Connect with us
nairametrics

Personal Finance

5 tips to ensure that you save more even when you spend more 

These are ways to ensure that you save more even as you earn and spend more.

Published

on

SAVE, LIABILITY, FINANCIAL, EXPENSES, BUDGET

Have you ever had an increase in income, with high hopes of achieving lofty targets, only to find that your expenses still gulped the entire sum?

That is the summary of what lifestyle inflation means – expenses increasing to match up with your income. And it never goes the other way. Yes, your income does not rise to meet your expenses. It is always your expenses rushing up to meet income.

Most people will spend more if they earned more, but not necessarily save more or invest more. This is not the best of financial habits.

We will be looking at five things you can do to prevent lifestyle inflation, and improve your money habits. These are ways to ensure that you save more even as you spend more and earn more.

READ MORE: Access Bank Plc reports profit of N40.9 billion for Q1 2020

GTBank 728 x 90

Have a budget

Ridiculous as it sounds, some persons do not keep records of monthly expenses, and they have absolutely no idea what they spend their money on. You cannot go month to month, spending on every and anything which comes up without having a clear idea of what you spend on. Your budget should capture everything your money goes to, including monies you give out to family or friends, provided it is done regularly.

The first thing your budget does for you is it tells you what direction your money goes. Some people spend ridiculous amounts on regular costs like data, but still complain at the end of the month that they do not know where all their money went to.

The next thing a budget achieves for you is prioritisation. When you have a clear idea of what you spend every month, you can easily stream down and decide what expenses to reduce when you have less purchasing power. It would also help keep your expenses in check, ensuring that they do not suddenly double because your earnings increased.

GTBank 728 x 90

READ MORE: Nigeria gets $3.4 billion disbursement from IMF, interest rate 1%

Make your financial plans in percentages not figures

Ensure to make your financial plan in percentage, not figures. E.g., instead of saying you will save N10,000 every month, decide to save 15% or 30% or 40% depending on the size of your income. Now, what this means is that when your income increases, your spending may increase but your savings would increase also. There could also be room to review your percentages; if you start earning more, you could decide to increase the percentage you save or invest monthly.

Structure your financial plans in percentage and stick to it, because it pays in the long run. Even your savings could be further structured, so that you have a certain percentage in liquid assets, or have some in high-risk assets, and others in low-risk assets.

The percentage plan always works, particularly if you are not very disciplined with finances.

READ MORE: Difference between Liquid and Illiquid investments

Jaiz bank ads

Learn to differentiate assets, liabilities, necessity and luxury

Unless you have an unlimited amount of money at your disposal, it is very important to differentiate between assets, liabilities, necessities and luxuries.

Fidelity ads

This has nothing to do with the item itself, but everything to do with you and what purpose it will serve you. So, while getting a new laptop may be a necessity for a data analyst who needs a gadget with a higher capacity to serve his work needs, it may simply be termed luxury for the factory worker who just wants something to keep him busy when there is power outage.

Now all four categories deserve to be captured in your budget, but differentiating one from the other will help you better prioritise and know what you really don’t need to spend on.

If an item is not going to directly affect your earning capability or increase your income, then it is not an asset. It could still be a necessity though, even if it is a liability. It can be a bit challenging to accurately label your expenses, but it is something you need to consider so that you do not end up rationalising every luxury item on your list.

Necessities should always get priority in your budget.

READ ALSO: What you should not do when you just receive a severance package

Build and maintain an emergency fund

Simply put, emergency funds are funds set aside for emergencies. if you decide to invest such funds, they have to be invested in liquid assets which you can easily convert to cash when the need arises.

Some people refer to emergency fund as miscellaneous, and end up spending it on other expenses. You cannot spend emergency funds on electricity bills or any other utilities. Expenses which occur regularly must be provided for, so you do not end up spending your emergency funds on routine expenses.

Coronation ads

Emergency funds must be kept aside for emergencies only. Of course, your insurance plan will come in handy if emergencies occur, but getting a comprehensive plan may not be too affordable for you, depending on your income. Your emergency fund should be your first point of call then.

