4 Easy but Effective Ways to Reduce Your Investment Risks

Each of us has different ideas of how we want to live our lives.

For you it may be wanting to spend time with family, travel the world and experience different cultures. For others, it may be wanting to relax with friends  and do nothing.

To be able to achieve the lifestyle you want, you need money, the knowledge to make informed financial decisions and the time to actually live that life.

Investing gives you and opportunity to be able to make money, so you can take off time to live your life the way you want.

All investments carry risks. One thing that should be at the forefront of your mind when you are planning to invest is how you can minimize the risk from your investments.

“All investments carry some amount of risks”

— BFR

To minimize your chances of making harmful financial mistake, you should consider doing these 4 things.

1.   Determine what your goal for investing is.

To meet your investing needs, you will have to figure out;

• What kind of lifestyle you want to live

• How much you need to fund that lifestyle

If you are planning on retiring, you will factor in;

• Where you plan to retire

• How you will continue to take care of your expenses when you stop working

• The healthcare costs you might incur

For example, your reason for investing may be to retire in 10 years so you can and travel the world. Knowing where you will travel to, how much it will cost to travel to those places and how much you will need to have if you do not want to keep working, will help you develop a plan.   

2.   Have an Investment plan

With an investment goal in place, you can move forward with crafting an investment plan. An investment plan helps you make informed investment decisions and is not based on how you are feeling at any given moment.

Your investment plan should take into consideration what your investment goals are, how much risk you can tolerate, and your current financial situation.

To determine how much income you have available to invest, you should start by making a budget. Your budget will guide you as to how much disposable income you have available to invest.

Should you find yourself in a situation where you do not have any money left over after taking care of your expenses to invest, it may be time for a lifestyle change. Find ways to reduce your spending and bring in more money.

• Switch the cable for something cheaper like Roku or SlingTV.

• Buy Generic instead of brand name products.

• Use coupons by searching on sites like Honey to get the lowest price on your purchases.

• Take your lunch to work.

Then redirect the money you save towards your investing goal. Every dollar adds up.

3.   Make use of tax-favored accounts

Tax-favored means that you do not to pay taxes on the profits you make in some cases up to a certain amount. How cool is that?

So taking advantage of this opportunity that the government has given is a great way to jump start your investment.

While there are other types of Individual retirement accounts, the 2 accounts you should consider looking are a 401K and a ROTH IRA.

A 401K is a retirement plan that is offered by your employer, and gives employees an opportunity to contribute a portion of their paycheck in that account. In most cases, the employers match the employees contributions up to a certain percentage 4-6%  sometimes.

So basically it is free money that is being given to you by your employer.  Not taking the match is walking away from free money.

“Not taking your 401K match is walking away from free money”

— BFR

Another retirement savings plan to consider is the Roth IRA. The Roth IRA is a Retirement Savings Account that allows your money to grow Tax-free. So you pay taxes on the money before you put the money, but whatever you make on the after that is yours.

There is a limit to how much you can contribute to your Roth IRA…. Usually, $6000 to $7000 depending on your age, so please consult with your tax advisor.

4.   Diversify your investments

Diversification simply means putting money into different types of investments.

Spreading out investments to reduce risk is putting your money across many companies minimizing your risk should one company be affected by the downturn of the market.

If you have a mutual fund and one company suffer a major decline or loss, some others may not go down as much or may even increase. As such your overall losses may not be as bad minimizing your risk.

On the other hand, if you bought just one stock and it when down 50%, you lost 50% of that 1 stock.

 You can safely invest and live the life that you desire. You just have to take the necessary precautions, do your research and make smart financial decisions. Gaining knowledge is the first and most important step when preparing to invest.

Whatever you decide to do, please consult a financial advisor you trust before making any investment decisions.

Learn to Say No to Your Family’s Financial Request

Learning to say NO is one of the most valuable lessons we have learned on our financial journey.

