A CASE FOR THREE CLASSES

The Rich, Middle Class, Poor And Shares Investment.

“Most people struggle financially because they do not know the difference between an asset and a liability… Rich people acquire assets. The poor and middle class acquire liabilities but they think they are assets.” Robert Kiyosaki.

Let me start this edition with a categorization of the three financial classes we have in any society and why and how we will end up in any of these classes. The three classes are:
i) The Rich
ii) The Middle
iii) The Poor

The Rich: They have sustainable streams of income and can afford to meet every financial need of theirs and always have more than they need.

The Middle Class: This class can afford some few good things of life, but are limited by their income. They may not afford some luxuries and may never achieve FINANCIAL FREEDOM. Even though they may seem to be wealthy and comfortable, their income is limited, unsustainable and their net worth is not high. Most “big men” in our society pretend to be rich, but they actually belong to the middle class. Two factors that determine financial class are NET WORTH and INCOME SUSTAINABILITY. In other words, to distinguish between these two classes; calculate your worth after all your expenses and liabilities are deducted and also calculate how long your current worth will carry your current expenses and liabilities without you going broke. A lot of “big men’ do not have enough net worth to carry them for more than six months if anything happens to their current income.

The Poor: They are those who do not have any sustainable income and lack the capacity to meet their basic financial needs. United Nation actually categorise them as people who live below an income of $1 (#120) a day but I know that someone can have an income of #1,000 a day and still remain poor.

The difference between these three classes is what they do with their income. In other words, what we do with every kobo that comes to us today will quality us into any of these three classes.

THE SPENDING PROFILE OF THE THREE CLASSES.

The Rich: You will become rich if you spend more or most of your income acquiring assets. The rich acquire assets with their income. Assets like lands, commercially viable houses (not ones built in your village), shares, savings and fixed deposits, buying of shops whose value will grow overtime.

The Middleclass: You will be middle class if you spend your income on liabilities. The middle class acquire liabilities and think these are assets. Liabilities like cars, houses in the village, expensive clothes and lifestyle etc. We mistake these as signs of being rich, but they make us remain middle class. This is why we work or trade for over 20 years and cannot afford to retire as guaranteed multi millionaires.

The Poor: You will remain poor if you spend your income on expenses, trying to meet up with basic things of life like feeding, transportation, clothing etc.

ASSETS ARE THINGS YOU SPEND MONEY ON WHICH GROWS IN FINANCIAL VALUE AND ALSO GENERATE REGULAR, INCOME WHILE LIABILITES ARE THINGS YOU BUY WITH YOUR MONEY WHICH REDUCES IN FINANCIAL VALUE AND DO NOT GENERATE INCOME FOR YOU.
When you buy a car for #500,000, drive it for one year and decide to sell. You would have spent thousands in repairs and maintenance and will not sell the car up to the amount you paid for it. In contrast, #500,000 invested in shares for one year will gain some thousands of naira in dividend and grow in value by 20%, 30% or even 100%.

The Thrust of this article is to bring us to the realization that we can aspire to any financial class irrespective of which we are born into. Through deliberately choosing to pursue a goal of financial freedom, drawing up a realistic plan and executing it, we can achieve our aspiration to belong to the rich class.

In June 1980, in a village in this vicinity, Okeke Ezeuche, a Youngman of 30years had his wedding. After all the fun and merriment, he deducted his expenses from the monetary gifts he received and had a meager balance of #89.On his search for what to commit this little money into as a memorial, an Uncle advised him to buy shares of Nigerian Breweries. Few months later, he received a little sum as dividend and was told that the initial was still intact and has grown in value. He thought deeply and took a decision to form a habit of saving and investing a reasonable amount in shares yearly but his income as a village farmer was meager. He took care of his family’s need from his produce on the farm, while he harvests his palm trees and give the proceeds from that to his uncle who was quite knowledgeable in stock investments. Currently he receives nearly #1m in dividend every year and has a net worth of over #30million. This net worth will give him a return of not less than #3m annually without fresh investment, just sitting down in the village and having companies in Lagos and other parts of the country working and growing his wealth on his behalf. At age grade meetings and events, his peers who used to be “big men”, those so-called successful businessmen who drove the best cars in those days and built the best houses in the village are now a shadow of their old self and find it difficult to fuel and maintain the cars, houses and train their children in the university. But Okeke Ezeuche has sent one of his children to university overseas and has set up one of his graduate sons who decided to start a business with #2m start up capital. He settles his married daughters with #1m worth of shares at their weddings and changes his car every 3 years with dividend paid him by companies where he has shares investment.

To think that a villager could achieve this with palm nut proceeds is awesome and a pointer that anyone, anywhere can make it no matter how little our income. Civil servants, workers and businessmen and women are better positioned to achieve even greater things than this man with their higher and regular income. You must decide today to put a part of your income into shares investment on a regular basis. This is a sure way to join the rich class and bid goodbye to poverty or a middle class life