Let us begin with the question, what is money? We may have
different expressions for it – cheddar, bucks, dough, and c-notes – but money
usually finds a way to overcome these barriers of dialects and speak to us.
That said, money is simply a measure of value and a medium of exchange for
goods and services. It exists in the form of an officially issued coin or note,
gold, real estate, stocks & shares, a deposit in a checking account or
other commodity of value.
There are two basic types of money
: investments and
liquid money.There are two basic types of money
Liquid
money refers to the cash we have either in our wallets or our bank accounts.
They are what we use to settle our immediate expenses such as purchase of
consumables or payment for services.
Investment is the
act of committing money or capital to an endeavor (such as a business, project,
or the purchase of a commodity) with the expectation of obtaining an additional
income or profit in the future.
Any money that
comes to us as salary, wages, profit or stipend is an income and whatever money
we pay for goods and, or services rendered to us is an expenditure. To keep
track of our incomes and expenditures, we need a plan to guide us. This plan is
called a budget.
It is very
important to be mindful of our expenses by classifying what we are buying into
‘necessities and ‘luxuries’. Necessities are those things people require to
survive, such as food, shelter, clothing and healthcare. On the other hand,
luxuries are expensive but desirable things without which we can survive. More
importantly, it is financially wise to cut down on luxuries to be able to save
and eventually make investments with the money instead.
We may need to
borrow to execute some capital projects such as building or buying a home, a
car or some other ventures. In such cases, the loan can be spread over a
certain period so that it is paid in installments.
One should at all
times ensure that his/her income accommodates the expenditures with a little
extra for saving.
This article is courtesy CITI Bank as part of The Bankers
Committee Financial Literacy Public Enlightenment Programme. It is also brought
to you by The Bankers Committee, comprising all the commercial Banks in Nigeria
and the Central Bank of Nigeria (CBN).
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