How to Improve your Finances as a Nigerian

Financial management entails how you manage your funds, plan your money and how you financially prepare for the future. Every financial activity has a direct impact on your financial health. Most of the time, there are certain rules of thumb that guide financial decisions like, “if you can’t afford to buy something twice over, don’t buy it”, or “You shouldn’t live in a house whose rent costs more than 2 months of your salary”. While a lot of these sayings are tested and proven, it is important to give more thought to and consider what you should do to improve your finances. Here, we discuss 5 things you can do to effectively improve your finances as a Nigerian in 2022 and get you on track to achieving your financial goals.

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Track Your Spending

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Tracking your daily spending is one of the most important things you can do to improve your finances. Money comes in and goes out. Instead of just ignoring this cash flow, a bit of planning and crunching can help evaluate your financial health and determine how you can achieve your financial goals.

If you don’t know what is taking up your funds daily or monthly, then you definitely need to re-evaluate your spending habits. Spending awareness is the first step in financial management. You can use a financial management app like Cowrywise or Flutterwave, to track your spending across different times and categories, and get a better idea of how much you’re spending and what you’re spending on. If you can properly track your spending, you can begin to make a plan to improve.

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Create A Realistic Monthly Budget

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By observing your spending habits and income, you can set up a budget to help you plan your finances. You can set up a personal budget on a monthly, quarterly or annual basis. Do not create a strict unrealistic budget where you base it on drastic changes like never buying fuel again when you have to drive out every day, or never eating out again when you’re currently ordering food every day of the week. You must create a budget that suits your lifestyle and works for you. Instead of looking at a budget as something that stops you from living the good life, look at budgeting as something that helps you build better habits, like driving only to important places to cut fuel expenses, or cooking at home more often to save money spent on eating out.

The only way budgeting will help you manage your finances and actually be effective is if it is realistic and attainable. There are various ways to approach budgeting; all of which will involve you making projections for income and expenses. The income categories you may include in your budget depends on your lifestyle and situation. Common income categories include: salaries, bonuses, tips, business profit. The 50/30/20 approach to budgeting divides your take home income into three categories: 50% necessities, 20% savings debt, 30% wants. Common expense categories include: rent, education, food, entertainment, transportation, medical, and utilities.

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Spend Mindfully

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This cannot be stressed enough. Unless you have an infinite supply of money, it’s always in your best interest to be aware of how much you spend. But how? You may ask. The first step to mindful spending is to identify and differentiate between your needs and wants. This will enable you make better spending choices. Your needs are those things essential to your survival such as food, healthcare, shelter, transportation, and other essentials depending on your life and situation. Wants are those things you would like to have but are not essential to your living.

These two can easily be confused for another as there’s a gray line differentiating them and sometimes, needs can become wants. For example, a car may be a transportation need which is essential to your daily movement. However, you may want to purchase a luxury Mercedes Benz which costs more than triple a regular saloon car which will in turn cost you more money in fuel expenses. A luxury Mercedes Benz might be a need because you need a car, and it is in fact a car, however, it can be classified a want. The difference between the Benz and the regular saloon car is money you didn’t have to spend, and money you could have saved or put into another “real” need.

Your needs should be top priority. Only after have they been met should you allocate any resources to other wants. If it happens that you have left over money after satisfying your needs, you don’t have to spend it. You can invest, save, or put it in an emergency fund. Make smart moves with your money!

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Start an Investment Strategy

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Investing your money into a safe project or portfolio is one of the surest ways to accumulate wealth. But you might ask; “how do I know the right project to invest in?”, or “how do I build an investment strategy?”. First, you need to understand investing basics. You don’t need to have millions of naira in your possession before you can invest. However, this doesn’t mean that you should invest your savings or “last card” if you cannot afford to. You need to set out your goals; Do you want to invest for passive income over time? Are you trying to build wealth to make a purchase in future? Are you trying to secure the future of your children? Set an investment goal, consider your time horizon and the amount you have to invest.

As earlier mentioned, you do not need to be a wealthy individual before you can invest. Little contributions to investment accounts can generate passive income for you. At OG Capital, you can invest as little as ten thousand naira (#10,000) which will generate a monthly interest of 3%. By investing, you’re leveraging on a system that puts you on top of a profitable credit system. And thanks to compound earnings, the returns on your investment over time start accumulating their own earnings. How cool is that!

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Save!

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This might sound like common knowledge but believe me, one can never overemphasize the importance of saving. Apart from the fact that savings help you build better money management habits, your savings can serve as an emergency fund for when you fall into unforeseen circumstances. This will save you from borrowing to settle the emergency and going into debt. Savings can also give you financial backing and security in case of a job loss. Your savings can serve many purposes, such as setting a target to purchase a high priority need, or generally paying for something that wasn’t originally in your budget. Saving your money is a continuous process that requires discipline and strict adherence.

You can use a savings app or software like Piggyvest that automatically deducts money from your bank balance, or go the traditional piggy bank way. Go with whichever method is that is convenient for you. Saving your money is one way of ensuring that you’re doing the right thing with your finances and not spending your money extravagantly. Start saving today!

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The journey to better finances begins with you and your current financial habits. Some of these habits might need to be changed for you to see improvements in your financial health. While some of these habits may be more difficult than others to change, total commitment to this transformation will guide you to becoming an individual with excellent financial management skills that will serve you through your entire life – all the while, you’ll have more money in your pocket.

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