Have a regular budget for treats

On a final note, have a budget for treats. It is quite easy to make a monthly budget and capture utility bills, data, food, and transportation, without making any provision for treats. But what happens when you have that occasional craving for pizza and ice cream, or you feel like going to get a massage at the beauty parlour, or you want to get a gift for a friend? Failing to make provisions for the occasional treats could mean that you end up dipping into your savings or funds meant for other things when these cravings come, or you need to buy yourself a gift after working really hard and achieving your goals.

app

Life is not meant to be tight, and you cannot be so stringent with spending on yourself. Some people will make a budget for every bill in the month without setting aside something to occasionally spoil themselves. This may be good on your finances, but not so good for you.

READ: FG’s unsustainable budget deficit and debt service cost

Even though you want to save and invest towards your retirement, you also need to occasionally treat yourself to something good, or reward yourself for working so hard and achieving your goals. Life is not all about nails and hammers, after all.

These cravings for luxury are bound to come, and since you are not going to go begging to get it, it is better to have a monthly provision for treats. It could range anywhere from 2% to 10% of your earnings, depending on you. If played well, it could become a good source of motivation to you, knowing that there is a reward for working hard. Also, the quality of your life naturally improves (with more money for treats) as you earn more.

Ruth Okwumbu has a MSc. and BSc. in Mass Communication from the University of Nigeria, Nsukka, and Delta state university respectively. Prior to her role as analyst at Nairametrics, she had a progressive six year writing career. As a Business Analyst with Narametrics, she focuses on profiles of top business executives, founders, startups and the drama surrounding their successes and challenges. You may contact her via [email protected]

2 Comments

2 Comments

  1. Gius

    July 27, 2020 at 3:40 pm

    Thanks for this great article dear. This is really appreciated.

  2. Wellington

    September 1, 2020 at 6:05 am

    Good morning Ma,am Wellington. Am very happy to have come by, I really have saving problems though am a low salary earner. Each time I try to partner with people, in small business my capital either lost or is been refunded in bits I cannot account, or when i think I should lease it,the person will pay in such a way its no longer meaningful.

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 prioritise your needs over wants

It is crucial, as a financially oriented person to learn how to prioritise your needs over your wants.

Published

on

To become financially stable, you have to learn to make some strategic decisions, and one of them includes prioritising your needs over your wants. The things you need are the things you cannot do without, your necessities, which include; shelter, healthcare, food, clothing and other essential items. Wants, on the other hand, are the things you can live without. For people who want to be financially responsible, wants are considered luxuries. It is crucial, as a financially oriented person to learn how to prioritise your needs over your wants. If you buy everything you feel like buying even when you don’t need them, you are being financially irresponsible, and it might have a massive effect on you. If at all you are going to spend on your wants, it shouldn’t take more than 10% of your monthly income. The deal is; if you want to buy the things you want or desire, you should earn more money.

The needs of men are grouped into three (3), according to Abraham Maslow’s hierarchy of needs. They include;

  1. Self Fulfillment Needs
  2. Psychological Needs
  3. Basic Needs

If your needs don’t fall into any of these groups, then they should be considered as wants.

How do you prioritise your needs over wants? 

 1.List your needs and wants 

Writing down your needs and wants will go a long way in helping you to prioritize. Your needs should come first while your wants follow. Your needs should include your house rent, your feeding allowance, your medical fees, and other basic needs, in order of importance. You can group your wants into a hierarchy of priority and move the ones you cannot afford to the following month.

GTBank 728 x 90

2. Research the prices of your needs and wants 

Research the prices of the things on your list and affix. They might not be the exact prices and might be in ranges, but it is good that you do this. This would help you to calculate how much you might be spending in a month and if it fits your monthly income. With this, you will be able to remove the things that might put you in debt. The goal at the end of this should be to spend lesser than your monthly income and have enough for emergencies. This helps you to focus more on your needs rather than wants

3. Cut all luxuries

GTBank 728 x 90

As far as basic needs go, there are some rules to it. It is essential that you eat, but you don’t have to eat at restaurants when you can cook at home and save costs. If you can’t cook, you can also check out some cheap restaurants instead of the big and expensive ones. Also, if you are not financially capable to rent a big apartment, look for smaller and less expensive options that would help you to save cost. Some basic needs can become wants if you don’t watch it.

(READ MORE:Trump or Biden? How the US Presidential election will impact the stock market)

4. Get multiple sources of income 

The way this works is, if you get more sources of income, you get to settle all your financial needs which are your top priority, then you don’t find it difficult to buy the things you want. To prioritise your needs over your wants then becomes more comfortable.

