Connect with us
Switch

Financial Literacy

What to do when your expenses are more than your income

What to do when your expenses are more than your income

Published

on

income - expenses

Today makes it three days since payday and if you are like most people, you know the same pattern concerning your finances is going to repeat itself again this month. In just a couple of weeks (or even days perhaps), you will have less in the bank than you need to get you to the end of the month. The general price increases we have witnessed over the last 6 – 12 months, have made the salary that used to just get you by in the past, totally inadequate.

Food is way more expensive now. Everything is way more expensive now! Your children’s school fees seem to go up every September; you barely have enough to entertain yourself like you used to and God help you if you have an emergency situation that requires cash to solve it because you don’t know who else you are going to get the money from.

If this describes your condition, well, I won’t say don’t fret, but I would say, you are not alone. “Inflation adjusted salary increase” is not in the vocabulary of most HR managers and many people are getting by on their savings or other sources of income.

What your condition requires is quick evaluation and action because you can’t go on like this for much longer; you will derail your long term financial goals otherwise. In this post, I share a plan that will hopefully get you out of your rot and back on the road to financial freedom. You may already be familiar with some of what I will share but sometimes we all need a refresher.

You need to write down and track all your income lines and your expense lines for the month. If you are not doing this monthly, then frankly, you haven’t even begun to solve your money problems.

Specta

[Read Also: How to make $1bn from a single product in Nigeria]

Evaluate Your Situation.

When your spending constantly outstrips your income, you really have just two options: increase your income or reduce your spending. That answers the “how to?” question but the more important question to ask is the “why?”. Why are you always in this situation? Let’s keep the more obvious answers till later and tackle the root cause. Your “why” could be because of a new addition to your family or that you’re taking a distance learning course that requires you to travel more frequently. Sometimes, it’s a recent change and can be identified easily, other times, it requires some probing.

A gentleman who inspired me to write this post came to me for help recently with his financial issues and the first thing I did was to find out the why behind his issues. With a little probing, it turned out that the underlying reason for his condition was debt. Over the years, he had acquired a car, electronics and what have you, all on monthly payment plans.  The total monthly repayments were within 30% of his monthly net pay and didn’t hamper his cash flow a year ago but the recent price hikes have gradually stripped away his very narrow buffer. So the answer to your problem may be to either increase your income or reduce your spending but you need to first know the “why” so you can make the best long term moves.

Know The Difference Between Need and Want.

Do you really need to carry around that internet Wi-Fi device that costs you N20,000 a month? Your excuse may be that you need to be online 24/7 but when it comes down to it, you spend most of the data watching TV series and movies. A 1GB data plan on your phone can provide you enough data to access your emails and social media accounts for the whole month. If you really need to watch movies, then you can watch with friends and save yourself some money.

Coronation ads

[Read Also: INSIGHT: Here’s a reliable way to save money from your monthly salary]

You need to access everything you spend money one and consider whether you need it or want it. Paying for something may bring convenience but if you could live without it before, you can again.

Write It All Down.

This is s-o-o-o important. You need to write down on a sheet of paper or on a spreadsheet or better still in a budgeting software, all your income lines and your expense lines for the month. If you are not doing this monthly, then frankly, you haven’t even begun to solve your problems.

When you create a monthly budget before the month starts, you need to ensure that the expenses are lower than your income and then you save the difference.

Coronation ads

Budgeting is step one. Step two, is to keep track of all your expenses. If you budget N80,000 for diesel  every month, keep your receipts and track your actual spend versus the budget. This is the only way you will know whether N80,000 is a realistic amount or if there is room to tighten things to N50,000 the following month.

Stanbic IBTC

Writing everything down also shows you the extent of the income gap. If still have an income shortfall after you have cut out all the non-essentials and you are living like a cave man, well, at least you would have quantified the extent of your problem. You would know exactly how much extra you need in income every month to get by.

[READ THIS: 9 easy steps to negotiate out of a bad loan]

Engage Frugal Mode.

