By The Editorial Board
If there is one thing rich Igbo men have in common, it is surely the fact that 7 out of 10 (70%) of them will die poor, all things being equal.
We found that the path from riches to rags goes through bad personal habits that can be avoided. Sadly, these self-destructive habits happen all too often among Igbo men. In every 10 Obi Cubanas selected at random, it is highly likely that 7 will ultimately go broke and die penniless.
But the bigger issue here is that Igbo wealth is not only untransferable, but also unsustainable. Sadly, the wealth of an Igbo man seems to have an expiration date.
Another striking finding from our research is that none of the men was born into luxury. None fits the “prodigal son” narrative. They were self-made rich men who engaged in disastrous financial habits.
Also, level of education was not a factor — the highly educated was as likely to go broke as the uneducated.
The source of wealth didn’t play a significant role either. A rich trader or athlete or contractor was as likely to go broke as a rich business owner or engineer or company executive.
However, the descend from riches to rags was less detrimental for high income professionals such as medical doctors, pharmacists and commercial real estate owners in prime locations.
A moderating factor was a wife who earned high income from a professional career. That is, an Igbo man whose wife earned high income was less likely to go broke as fast as one whose wife was a full-time homemaker.
It is important to state that while the analysis sample was from a population of rich (not the Uber-wealthy) Igbo men, we posit that the phenomenon of riches to rags is highly likely to generalize to men in other ethnic groups such as the Yoruba and Hausa/Fulani, for example. This is because the causal factors seem pervasive across the nation.
In this article we do two things. We identify why rich Igbo men go broke. Then we recommend ways to avoid this devastating predicament.
With this in mind, the article highlights the importance of financial planning and the impact of behavioral economics on financial habits such as making, saving, investing, spending and borrowing money.
So, if you’re a rich Igbo man and want to avoid this catastrophic fate, you are well-advised to continue reading.
Importantly, to stop the next generation of Igbo men going from riches to rags, you are duty bound, in fact obligated, to share this article with your own children, relatives and friends.
To begin, what do we mean by being rich or poor?
For this article, a rich Igbo man is a high-income earner who has the financial resources to afford a good lifestyle, enough money to achieve personal comfort, with no worries about paying bills. Those in our sample enjoyed a lifestyle that most of the world would recognize as upper middle class or above.
By poor we mean a previously rich Igbo man who currently does’t have enough money to pay for important day-to-day expenses. He can’t afford to pay hospital bills when sick, and didn’t save money for his own burial. Currently, he is financially dependent on the benevolence of others.
What Went So Wrong?
Why did these men go from the apex of the income pyramid to the bottom? How could it possibly have gone so wrong? To what do we attribute this remarkable fall from hero to zero?
We examined these questions by surveying and interviewing a cohort of rich Igbo men over time. In general, three adverse behaviors help explain this alarming phenomenon:
- Lack of long-term financial planning and financial goals.
- Bad spending habits — excessive make-and-spend lifestyle.
- Poor savings habits and bad investment decision-making.
Ok, let’s dive deeper.
Lack of financial planning and financial goal setting was a major factor for those who went broke.
- They didn’t set financial goals early in their careers. With longer lifespan, people are living into their 80s and 90s. Without a financial plan, these men lost sight of financial needs later in life. So, they underestimated how much money they needed to support themselves later in life. Bottom line: they ran out of money.
- They didn’t save. Often the only savings plan they engaged in was the pension or retirement program at work, if any. As many of them found out later, their pension payout was insufficient to fund long term expenses as they got older, sicker and lived longer. They didn’t safe enough.
- They didn’t have a budget to gauge how much money came in and how much to spend. Without a budget, they spent more than they earned.
- They engaged in large, unplanned, speculative projects late in life when such projects could not generate positive cash flow to sustain them for life.
- They didn’t buy life insurance when and where it was available. So, they left the burden of burial to their impoverished families.
Bad spending habit was another key contributing factor.
- They were “Egoistic Spenders” — These Igbo men splurged and overindulged to prove to others that they were important. They were status conscious and thrived on status spending to boost their ego.
- They were “Self-esteem Spenders” — They had obsessive compulsion to spend money on anything they perceived as enhancing their fragile self-esteem.
- They were “Addict Spenders” — They loved shopping and spending. They were prone to blowing large sums of money with little regard for the repercussions or their future. A common practice among these spend addicts was impulse buying. They enjoyed purchasing what attracted their attention right away.
- They were “FOMO Spenders” – They were big spenders who bought things because of FOMO (Fear of Missing Out). They wanted to belong. They liked to be part of the “happening group” or wanted to fit in with the upper social group.
- They were “Emotional Spenders” — They spent irrationally. When faced with spending situations, they were unable to maintain any sort of self-control. They always persuaded themselves that they can earn the money back or save on other things. But they never did. They often had buyer remorse after the purchase. But hardly returned the goods.
- They were “Vices Spenders” – They spent on addictive vices – sex, drugs, gambling. They spent large sums of money on too many trophy girlfriends or mistresses who were “cash sucking parasites”, as one spender called them.
- They were “Oversea Spenders” — They spent their life savings on foreign vacations and shopping spree abroad.
- They were “Faith Spenders” — They got conned by charlatan Pastors to give away their savings in the hope that God will replenish them in the future. They made their Pastors rich and themselves poor.
- They were “Foreign Exchange Spenders” — They made Naira and spent Dollars and Euros. The mismatch was problematic when the value of the Naira weakened and depreciated significantly over the years.
- They were “Shaman Spenders” — They spent lots of money consulting shamans, oracles and diviners who promised to make them richer but ended up making them poorer. They forgot that if money rituals worked, the diviners wouldn’t be in the business; they’d be rich already!