5. Be sincere with yourself 

Jaiz bank ads

Be realistic in your budget and don’t list out the things you cannot afford. If some of your needs will make you spend more, look for cheaper alternatives. You are the only one seeing your budget.

Fidelity ads

As stated above, some of the basic needs include; food, shelter, water, clothing, security and so on. They are the things that might kill you if you don’t have them. It would help if you considered these basic needs first when creating your monthly budget. Having satisfied these needs, you can go ahead and get the things you want. Never choose your wants over your needs. It is a risky financial move that might make you go broke and run into debt.

Continue Reading

Personal Finance

ATM Fraud: How to care and use your card wisely

To protect your card from external harm, there are few tips you must acknowledge and start getting familiar with.

Published

on

The Cashless Policy, as we know it in Nigeria, was officially introduced and became fully operational in 2014 – with the aim to encourage electronic banking and to reduce physical cash in circulation – which would in turn decrease cases of cash-related crimes. One way of implementing this policy is through the use of ATM cards.

It is true that the advancement of technology has generally made our lives easier and more convenient. But, the adage “whatever has advantages, also has disadvantages” is not left out in the case of electronic banking. With the development of ATM machines and electronic cards for mobile banking, there are some risks and exposures associated therewith.

Some of these could devastatingly leave you broke in the blink of an eye; whereby, you find out the money you have worked so hard to accumulate has vanished with the stroke of some keys.

The Cashless Policy was met with e-banking fraud. There were reports of banks and individuals losing a lot of money to fraudsters, despite the regular checks put in place by financial bodies to curtail the loss of an individual’s hard-earned money.

The onus, therefore, falls on all responsible individuals to guard and protect their assets – Yes, your ATM card is an asset.

GTBank 728 x 90

It is important to know how to handle your cards and make sure you’re not only using it correctly but smartly.

Automated Teller Machine (ATM) means a machine that dispenses cash and also performs specific banking services at the user’s convenience.

It is a dedicated payment system and the ATM card is issued by banks and other financial institutions for ease of financial transactions. It usually comes in the form of debit cards, which means you must have monetary assets with the said bank, to be able to use the card for transactions.

GTBank 728 x 90

In order to handle your card wisely, you must be intentional about the money that comes into and goes out of your pocket. You cannot leave anything to chance. Have a plan for your money and stick to it.

To protect your card from external harm, there are few tips you must acknowledge and start getting familiar with.

  • Protect your pin: You must not give out your Personal Identification Number. As the name connotes, it’s your very own personal form of identification, which grants you electronic access to your money. If for any reason your PIN gets exposed, you must immediately reset it. Furthermore, do not write it down on a piece of paper or if you must, do not leave it exposed or in your wallet
  • Always report suspected cases of fraudulent activities: When you’re in the know about your finances, any discrepancy will immediately come to your notice. Some people do not recover from cases of fraud, because they didn’t discover it on time. Remember that the earlier you report a problem, the sooner it gets resolved. On this note, you must always be familiar with all bank transactions and statements. If you notice at any time that your card is missing – especially when you’ve been out with it, and you suspect it’s been stolen, report it immediately and block that card.
  • Be cautious of the ATMs you use: Always use one that is associated with banks. Avoid any machine that may be situated in suspicious locations. In as much as it grants ease as a means of solving our problems, compulsive use of your ATM card should be avoided. Even with the extra charges attached to card transactions these days, you really would be doing yourself a favor by being careful of where you insert your card in your bid to avoid bank ATM charges.
  • Do not be careless with your phone: Try as much as possible to avoid being careless with your phone or any other device that may contain your bank information. Always create security profiles for your gadgets. It doesn’t take much for someone to access your details and wipe your bank account clean. Make sure that your phone is protected by a password or pin and whenever possible, delete traces of money transactions from your gallery or messages, after you must have successfully backed them up of course. Just remember that your card information could be contained on your phone and leaves you to exposure if mishandled, so handle with care.
  • Do not use public wireless connections for financial transactions: In fact, you should always be wary of all public wireless access. It is a fast and unsecured way for a third party to gain access to your private information. You could as well leave that information on a billboard for the whole world to access. Be sure to use password-protected wireless connections, it makes it more difficult for hackers to access your details.

Bottomline

Try to change your pin every few months. Keep it simple and short, only using codes you can remember.

