It is safe to conclude from historic precedence that a season of economic prosperity is often followed by a downturn and that these boom-burst cycles could have a significant impact on your wealth.
It is no longer news that the Covid-19 pandemic has unleashed a global economic slowdown and Nigeria, suffering its fair share of consequences, slipped back into recession last year. The challenging economic condition and the adjustments that it demands could baffle the average worker or business owner. While the economy has rebounded quickly, albeit modestly, the impact of the slowdown on your finances and investment goals could linger much longer. If you feel blindsided by a decline in your income, rising inflation or a fall in the value of assets you own, here are a few practical steps to get back on track:
First, schedule time to discuss your financial position with financial advisors and family. Discussions with family will help members adjust spending habits, deflate potential conflicts related to spending, and inspire collaboration. Professional advisors provide vital information on available resources and can help chart a path through challenging times.
You should also be pragmatic about the outlook for your income and investments. Recognize a decline in income and adjust your spending accordingly. Actively monitor and control your budget. The current slowdown has been characterised by rising inflation, which is an increase in the cost of goods and services. Be more intentional about planning your expenses as prices change.
In many cases, it may be prudent to sell unproductive assets. This can unlock cash that can be diverted to assets that are likely to rise as the economy recovers. The stock market for example often presents a mix of businesses that are resilent in a recession and others that struggle for a long time. You are better off knowing the difference and reallocating your investment portfolio accordingly.
The impact of the slow down on your finances could be mild or harsh. Regardless, you must resist the urge to take on a victim mentality. It is also important to not let the recession beat you. Be intentional about exposing your mind to information that you can use to boost your income and advance your career. Networking and skill acquisition are often neglected when financial pressures surface but these are some of the things that can help you get ahead. Increase your value by acquiring new skills and pay attention to your physical and mental wellbeing.
Finally, if you don’t have one, this is the time to create an IPS (Investment policy statement). An IPS is a document created between an investor and fund manager that specifies the investor’s goals, priorities, and investment preferences. It establishes a systematic review process that enables the investor to stay focused on the long-term objectives, even as the economy goes through a downturn in the short term.
FBNQuest Asset Management will be delighted to help you navigate the challenging economic conditions. We are happy to have that important conversation with you about how to invest in these tough and evolving times and to also help you craft or update your IPS on terms that best suit your current financial situation and investment experience. As you take practical steps to adjust to the impact of the slowdown on your income, we offer a range of products that can match your short and long-term investment objectives and put you back on track to meet your goals.