In a country like ours, called Nigeria any talk of cash could be laughable to very many at the moment. A talk of surplus cash will even be considered more preposterous in such quarters where hardship hold fame and steady.
The reason is not farfetched – there is hunger in the land and most people are struggling to find enough for the day, not to talk of surplus. The economy is so pathetic that three square meals a day has become luxury to many.
Therefore, let’s face it – for this singular reason trying to figure out what to do with a cash surplus is at best an illusion to those whose economy have had the greatest hit in the present day Nigeria.
This notwithstanding, there are still a great number of Nigerians who are creating wealth even in this had times in the country. There are even more people who may not be creating wealth at the moment, but are earning enough to prepare for the next rainy day.
However, they may not have the foresight to take a good decision on how best to allocate these resources.
We may not know exactly when things will get back to normal (if there is anything like normal) in our country. What we know for sure is that things will get better someday. It may not be today, but better days will surely come sometime “tomorrow”.
We also know that there will be more rainy days in our lifetimes. It never stops coming, even though many of us never give a thought on how to prepare for it.
That is what we are going to look at in a moment – just a bit of options on how to manage available cash (no matter how difficult things seem to be).
However, I cannot deny that most of the strategies discussed below are better suited for those with some form of extra cash, after checking certain boxes in the personal finance scale.
Extra cash could come in the form of a sudden windfall of cash in the form of a work bonus, an inheritance or profits from a business deal, property sale. It also come from extra savings made from new savings strategy within same income level.
Market conditions are creating a cash conundrum: Investing is risky and buying real estate isn’t an option for just everyone, unless you have quite good cash balance set out somewhere.
Reason being that Nigeria lacks good mortgage system that make property acquisition possible for much of the people.
However, leaving money liquid can have significant downsides as well, due to today’s high inflation rates.
At current rates, cash has lost more than 15.9% of its value since this year alone, and the average savings account yield of 1.25% according to Nairametrics, is doing little to offset that.
Therefore, you are automatically taking a risk by leaving money in cash. Cash is much more volatile than people realize, because they do not see the number moving up and down in their bank account.
Your first move, of course, should be to make sure you’ve got your financial basics covered.
That means having an emergency fund with three to six months’ worth of savings, eliminating high-interest debt and making sure you’re on track to save at least 10% of your income for retirement.
Your emergency fund should off course include cash you are likely to need within the nearest future to meet personal needs in the absence of regular income.
Accidents in the work place, loss of job or business are a few reasons that can lead to loss of regular income.
For days like that, you will always need an emergency fund to rescue you for a while. Experts say money that you need in the next year or two still belongs in a liquid savings account, where you can access it easily, for the purpose of emergency fund.
If you’re lucky enough to have all those boxes checked, there are lots of paths you can take with your extra cash, especially if you don’t need it in the near term.
If you plan to use this cash in the next year or two, keeping it liquid or in a high-yield savings account is likely the best near-term strategy.
Essentially, above all things make concerted efforts to set out some cash for long-term investment.
The choice of what and where to invest must not be made based on sentiments. Consult experts who really know their onions, but also make personal research to stay on top of things yourself.
Written by Rita Onumajuru, a money blogger, who writes on personal finance, savings, investment and investment.
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