Navigating your personal finances can be intimidating. Only a few people are fortunate enough to learn personal money management in their early years, so becoming an adult and suddenly having to figure out your finances can feel like being thrown into the deep end. The delicate matter of the multidimensional poverty afflicting 63% of Nigerians only adds to the problem. It is a textbook case of being stuck between a rock and a hard place.
Your level of financial literacy aside, it’s never the wrong time to give your personal finances a facelift, especially if you’ve been struggling in prior years. Make it a part of your 2024 resolutions if you must; it’s another chance to learn lessons that improve how you manage your money. Endeavour to read books and blogs on personal finance and constantly look for helpful personal finance tips that can improve your relationship with money.
Now that you have decided to kickstart your journey to managing your finances better, let these seven important lessons advise the way you see money this 2024:
1. Compound interest is your ally
Compound interest is earning interest on your interest. It’s why investing is one thing and investing for long periods is another. The longer your money stays within an investment, the quicker it grows. As the interest from your initial investment gets added to the investment, your portfolio continues to grow, earning you even more returns over time.
You must begin exploring investment opportunities as soon as you can. It’s okay if you haven’t already started your investment journey. Today is as good a time as any to take that crucial first step.
2. Live within your means
If you can afford to splurge occasionally, you can afford to Quick Save in your Piggybank. A frugal mindset will take your personal finances to the next level. Consider trimming your lifestyle around the edges to cut out excess.
Aim to spend less than you can afford on rent, cars or shopping. Shop affordable brands over luxury brands. Buy in bulk if you can. Don’t succumb to peer pressure to live frivolously, and be willing to turn down invitations to places you can’t afford. Don’t waste any time trying to impress others. A modest lifestyle is a great starting point if your end goal is financial freedom.
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3. An airtight budget will free you financially
As far as clichés go, budgeting is one enduring finance hack that has remained foolproof and relevant. Creating a budget may stump you initially, but budgets are never perfect on the first or even second try. By nature, they are meant to be tweaked and reviewed over weeks, months or years to account for changes in your income and cost of living.
A budget helps you live within your means and account for every naira you earn and spend. Making lists when you go shopping will help you track your spending and curb impulse purchases. After creating your budget, try using Labels to allocate your cash for each purpose. Figuring out how to budget correctly puts you well on your way to ultimately figuring out your finances.
4. Save before you spend
Every solid budget should account for your savings. But unlike every other expense on your budget, your savings should take priority. See it as paying your (future) self a salary. You don’t need to be saving for future expenses or purchases before you start saving. Saving for no reason at all, AKA building an emergency fund, is akin to wearing a lifejacket on a boat ride. You might not need it, but it’s best to have one, just in case.
Why struggle to save when PiggyVest has provided you with an easy way to automate your savings? All you have to do is pick a suitable PiggyVest plan, and start saving the funds that will save you tomorrow.
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5. ‘Easy money’ can ruin your finances
If there’s one money mistake Nigerians commonly make, it’s falling for the lure of shady companies and individuals promising unrealistically quick and massive returns on their money. Another common — but just as ugly — version of this is scammers who offer suspiciously low prices for goods and services.
Keep your eyes peeled for loan apps, Ponzi schemes, fraudulent social media pages, fake cooperative groups, and other apparent scams hiding in plain sight. One money lesson you must take away this year is this: if it sounds too good to be true, it probably is.
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6. Long-term financial goals are important
Saving for retirement is one of the most popular long-term financial goals. Nobody wants to work for decades and end up in their 60s, weary, with nothing to show for it. Bleak as it might sound, it is one of the major reasons why long-term financial goals are essential. Short-term financial goals are nice to have, but long-term goals are incredibly crucial. Other common long-term financial goals are children’s education fund and building or buying a home.
If you haven’t already considered it, start today to set aside a certain (really small) percentage of your earnings towards your pension and retirement savings. Continue to revise and increase this amount as you go. Invest in a life insurance policy, too. Future you will thank you from your villa in the Maldives.
7. Health is wealth
This phrase sounds like another cliché, but it isn’t taken seriously enough and thus bears reiterating. With a majority of Nigerians living below the poverty line, it’s easily discernible that most of us are one major health crisis away from harrowing impoverishment. Nigerians cannot afford premium healthcare, and the pervasive lack of access to world-class healthcare infrastructure is enough reason to prioritise self-care.
Investing in your physical and mental health is important. As a common Nigerian saying goes, “Na who dey alive dey make money.” Eat healthy, take mental health breaks, exercise often, have annual checkups and invest in an affordable health insurance plan. Don’t wait till you find yourself with life-threatening conditions before you visit your healthcare professionals. Prevention is better — and most times cheaper — than cure.
