Guest post by: Karo Omu
I know there is so much information out there about financial planning and all that but I really wanted something realistic for the average woman especially in Nigeria. I ended up having a long conversation with Oby Iwobi about it and I can confirm that she seems to have it all figured out. So this is mostly her than me. It has worked for her and now, I am going to apply it to see how it works for me. I find that money stresses me out, like I always need more money and find myself spending even more money.
You have to decide if you just want to get by or if you want to get by and also have something in case of emergency. You also need to know why you spend money, basically, do you need to, do you want to or is it a hedge? You will also find that every reason to spend money could also be a reason to save.
Write them down, everything!
You’ve got to write everything you spend money on down, everything. The experts say it will help you plan better, but when I wrote mine down, it exposed me to how much shit I spend money on that I need to just stop. So it is a win, win. Write it down.
Secondly, you want to separate your expenses into recurring expenses and “one-off” expenses. Recurring expenses could be your rent if you pay monthly or food stuff, phone bills, data, money you send your parents and things like that.
One off could also be rent, exam fees, the shoes you’ve been longing for e.t.c. If you write everything down even before your salary comes, you already know if you can afford your life. Make the list comprehensive and realistic, don’t lie to yourself. There are many spread sheets that can help.
If you have done this, you are most likely over budget by now, so you have to go back and scrap some stuff or save towards items over time. Your expenses should not be above your income. If for any reason, it is so, you need to make a plan on how you can repay before you take any loans.
Save before you Spend.
Save towards something every month. As part of your budget, you want to put aside an amount every month. The most important part of this is putting money away towards something, not just randomly saving. So you can decide, you are putting away N10,000 monthly towards your rent, which means when rent comes up next year, you don’t have to be stressed. In this case, you would put your savings as a recurring expense.
Now, many people find that it is hard not to dip into your savings, so you may want to consider putting it in a mutual fund of perhaps the Piggybank.ng autosave.
Just somewhere you don’t have immediate access to. Bottom line, when you are putting money away, make a commitment to what the money is for, it makes it harder to dip into it this way. If you have a loan, even if it is not yet due, you can always put away specific amounts towards it monthly.
Then comes your needs.
Your needs first. This is especially hard for me as I tend to commit to other people first, but I am being told that the only way to relax at least a little is to put my needs first. This also includes learning to say no to frivolous expenses. No, I can’t afford it right now.
Invest in insurance.
This is not something I grew up knowing but invest in health insurance, car insurance and whatever sensible and reasonable insurance options are available to you. This protects you in case of unforeseen circumstances. Find out what your employer offers and they may be able to cover some of it.
Invest the difference.
Yes, there is a difference between saving and investing. Saving is targeted to towards a specific expense in the future while investment is for wealth creation (wealth multiplication). This one is a bonus, intentionally invest the difference. There are different investment options (like the Piggybank Safelock option which offers 12.5% annually).
I shop a lot of thrift stuff/ second hand items, so I find that I spend less than I intended to. So if I wanted to buy a dress for N10, 000, I would most likely end up finding it for about N5,000, this means I am left with N5,000 for my budget. What I often do, is buy another dress with the balance but imagine if I always put away the difference, it just means, my savings would grow steadily.
In conclusion, you are not going to suddenly become rich by one month of financial planning, trust me, I thought I would. Lol. It needs to be a lifestyle and over time, I guess it becomes a part of you and eventually feel a little financially free.
We hope you learnt something from this awesome post!
Thank you to Karo Omu for letting us share this!