Poor savings habit is another key contributor.
- They lived paycheck-to-paycheck – They made money and spent it all by month-end. They had no emergency fund for rainy days that came later in life.
- They were late savers — They started saving late in their careers, just before retirement. They retired without enough saved. They counted on insufficient pension payment.
- When they saved, the amount was inadequate — Even when they saved regularly, the amount they put in savings was too small. They ended up not having enough for retirement.
- They carried high debt load — They borrowed to spend. They overcharged credit cards and paid exorbitant fees and high interest rate on debt. Often they borrowed for consumption of depreciating assets like cars, boats and electronics. Others borrowed to pay school fees without holding their adult children accountable to help pay off the school loan when employed.
- They expected others will “save” them — They miscalculated that their children would step in to assist financially. Well, the system changed on them — today, children only bury their dead parents, not support them when they are in financial straits. Their children had their own bills to pay.
Bad investment habit played a significant role.
- They had little or no investments in appreciating assets — e.g., money market funds, real estate, equities and bonds.
- When they invested, they bought high and sold low – When they invested, they got it wrong by buying at the highest price and then sold at a lower price with huge losses. This happened to some of them who bought high-priced real estate at the top of the market and when they flipped it at the bottom, they couldn’t get what they paid for it.
- They suffered from FOMO – They joined the bandwagon of “hot investments” too late and put significant money in assets or deals that had already risen too high for fear of missing out. Of course, they ended up losing money on the downside.
- They made emotional investments – They invested based on emotions rather than doing their homework to understand what they were investing in. Many built expensive mansions in the village with high emotional value but little or no economic value (village mansions tend to have no resell value) instead of building in the city where they could become cash-generating landlords.
- They were prone to investing in scams or get-rich-quick schemes – They wanted “quick wins” with high rates of return, especially when they were running out of money. Greed was often their motivator. Money rituals and pyramid schemes were examples they cited. This misstep was a key money loser.
- They tended to invest in what they didn’t know — This happened a lot, especially to retirees who had lump-sum pension payout and went into risky businesses. They invested in businesses they knew little about. Of course, it was one of the quickest ways they got broke.
- They invested with friends and family — They not only lost money, but they also lost friends and family members. Also, loans they made to family members and friends were never repaid.
- They didn’t diversify their investments — they put all their eggs in one basket. Some bought land that was later contested and they lost all the money they had put in it. They lost their life savings, everything in one bad deal.
- They didn’t develop a budget to manage their cash flow – what came in and what went out of the bank. As noted earlier, the lack of a budget was a common factor in overspending.
- They didn’t invest in their health. They prioritized big homes and luxury cars and Dubai vacations to getting a routine health checkup. It took one chronic illness to wipeout their life savings. Unfortunately, they didn’t realized that “health is wealth”, especially in old age when chronic health problems surfaced.
Take These Steps TODAY To Avoid Financial Ruin Tomorrow
Now that you know what went wrong, the question is how should you avoid this terrible predicament? Here are steps you must take today to save yourself and your family from a looming financial ruin.
Develop a financial plan with clear financial goals. Creating a financial plan is important because it allows you to make the most of your assets and gives you the confidence to weather any bumps along the way, and ensure you have enough to enjoy the rest of your life.
Answer the following questions before you embark on developing your financial plan:
- What do you want your life to look like in five years? What about in 10 and 20 years?
- What are your financial goals?
- How do you imagine your life in retirement? Traveling? Farming? Building a retirement home?
- What will bring you happiness?
- If you have children or other dependents who wish to pursue a university degree, how much will it cost?
- How much money would you require to keep your current lifestyle when you retire?
- Once you have enough food to eat, clothes to wear and a place to live, how much disposable income is necessary?
- What else will you need to be fulfilled? You should consider lifestyle, life satisfaction, health, relationships, and financial independence.
- How much should you put aside each month in savings and investments to reach your financial goals?
Based on your financial goals, establish a savings plan. Start with investing in a high-quality money market fund to accumulate an emergency fund. Later, you can venture into investing in other asset classes. But know your risk tolerance. Invest regularly and with self-discipline never to tap savings for today’s consumption.
Develop and enforce a budget to control how much money comes in and how much should go out. It will help you to identify where you are overspending. It will also help you to enforce financial discipline to reach your savings goal. If you need an efficient budgeting template, send us email using the Contact tab.
Track your money and budget regularly. Get a sense of your monthly cash flow — what’s coming in and what’s going out. An accurate picture of your cash flow is key to achieving your financial goal. Seeing where your money goes can help you develop immediate, medium-term and long-term plans to reduce overspending and invest or save more of your income.
Payoff high-interest debt and avoid taking on new debt. Pay down high-interest debt, such as credit card balances, bank loan, car loan, private debt, payday loans, etc.
Take care of yourself first. You know the safety instruction you hear on a plane well by now — “In the event of emergency, put your oxygen mask on first” before helping your loved ones – your kids, relatives, friends and family. Be mindful of how you spend your limited resources to “help” dependents when your own livelihood is at risk. Save your money for yourself first before saving others.
Above all, Control Spending. Carefully review the above lists of root causes of riches to rags and identify which ones apply to you and your spouse. Then change your spending, savings, borrowing and investment habits to safeguard your financial future.
In sum, the path from riches to rags goes through bad personal habits that can be avoided. In this article, we’ve identified these bad habits and suggested ways you can develop a financial plan and savings goal, how to stop spending beyond your means and how to save enough to enjoy your time in retirement. If you follow these recommendations, you’ll escape the curse of the rich Igbo man.
Happy New Year.
Ndigbo Kwenu!