This means pinch every penny and spend like it’s your last kobo. It means that you will seek out the absolute best deal you can get and still bargain for a discount wherever possible. This also means switching from your favourite breakfast cereal to a Nigerian brand or switching to boiled yam and fried egg outright. I use cereal as an analogy but I trust you get the point.

Jaiz bank ads

You will need to do this with your spouse though, over a long period for it to have real value. The generator won’t go off at 10 p.m. anymore but at 9 p.m. No more snacks and pastries but packed breakfast and lunch for everybody.

You will also need to get creative. A lady told me once, how she used to pass on her share of a bag of beans at the office during Christmas. Last Christmas, she insisted on her share and introduced beans into her family’s diet in a variety of ways that didn’t make them complain; akara, moin moin, porridge beans, gbegiri, ewa agoyin etc.

Enough Talk, Act Now!

Try to remember that you are in a temporary situation and you can plan your way out of your circumstances.  In summary, you will need the following:

  • Short term plan: Reduce spending and cut out all non-essentials.
  • Medium term: Look for side hustles that fetch you some money to shore up the income gaps.
  • Long term: find a way to grow your overall monthly income. This might mean getting a new qualification or switching jobs or even careers.

Follow Tunde via his blog on Talking Money

[YOU SHOULD READ THIS: Does one’s fat salary automatically guarantee wealth?]

 

app

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training.He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE).He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy.You can contact him via [email protected]

1 Comment

1 Comment

  1. Alfred Akuki

    July 8, 2019 at 9:09 am

    Hi Bigz, I will advise you to have allocated funds for such, when exhausted don’t go beyond.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Personal Finance

How to fund capital projects debt-free with high interest yielding investments

These are the four things you need to fund your capital projects debt-free.

Published

on

The one thing that will reveal to you the gaps in your current financial situation is capital projects. A capital project is any project that is beyond your current and future financial capacity to execute. For most people, capital projects lead them into debt. Debt and Capital projects go hand in hand because the income of most people is still struggling to meet basic bills. And in instances where income is high, expenses overwhelm income. So whether you are a high-income earner or a low-income earner, the chances are high that you will struggle to fund certain capital projects in your life.

To fund capital projects, you need four things to be working simultaneously in your life. The First thing is your ability to earn high incomes. The second thing is your ability to keep a major part of that income. The third thing is your ability to grow that income without losing it. And the fourth thing is your ability to build solid Passive Income that exceeds your current Active Income. These are the four things you need to fund capital projects debt-free. Unfortunately, only a few people know how to do all four things correctly. Certain people hardly thrive in one area. But, if funding capital projects debt free is important to you. You must know how to do all four things well or surround yourself with people who can help you.

Funding a capital project debt-free is a difficult task to achieve if all you have is a modest income and meager savings. The lower your income the more things become capital projects to you. This means that what is a capital project for you may not be capital projects for another person. To help us unify our definition of capital projects. Let us use an example of capital projects that we all agree is the most difficult to fund debt-free. This example is Homeownership.

Read Also: If you experience these signs then know your salary is not enough

Homeownership is a type of capital project and one of the most popular capital projects because many people want to achieve it. By the time you are an independent adult, the desire for homeownership is already burning inside of you. This desire comes from parent influences, external pressure, and the frustration of paying rent to a homeowner. Owning a home is thus one of the most universally accepted capital projects with a global desire. It is also the most expensive capital project to fund. Yet despite its expansiveness, most people want to achieve it. Every year millions of people attempt to climb the homeownership ladder. A few of them make it. Many of them are buried in debt. And many more fail to achieve it. This is because the desire for homeownership does not automatically translate to owning a home. And here is why.

Specta

Many people are trying to own a home on the fragile back of a low income and low savings. The truth is one income, and low savings cannot fund the homeownership project. To fund your dream home you need multiple streams of income and big portion savings. Second, you need to overcome the temptation of owning a home too soon. Many people rush to own a remote and low budget home. A home where people struggle to come to due to its distance and neighborhood. Owning a home is not about being the first to own a crappy home. It is about being the first to own the dream home in a dream location and to do it debt-free. Attempting to own a home too soon is the reason most people end up with crappy homes that are way below their league. Homeownership is best achieved at a time when you are most financially capable to fund it. This is not to say you just sit and do nothing before then. But to say that you use that time to build the solid cash reserves you need to fund your dream home.

