Managing the rising cost of living, tailored wealth building plans for Nigerian millennials and Gen Z

If you’re a millennial like me, all you want is to tackle today’s money problems and still come out on top.

But let’s be real: We’re not just trying to survive; we’re aiming to build wealth that lasts, and you can do it too. Yes, it’s possible to create lasting wealth that even future generations can benefit from.

Financial planning is the foundation of wealth creation and management, helping you grow and preserve assets over time. While this concept isn’t exactly new, the way millennials and Gen Z are approaching wealth management is evolving.

We’re dealing with some unique challenges, such as rising inflation, increasing living costs, and the ever-changing dollar. But we also have opportunities, like the expanding equities market. That’s why having a tailored strategy is crucial for financial success.

As your savvy money friend, let’s explore some wealth management strategies designed for our generation. Common Wealth Management Mistakes and How to Avoid Them While Millennials and Gen Z have amazing potential to achieve financial success, some habits and choices can get in the way.

Here are a few common pitfalls:

1. Skipping Financial Education: One of the biggest mistakes young people make is skipping out on financial education. It’s easy to assume that managing money is intuitive or something to figure out later, but this mindset can lead to financial setbacks.

Financial literacy is more than just knowing how to save or spend. It’s about understanding how to grow your money, protect it, and make it work for you. Financial education teaches you how to budget effectively, invest wisely, plan for retirement, and navigate financial products like loans and insurance. Without this knowledge, you may fall into traps like high-interest debt, poor investment choices, or being unprepared for economic changes.

Investing time in learning about money management early on pays off exponentially in the long run. From personal finance books and online courses to following reputable financial advisors, there are countless ways to boost your financial literacy.

Solution: Make financial literacy a priority. Read finance books, attend workshops, and follow credible financial experts. Getting advice from a financial advisor can also help you create a personalized plan.

2. Living Beyond Your Means: Trying to keep up with trends and accumulating unnecessary debt can slow down your financial progress. In our quest for a good life, it’s easy to slip into the habit of spending more than we earn. Social media doesn’t make it any easier seeing friends or influencers flaunting luxurious lifestyles can pressure us into keeping up. But living beyond your means often leads to accumulating debt and missing out on saving and investing opportunities.

It’s a cycle that keeps you financially stuck, even as your income grows. To break this cycle, it’s crucial to differentiate between needs and wants. Budgeting helps create a clear financial plan, allowing you to set priorities. Focus on essential expenses first and then allocate funds to savings, investments, and, if there’s room, your wants. Living within your means not only relieves financial stress but also sets the stage for building wealth and financial security.

Solution: Create a budget, distinguish between needs and wants, and avoid debt where possible. Living within your means frees up cash for investments.

3. Delaying Investments: Some young folks think they need a lot of money to start investing, so they put it off. The problem? The earlier you start, the more compound interest works for you. One of the most significant financial missteps young people make is delaying investing. Often, they believe they need a large sum of money to get started or that investing is something to think about later in life. However, this mindset can significantly reduce wealth-building potential. The power of investing lies in starting early, leveraging compound interest, and allowing your money to grow over time. Waiting too long means missing out on the magic of compounding, where your earnings generate even more earnings.

Starting small is far better than waiting for the “right time” because the truth is, there’s no perfect moment to invest, just the earlier, the better. Whether it’s a few thousand or dollars a week, consistently putting money into investments will pay off in the long run. Don’t let the fear of not having enough stop you from building your financial future.

Solution: Start small if needed. Even a little investment now can snowball over time. Here’s a detailed guide on how to open an investment account and start your journey to financial freedom: –

Understand Your Investment Goals

Before you open an investment account, it’s important to clearly define your investment goals. Are you saving for retirement? Wanting to buy a home? Or just looking to build wealth over time? Your goals will guide your investment decisions and help you choose the right type of account and investments.

