Using Corporate Finance concepts to improve your day-to-day life

Two days ago I had a training appointment with a client, so about an hour to the appointment I called him. Guess what? He suddenly wanted the appointment shifted to the next day, without prior notice and without calling me.

Again, yesterday I had another appointment with my most valuable client. Well, due to the illusion of communication between us I met an empty rendezvous.

Had these happened last year, when I hadn’t taken my Coursera course on Corporate Finance, I would have felt really bad like I had wasted two days in a row. But thanks to my knowledge of Corporate Finance theories, especially that Promised return is hardly Expected return and you have to figure out the default risk. So, right from the start I knew every arrangement with my client is the “Promised” and I have to (over time and interactions) determine the “Expected”. So, I have been expecting a day when one of us will breach his own side of the agreement, temporarily.

Now that is one simple example of how knowledge of Corporate Finance concepts helped me in my day-to-day living.

Also, I have been trying to get secondary income sources that have zero beta relation with my day job and one another. In non-finance terms, getting secondary income sources that won’t be affected by job loss and issue with any one of the secondary sources won’t affect the others. And the fact is that I have even managed to get a secondary income source whose beta is negative in relation to my day job, if I lose my day job, the income from that source will soar.

That’s another cool example.

In Nigeria, inflation has been hovering above 11% for years now. And the risk free rate (rate I’ll get if I invest in Nigeria T-bills) is just above 10%. Meaning without doing any hustling or brain work, I can grow my savings at 10% annualized rate. In 7 years, 1 million saved this year will become 2 million (if the 10% rate stays so throughout those 7 years). And that’s more profitable than Total Nigeria PLC, Julius Berger PLC, Mobil Nigeria PLC and Cadbury have been in many years now. And they have several MBAs, expatriates and industry veterans working there. Heck, I won’t mind working their too.

This just shows that running a biz isn’t as easy and profitable as we all think. We see the big money splashed here and there by companies, and think the owners must be minting cash. The truth is, most of those monies were borrowed cash – from shareholders, retail banks, investment banks and bondholders. It doesn’t mean that they can double those monies faster than a street smart guy like me.

Hence, my knowledge of Corporate Finance has helped me make better money (investment and spending) decisions

In Nigeria, the middle class has been aggressively expanding and lots of foreign direct investments are pouring in. I believe that my generation will be Nigeria’s baby boomers – enjoying the post democracy boom. I know that this boom won’t be forever. I see lots of people who have a single income source (working for one big multinational) and they go on vacation every year; they know very little about personal finance, business cycles, retirement plans and life insurance/annuities. They act very pompous, spot the latest gadgets and change cars frequently. Sometimes, I wonder if they are not conscious of the fact that they are that rich just because they are working in that particular coy, which to me is like putting all your eggs (and your children’s eggs) in one basket. The very people how will have bank accounts in 3 or 4 banks, just to avoid being stranded when one bank’s ATM card is non-functional, will not consider building income sources that will prevent them (and their family) from being stranded if the company downsizes them or their pay.

For me, armed with ample knowledge of Corporate Finance & Macroeconomics, I am living a financially well planned life.

Oh no, not again!

I’m experiencing a writer’s block now. I might continue later, but if you have something wonderful to share, please do.