So how then do you fund your dream home?

To fund your dream home there are three paths you can take.

Read Also: Still on the FG’s $22 billion loan

The first path is the Loan path. This is where you borrow money and end up in debt. The second path is the bootstrap savings path. This is where you painstakingly save your way to homeownership. Only a few people ever achieve this. The third and most effective path is to create your own interest-free solid cash reserves and then use them to fund your dream home. This is the Path we will be dwelling on in this article.

Coronation ads

So how then do you create your own interest-free cash reserves?

To create your own interest-free cash reserves there are four things you must do.

The First is to develop Income security skills. The second thing is to leverage a complementary Side Hustle. The third thing is to establish a Financial defense System. And the fourth thing is to use a multipurpose, high interest yielding investment vehicle to build your cash reserves. Below I explain each of these points in detail.

Develop Income Security Skills

There is only one way to secure your income in the world. This way is not to secure your job. But to develop high-income skills that preserve your ability to earn high incomes. The truth is there is no job security out there and since homeownership is a long-term process. You need certain skills to guarantee a continuous flow of cash. There are three income security skills that can help you achieve this. The first is problem-solving or creativity skill. The second is Relationship building or Networking skills. And the third is marketing and sales skills. These are the three skills you need to secure your homeownership income. And ensure you are never recycled back into the pool of broke people. Developing income security skills is thus critical for funding your dream home. The key to success here is to invest in developing and refining these skills. And to put them to practice and perfect them. If you need help developing these skills or practicing and perfecting them send an email to [email protected]

Coronation ads

Get a Complimentary High Income Side Hustles

No homeownership project can be funded debt-free from a single meager source of income. Thus to fund your dream home you have to grow your main income and add another source of income to it. To grow your main income you need to rise to positions that have a direct impact on profit and revenue. Then you need to find a side hustle that complements your main income.

Stanbic IBTC

The problem is most people do not know the side hustles that complements their main income. They are also concerned about whether or not they will like this side hustle or make the desired income out of it.

The key to identifying the side hustle that is right for you is to consider these three things. The first is your interest. Can you do and promote this side hustle easily? The second is the income speed. How soon before this side hustle produces the kind of income that you desire. And the third is the workload and time requirement. How much time do you have to invest to generate the kind of income that you desire? Adding a side hustle that increases workload. Consumes time. Reduces job efficiency and drains current income is a mistake. The key here is to identify side hustles that complements your main income. And ensure that your side hustle has the high-income capacity and is aligned with your area of interests

Jaiz bank ads

Read Also: How PR can transform the future and profitability of a business – CEO, Mosron Communications

To find this kind of side hustle you need to identify your current area of interest. So if you are reading this article right now. Chances are high that you are interested in making more money and funding capital projects debt-free. If you can find other people within your circle who are also interested in making more money. And funding capital projects. And if you and these people are willing to invest in products and services that can help you. You can make a high-income side hustle from it. Granted that the product or service you promote solves a high-income problem. Thus to earn high incomes you need to choose side hustles that can pay you high income. Getting rich through a side hustle is thus about first solving your own problems. And then showing other people how you can help them solve the same problem. This is the fastest way to get on the High-income side hustle ladder. Every other way takes time, produce low income, and increases your workload. To fund your dream home debt-free. You must choose side hustles that require you to work less earn more and produce income in less time. This is the fastest way to fund your dream home.

Build Your Own Personal Financial Defense System

The worse way to try and fund a capital project such as homeownership is to do it without a financial defense system in place. A financial defense system is a system that can provide you income in the presence or absence of a Job. This is important because homeownership is a long-term project. And you need the continuous flow of income to survive.