Although it is a skill that was not easy to develop, it is one we are are very grateful for. Being unable to say No was is one of the factors that contributed to our debt load.

Growing up, we were taught the needs of elders, our family and the community took precedence over our personal needs. Saying No is often times perceived as being selfish, negative or ungrateful. And thus, guilt often sets in when we place our needs before those of others.

Needless to say, as Africans, the love we have for our family can often times lead us to make irrational emotional financial decisions.

The first thing we had to do was admit to ourselves that our inability to choose us over others was causing us financial problems. When we read Boundaries by Dr. Cloud and Dr. Townsend, we realized that sometimes when we say Yes to others , we are saying No to ourselves. By so doing, we are unable to make our dreams possible.

It is our responsibility to say no to the things that are keeping us from our goals and it is our right to say Yes to the life we want to live.

Next we had to find ways to minimize the damage it was doing to our financial life. That meant developing the ability to say no.

Here are 5 tips to help you say NO and protect your financial dream

1. Be honest. Lies can turn to guilt.— “I’d love to help, but financially, this it really not a good time for us”

2. Be direct but polite. Thank the person for the request or for thinking of about you.— “Thank you for thinking about me to be your bridesmaid, I’m unable to make that commitment right now. If things change, I’d keep you updated”.

3. Do not prolong the request. It will increase your stress and make the situation more awkward. ——Don’t tell them “ I’d think about it” when you do not plan to. Unless you plan on may be talking it over with someone, for instance your spouse.

4. Practice saying No.

5. Consider your self worth and your dreams with every request. Remember every time you say yes, you are saying No to something else. —— “What a great idea! Unfortunately, my family’s budget is maxed out at this time. Maybe next time.”

Learning to say “No” to others will allow you bring your dreams to fruition. The quest for financial independence should not alienate you from your loved ones; both can co-exist.

Finding that balance can be challenging but it is possible. Find what works for YOU.

Our Reset. Our WHY

In 2017, we did a total financial reset and decided to work towards building the life we have always dreamt of. We were over $300,000 in debt with no house and had two kids we were struggling to feed. Both of us had graduated from school. Jay from pharmacy school and Sylvie from nursing school. We were stressed out, frustrated at the financial mess we had on our hands, and disheartened by the toll it was taking on our marriage.

Where did we go wrong?

As immigrants in pursuit of the American dream, we had worked hard, gone to school, gotten good jobs, yet the American dream was nowhere in sight. What we had instead was a pile of debt; student loans, medical bills, car loans, lots of credit cards and a long list of financial mistakes. What was more, the financial commitments, expectations from our community and the needs of our extended family was getting us deeper in debt. We were barely trying to make ends meet. Struggling to stay afloat, we resorted to shuffling funds from one credit card to another and applying for even higher limits.

And when we thought we were at breaking point; Jay’s income was cut in half while Sylvie was in school amassing more debt through her master’s program.

How were we going to take care of our kids? Put a roof over their heads?

We went into survival mode. We did a total reset. Instead of trying to keep the house from falling by shifting funds from one credit card to another, we decided to start rebuilding from the ground up. This time with a better foundation. We needed a solid plan. Plagued with questions such as; how do we climb out of the financial pit hole we are in? How do we prevent this financial distress from happening? We got to work. Our financial journey had begun. A journey, though challenging at times, has become the turning point of our lives in the US.

When we were $300,000 debt, we were in so much distress and felt frustrated at our circumstance. Sometimes we were angry at each other for not being able to provide for kids or felt disappointed at ourselves for struggling to meet the needs of the family. Many times, on our financial journey, we felt like reverting to our old ways. But in your moment of despair, that is when God sows His seed. And so, it was for us. He reminded us WHY we were on this journey and of the experiences that had led us down this path.We were able to reset our thinking, and with the help of Dave Ramsey we began seeing results.