For example, if you’re investing for more short-term goals, a high yield account could be the better choice. –

Choose the Right Type of Account

There are several types of investment accounts, and the one you choose will depend on your goals and financial situation. Here are some common types:

● Brokerage Accounts: This is the most common type of account, offering flexibility and the ability to invest in stocks, bonds, ETFs, and mutual funds. While these accounts are not tax-advantaged, they give you more freedom to buy and sell investments at any time.

● Retirement Accounts: Accounts like pension accounts are designed for long-term retirement saving. These accounts have specific contribution limits and rules, so it’s important to know the guidelines before you invest.

● Robo-Advisors: These are automated investment platforms that help you build a portfolio based on your financial goals and risk tolerance. They’re great for beginners who don’t want to manage investments themselves but still want to invest in a diversified portfolio.

● Custodial Accounts: If you’re a parent or guardian, you can open a custodial account for a minor. This can help teach them the basics of investing and give them a head start on building wealth. –

Select an Investment Platform or Broker

Once you’ve decided on the type of account, you’ll need to choose an investment platform or brokerage. There are plenty of options, from traditional brokerage firms like Cardinal Stone, Stanbic IBTC Securities, and Coronation Securities to online platforms like Invest Bamboo, Trove, and Etoro. Here are a few things to consider when choosing:

● Fees and Commissions: Some platforms charge commission fees per trade, while others offer commission-free trading. Make sure to understand the fee structure to avoid unexpected charges.

● Ease of Use: Choose a platform that has an easy-to-use interface. Some platforms are designed with beginners in mind and have educational resources to guide you as you start investing.

● Investment Options: Look for a platform that offers the investment options you want. Some may specialize in stocks and ETFs, while others offer mutual funds, bonds, or real estate investments.

● Customer Support: In case you need help, check if the platform has accessible customer support. Good customer service can make a huge difference, especially when you’re just starting. –

Complete Your Application

Once you’ve chosen your platform, you’ll need to complete the application process. The required information typically includes:

● Personal Identification: You’ll be asked for personal details, such as your full name, address, or national identification number.

● Financial Information: The platform may ask about your income, employment status, and investment experience to help tailor your investments.

● Risk Tolerance: Many platforms have questionnaires to assess your risk tolerance. Your responses will help determine which types of investments are most suitable for you based on your risk appetite and financial goals. –

Fund Your Account

Once your account is set up, you’ll need to fund it. Most platforms allow you to deposit funds through methods like:

● Bank Transfers: You can transfer funds directly from your bank account into your investment account. This may take a few days to process.

● Wire Transfers: Some brokers allow you to wire money directly to your investment account. This option can be faster but may come with higher fees.

● Check or Deposit: In some cases, you can mail a check or make an in-person deposit at your local branch. –

Choose Your Investments

After funding your account, it’s time to choose what to invest in. As a beginner, start with investments that align with your goals and risk tolerance. Common beginner-friendly options include:

● ETFs and Index Funds: These are funds that pool money from multiple investors to buy a diversified set of stocks or bonds. They’re low-cost and less risky than picking individual stocks because they spread your investment across a wide range of assets.

● Stocks: Buying individual stocks allows you to own a piece of a company. However, stocks can be more volatile, so it’s important to research the company and understand the risks.

● Bonds: Bonds are lower-risk investments where you lend money to governments or companies in exchange for regular interest payments.

● Mutual Funds: Like ETFs, mutual funds pool money from many investors. However, they are typically actively managed and have higher fees than ETFs. –

Monitor and Adjust Your Portfolio

After you’ve made your initial investments, don’t just forget about your account. Keep an eye on your investments, track your progress toward your goals, and make adjustments as needed. For example, if one investment grows significantly, you might want to rebalance your portfolio to ensure you’re not overexposed to one asset class.