So how do you build a solid financial defense system that protects you throughout the homeownership process?

To build a solid financial defense system there are four things you must do. The first is to hit a big portion savings target. The second is to make your savings failure-proof. The third thing is to shield your savings from financial distractions. And the fourth is to spend in the direction of Freedom.

Read Also: What SMEs must do to survive the Coronavirus outbreak

  1. Achieve a Big Portion Savings Target
    Saving is a critical part of every investing activity. So if funding your dream home is important to you. You must save a significant part of your income. To save 50% of your income for example there are two things you can do. The first is to increase your income, to the point where it overwhelms your expenses. To do this you need high-income skills and high-income side hustles. The second thing is to reduce your expenses to the point it becomes lower than your savings. The fastest and most effective way to do this is to focus on increasing savings and not reducing expenses. And there are two ways to increase savings. The first is to increase savings by 1% every month until you hit a big portion savings target. Your expenses will adjust accordingly. The second way is to deduct a big portion of your income as savings from the source. And figure out how to live on what is left. If you survive after a month it means you can live on what is left. These are the two smart ways to increase your savings and invariably adjust your expenses.
  2. Make savings Failure Proof
    One of the abilities you must have if you want to fund your dream home debt-free is the ability to consistently save without skipping it. Skipping savings is postponing your financial freedom and homeownership dream. Thus if you want to save without fail, you must make your savings failure-proof. To make savings failure proof you need to deduct savings from the source. Use compulsory savings vehicles such as group contributions or standing orders. And be accountable to someone you trust and respect.
  3. Shield savings from Financial Distractions
    The biggest killer of all the savings in the world is financial distractions. The inability to stop unplanned events and people from stealing your savings. Financial distraction derails your saving from its original purpose. And this elongates your ability to own your own home. To own your own home you must shield your savings from financial distractions. To shield savings from distractions you need certain protective investment vehicles. You also need to assign a purpose to every idle fund. And to work with a mentor to keep idle funds tied up for the right purpose. This is the only way to fund your dream home in record time and without delays.
  4. Spend in the direction of Freedom
    There are two ways to spend money. The first is to spend in the direction of freedom and the second is to spend in the direction of poverty. To Fund a dream home debt-free you must spend in the direction of freedom. When you spend in ways that use up big portions of your income. You are facing the direction of poverty. And when you spend in ways that save up bigger portions of your income You are facing the direction of freedom. The key here is to save more than you spend and spend in the direction of where you want to go.

These are the four things to do. To build a solid Financial defense system that supports you throughout the homeownership process.

app

Choose a Multi-Purpose High-Interest Yielding Investment Vehicle

There are many investment vehicles in the world. But the most suited and effective investment vehicle. For funding capital projects is the multi-purpose high-interest yielding long-term investment vehicle. This is a special purpose vehicle that has been designed to fund capital projects. It is a multi-purpose vehicle because it can fund many capital projects within the same time frame. It is also safe and high interest yielding because it is a long-term investment vehicle. So if you are considering owning a home debt-free at some time in the future. This is the best investment vehicle for you. The key to investing is to never lose money, especially when building towards a capital project.. Once you choose the right investment vehicles that preserve your investment. You will fund your dream home in no time.

Read Also: FG to inject over N198 billion on capital projects in power sector in 2021

The truth is you will remain the same person year after year except for your ability to make more money. Your ability to keep more money. And your ability to grow that money without losing it. The more you master these three abilities the richer you become. And the easier it will be to fund your dream home. There is nothing as powerful as having zero cash worries when you want to fund your dream home.

If you want to own your own home, make extra income, or fund capital projects debt free we can help you. Send an email to [email protected]


About author

Grace Agada is The Senior Financial Happiness Director @ Create Solid Wealth. She is an author, and column contributor in six national newspapers. She is a contributor at BellaNaija, Nairametrics and Proshare and she is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you send an email to [email protected]

Continue Reading

Business

The FG in partnership with the private sector will continue to support MSMEs – Osinbajo

Osinbajo has stated that the FG in partnership with the private sector would continue to provide interventions to boost the growth of small businesses.