Though we were able to reset our lives and dig our way out of debt, if God had not ordained it so and poured out His blessing on our lives, we would not have been able to budget and execute our plan.Now, when faced with challenges, our faith in God, believe in our dream and each other keep us moving forward. We have learnt through all of this that no experience is wasted. Whatever you go through, there are lessons to be learned. Do not let your past experiences define you. Use your failures, mistakes, and setbacks as building blocks for the dreams you want to create.

Don’t give up. Set your financial goals, develop a plan, put in the required work and soon you will see results.

You’ve👏🏻 got👏🏼 this!👏🏽 

Be Financially Prepared: COVID-19

The Coronavirus is here, and has been declared a Pandemic. While we wash our hands and follow the recommendations advised by the CDC, we also want to stay financially prepared.
In the mist of an illness, the last thing you want to be doing is worrying about money, your loved ones or trying to find your important documents like your insurance cards .

While you take measures to prevent getting the virus, or read up on the signs or symptoms of the coronavirus, take some time to plan. The plan will serve as a road map for what actions you and your family will take if you or anyone gets sick.

• Make a plan and review with your family members 

• Gather important financial , personal, and medical information and keep in a safe place. 

• Continue to save money in your emergency fund . Keep a small amount of cash at home in a safe place 

• Discuss your Investment options with a certified financial advisor and ensure you are making an informed decision.

• Make sure you review your insurances and consider enrolling in life, health insurances and update your beneficiaries. 

Another useful tool to use to gather your documents is the Emergency Financial First Aid Kit.

𝗧𝗵𝗲 𝗘𝗺𝗲𝗿𝗴𝗲𝗻𝗰𝘆 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 First 𝗔𝗶𝗱 𝗞𝗶𝘁 (𝗘𝗙𝗙𝗔𝗞) keeps you prepared if a disaster strikes your community. The EFFAK contains the following four sections 

♦️Household Identification

♦️Financial and Legal Documentation

♦️Medical Information

♦️Household Contacts

Each section includes checklists and contact forms to help you collect and assemble your relevant documents and information

The form  is available for Free from the Federal Emergency Management Agency (FEMA) 

Download the form today and create your plan. So if you or a loved one gets sick, you do not have to worry about anything else but nursing them back to health.

529 Plan

𝐌𝐚𝐤𝐞 𝐠𝐫𝐚𝐝𝐮𝐚𝐭𝐢𝐨𝐧 𝐬𝐨𝐦𝐞𝐭𝐡𝐢𝐧𝐠 𝐭𝐨 𝐥𝐨𝐨𝐤 𝐟𝐨𝐫𝐰𝐚𝐫𝐝 𝐭𝐨! 

The 529 plan is an investment vehicle used to save for education and education- related expenses .

Benefits of the 529 plan

It is a tax -advantage account

Can be used for education related expenses for any age: elementary through college level and beyond 

It is transferable to other siblings and relatives( in case one decides to skip college) 

Owner controls the account not the beneficiary

Can be used for tuition and other education-related expenses such as housing 

Accounts owned by the parents have very little impact on financial aid so child may still qualify for financial aid 

Disadvantages

Limited investment options

Has associated early withdrawal fees

May have a short investment window if you start late

𝘔𝘢𝘬𝘦 𝘺𝘰𝘶𝘳 𝘣𝘦𝘯𝘦𝘧𝘪𝘤𝘪𝘢𝘳𝘺 𝘦𝘹𝘤𝘪𝘵𝘦𝘥 𝘵𝘰 𝘵𝘰 𝘨𝘰 𝘵𝘰 𝘴𝘤𝘩𝘰𝘰𝘭. 𝘉𝘳𝘦𝘢𝘬 𝘵𝘩𝘦 𝘣𝘰𝘯𝘥𝘴 𝘰𝘧 𝘴𝘵𝘶𝘥𝘦𝘯𝘵 𝘭𝘰𝘢𝘯𝘴!

Disclaimer: Consult a Financial Advisor on whether to, and how to implement investment advisory services.