, that I did not get an increase in income.
Good enough for me, I got a new job that allowed me to save about a million naira within the first 1 year on the job. Can you see the point I’m getting at now?
Savings and investing is good. A habit that must be cultivated else, one will remain in perpetual poverty. However, obsessing over saving and investing the small amount one earns instead radically working to increase one’s income is an ill-informed obsession.”My first salary was 70k/month. With such an amount, no matter how much I save, before I could have a million naira saved up, it might take between 1 year (if I save everything that I made) to 11 years (if I save just 10% of that… Click To Tweet
I tweeted recently that I would rather have a 5% ROI on an N100m than rejoice over 200% on N10k. The reason is obvious, the former gives me a larger capital and eventual N5m ROI, while the latter despite its high percentage only leaves me with a paltry amount of N30k.
And that’s why they that look for high ROI are usually those with small capital base. When you have large capital even a 3% “guaranteed” ROI would do you much good. That’s usually so because one, you don’t want to lose that capital since you must have worked really hard to earn it and two, since it’s large enough, little percentage returns are usually big enough to take care of your moderate lifestyle.
The goal for everyone who’s looking to make wealth is to ensure that they do everything within their power to increase their capital base. And that only comes by increasing your earnings. Savings and investment is a practice along the journey to riches that ensures that you preserve what you earn and grow it. It’s not a substitute for increasing your earnings capacity and it will never be.
So when I say investing will never make you rich, I don’t mean it literally. But that obsession over-investing at the expense of increasing your income will keep you in the poverty that you aim to escape. Just imagine if I’d remain in my first employment with no salary increase and I had to take 11 solid years to save up to N1m. That’s cruel.
How to increase your income
I have seen people take all their savings and liquidate all their investments just to use it to pay for a professional exam. To the uninitiated, it looks foolish. They will wonder why will you not have an investment, why can’t you think long term and play to the tune of compounding, why are you so short-sighted? I will tell them to shut up. Yes.
You see, the biggest investment you can possibly make is an investment in yourself. An investment in yourself will return the highest ROI. And educating your mind is how you invest in yourself.
Let me ask you a few questions. Since you know that investment is the principal thing, why didn’t you save all your school fees and invest it in someplace instead of going to school? Why did you choose to go to school first? Isn’t it because of the school that you went to that is giving you some leverage to earn an income now? So why did you all of sudden think investing instead of more education (skill) would salvage your money problems?
You see, your income problems can’t be solved by investment in assets but an investment in yourself via the acquisition of more knowledge. That could be by taking professional exams or learning a new skill, or learning how to do something differently. Basically, it has to be an investment in yourself. That’s how you increase your income.
It is you that earns the income. When you are about to be paid, you will be paid based on what you have in your head and can do with your hand. Not what you have saved up and invested. Always remember that.