Published

on

Solar, FG to slash import duties on tractors, buses, others in 2020 Finance Bill, Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

Nigeria’s Vice-president Prof. Yemi Osinbajo during an MSME stakeholders’ meeting, disclosed that the Federal Government in partnership with the private sector would continue to provide interventions to boost the growth of small businesses across the country.

According to a press statement issued by Laolu Akande, the VP made this statement on Monday at the first meeting of MSMEs stakeholders for the year 2021.

Prof. Osinbajo said the Government would continue to support innovation and interventions to deepen the involvement of new and existing MSMEs in the nation, this he said would help to improve the economy and create more employment opportunities for Nigerians.

He stressed further that the implementation of the Economic Sustainability Plan Survival Funds has sent positive economic signals. In a bid to complement the gains in this space, the Government needs to scale up interventions in the MSMEs sector.

In this vein, Osinbajo urged stakeholders in the public and private sectors at the virtual meeting to be innovative in the interventions planned for small businesses across the country, so as to consolidate on the gains recorded in the MSMEs space in the past few years.

Specta

What they are saying

Prof. Yemi Osinbajo, during the MSME stakeholders’ meeting, said:

“We must continue to be innovative in the interventions that we plan for MSMEs because small businesses are the engines of growth of any economy, in the areas of wealth creation and employment opportunities, MSMEs are very important.”

Continuing, Prof. Osinbajo said:

“We really have to think out of the box in our engagements going forward. We need to change the way we do many things, we need to look for ways of multiplying our efforts because the challenges in this space are greater than what we have been able to achieve so far. Of course, we have done a lot, but looking at the numbers in need, you will find out that there is a lot more to be done.”

Coronation ads

What you should know

  • The Federal Government’s MSMEs Survival Fund grant scheme, which includes Payroll Support, Artisans and Transport support tracks, is a component under the Nigerian Economic Sustainability Plan, NESP.
  • The Survival Fund scheme was designed to cushion the economic effects of the COVID-19 pandemic especially on the most vulnerable small businesses, is a conditional grant to support vulnerable MSMEs in meeting their payroll obligations and safeguard jobs in the MSMEs sector.
  • The scheme is estimated to save not less than 1.3 million jobs across the country. However, 283,023 Nigerians employed by MSMEs across the country have benefited from the Payroll Support Scheme. This leaves millions of Nigerians out of the consideration of the scheme.

Continue Reading

MSME

283,023 Nigerians employed by MSMEs have benefited from FG Payroll Support Scheme

The FG has revealed that over 200,000 persons have so far benefited from its Payroll Support Program.

Published

on

Nigerian MSMEs suffer negative impact of COVID-19

The Federal Government of Nigeria has disclosed that 283,032 Nigerians employed by MSMEs across the country have so far benefited from the Payroll Support Scheme of the Federal Government.

This disclosure was made in a tweet shared via FG Survival Fund’s official Twitter account.

What you should know

  • The Payroll Support Program by FG under the Survival Fund initiative was created to provide an adequate buffer against the impact of the COVID-19 on the stream of income of MSMEs.
  • This, however, is an offshoot of the Survival Fund initiative, established to support and protect small businesses from potential vulnerabilities brought about by the COVID-19 pandemic.
  • In line with the mandate of the programme, the government will support MSMEs with staff salaries for 3 months.
  • It is important to note that the COVID-19 pandemic and other regulatory actions of the Federal Government affected the core segments of SMEs, as well as the revenue and income vehicles of Small businesses in Nigeria.
  • According to a survey by NBS, it became public knowledge that the total number of Micro, Small and Medium Enterprises in the country was about 41.5 million, as of December 2017, with significant employment contribution running to millions.
  • In the light of this, it is plausible to say that the Payroll support programme is not inclusive enough, as the recent move by FG to support MSMEs leaves millions of MSMEs and their employees out of the radar.

Continue Reading
Advertisement




Advertisement