4. Ignoring Emergency Funds: Without an emergency fund, unexpected expenses can derail your finances and push you further from your wealth goals. We’ve all been there: living paycheck to paycheck, trying to make ends meet, and putting off saving for the unexpected. But here’s the hard truth: ignoring an emergency fund is one of the quickest ways to jeopardize your financial future. An emergency fund isn’t just a luxury or a “nice-to-have.” It’s a financial safety net that can save you from spiraling into debt when life throws you a curveball. Without it, you risk falling into panic mode when an unexpected expense arises, whether it’s medical bills, car repairs, or a job loss. This often leads to credit card debt or loans with high interest rates, which only worsens your financial situation. Think about it: what happens when you lose your job or your car breaks down and you don’t have a backup plan? You’re left scrambling, possibly borrowing money from family, friends, or lenders, which can create more stress. The longer you go without an emergency fund, the more you put your financial security at risk.

The Power of Having an Emergency Fund

Building an emergency fund isn’t about having a huge stash of cash just sitting there. It’s about peace of mind. An emergency fund gives you breathing room to handle life’s surprises without completely derailing your financial goals. The recommended rule is to save enough to cover three to six months’ worth of living expenses, but even starting small can make a big difference. Having an emergency fund also protects your investment strategies. Without it, you might be forced to dip into your long-term investments or retirement savings when an emergency strikes, which could set back your progress significantly. That’s why it’s crucial to prioritize building your emergency fund before diving into other investments.

How to Start Building Your Emergency Fund

The key is to start small. You don’t need to save thousands of dollars right away. Begin by saving a small percentage of your income, whether it’s 5%, 10%, or whatever you can afford. Once you build up a small cushion, you’ll start to feel more secure about your financial situation, and you’ll be less likely to panic when unexpected expenses pop up.

Here are a few tips to help you build your emergency fund:

● Set a Clear Goal: Aim to save enough for at least three months’ worth of living expenses. This includes rent, utilities, food, transportation, and any other essential costs.

● Automate Your Savings: Set up an automatic transfer to your emergency fund account each month. Even if it’s just a small amount, automation ensures you stay consistent.

● Cut back on Non-Essentials: Temporarily reduce discretionary spending like dining out or shopping for things you don’t need. The money saved can go directly into your emergency fund.

Solution: Aim for an emergency fund that covers three to six months of expenses. This cushion helps you deal with surprises without jeopardizing long-term plans. By prioritizing an emergency fund, you’ll protect your finances from life’s inevitable bumps in the road. It’s the first step toward long-term financial stability and a crucial component of any solid wealth-building strategy.

5. Not Seeking Professional Advice: DIY financial management might seem empowering, but professional advice can help you navigate complex investments and optimize your wealth-building strategy. Solution: Consult a financial advisor to help you create a practical and efficient wealth management plan.

6. Overlooking Technology: Some young people underestimate the power of digital tools for financial management. Embracing technology can simplify the process. Solution: Use apps and digital platforms to manage investments, track spending, and automate savings.

In summary, mastering Your Finances with budgeting is the backbone of any solid financial plan. It helps you keep track of your money, spot areas to save, and make choices that align with your goals. Here’s how to start:

● Track Spending: Write down every penny you spend, whether in a notebook or through a budgeting app. ● Categorize Expenses: Separate needs (like rent and groceries) from wants (like takeout and subscriptions).

● Set Financial Goals: Know what you’re working towards, whether it’s clearing debt or saving for a house.

● Allocate Income: Divide your paycheck into spending categories and make sure you’re saving regularly.

● Invest regularly: In stocks, bonds, mutual funds, real estate. These investments offer growth potential and can generate steady passive income and appreciate.

The Bottom Line Managing your finances as a Millennial or Gen Z means being smart and proactive with your money. Start early, invest wisely, and take advantage of tech tools to streamline the process. Share these tips with your friends, and let’s build a financially secure future together.

Jennifer is a financial educator. She is also a digital content creator and influencer and teaches people how to plan their finances and invest to build wealth and achieve financial freedom