Conclusively, while it is very convenient to use debit cards or ATM cards for financial transactions, you wouldn’t find it funny to learn that someone has emptied your account on the spot. Hence, it is important that you take precautionary measures to always keep your card safe.

Jaiz bank ads

Fidelity ads
Continue Reading

Personal Finance

Curfew: How to plan for a financial emergency

To ensure that you are prepared for a financial emergency, here are some basic decisions you have to take from the onset.

Published

on

Top 5 businesses to start to embrace the "new normal"

Life has its ways of generating unforeseen emergencies that leave us stranded. You cannot exactly prepare for some of these incidences despite your dedication. However, unlike other emergencies, a financial emergency is something you can actually plan for and work towards. Hence, the question of how to plan for a financial emergency is very vital.

READ: This is how Nigerian entrepreneurs can survive COVID-19

READ: The definitive Cryptocurrency tax guide for 2020

The sudden declaration of curfew across several states in the country indicates that things could happen when you least expect. Traders who earn income from daily sales were the most affected; especially, the ones without laid down plans. Some white-collar workers too got a watered-down salary due to the situation, as the company made little or no profit.

READ: CAP Plc is running at a risk of increased bad debts

GTBank 728 x 90

READ: Never give money to your financial advisor without signing this document

However, to ensure that you are prepared for the next wave of sudden income blockage, some basic decisions you have to make from the onset are:

  1. Set up an emergency fund account: This is your most assured way of preparing for financial emergencies. It is non-negotiable. At every point, you should always have some money specially set aside for sorting bills in case of financial troubles. Although this seems like an obvious thing to do, in reality, most individuals do not have one. Financial experts recommend that the set-aside sum should be able to cater for at least 3 to 6 months of your basic expenses.
  2. Ensure you stay debt-free as much as possible: When financial difficulties kick in, what becomes a burden is the regular payment obligation you have to make. Remember, there are already basic non-negotiable expenses that you have to meet, and adding debts makes it much worse. If you are currently in debt, channel your resources to pay back in time. Also, focus on paying debts with the highest interest rate first.
  3. Slash down your expenses: As soon as the crisis kicks in, the first thing for you to do is to reevaluate. Run through your standard expenses and remove the wants. In a time like this, only the needs should stand. Keeping your expenses as low as possible would help you thrive better.

READ: Most profitable asset in a decade, Bitcoin up over 26,600,000%

GTBank 728 x 90

READ: Personal Finance Culture: The 4 Cs of Financial Success 

Having understood how to prepare for financial emergencies, it is also critical that you understand how to deal with them. Preparation and dealing with the situation itself are two different things.

Here are some tips on how you can deal with the current financial situation:

  1. Be critical about every financial decision: Financial debacles are mentally stressful and could cause you to make poor decisions. This is why, at every moment, you should think properly before making any money decisions. Practicing this would greatly help you steady the ship. Ask yourself what long-term consequences would this have on my credit and finance? If disastrous, you know what to do.
  2. Explore other potential streams of income: One of the fastest and easiest ways to navigate financial emergencies is to explore other streams of income. What else can you do to make extra income that would help deal with the present situation? In real-time, looking for a side hustle while going through financial difficulties is not easy, but if you can pull it off, it would help a great deal.
  3. Talk to a financial advisor: Lastly, you can always visit a financial advisor for a professional view on your current crisis. However, this may be a little tricky because you would have to pay for their services. But the right person can help you get your finances in check from the very first day, as opposed to you trying to put things together by yourself.

READ: 7 Winning ways to become debt-free

READ: Jumia is optimistic of COVID-19 boost, despite poor Q1 2020 earnings report

Jaiz bank ads

Bottomline

Fidelity ads

Emerging successfully from financial emergencies depends on how well you can prepare ahead, steady your ship, and navigate the terrain. The good news is that if you are one of those who planned early enough, you are less likely to stay long there than those who are unprepared. Remember that your goal should not be to learn how to deal with the difficulty as it comes, but rather focus on being prepared ahead.

Continue Reading
Advertisement
Advertisement
Advertisement
ikeja electric
Advertisement
Advertisement
Patricia
act markets
Advertisement
FCMB ads
Advertisement
IZIKJON
Advertisement
Fidelity ads
act markets
Advertisement
first bank
Advertisement
bitad
Advertisement
Stallion ads
Advertisement
financial calculator
Advertisement
deals book
Advertisement
app
Advertisement