“How am I supposed
to save when I earn barely enough to live on?” “My salary starts to
disappear as soon as I receive it. No matter how hard I try to save, I
am always broke” “Even when I do save, something always comes up, like
my friend’s wedding which was last week; she will never forgive me if I
don’t “take” her ‘aso-ebi,’ that set me back N30,000 and there is
another one in two weeks time. It’s impossible to save.”
Many young
Nigerians complain that by the end of the month, there is no money left
to save; they give up on saving even before they start. Once they have
taken care of their mobile phone bills, rent, food, clothes and
entertainment. If you are constantly broke before mid month and cannot
make ends meet, then it is time to change the way you treat your money.
With a little determination and discipline, you can do it.
You don’t earn enough to save?
This is the most
common reason for not saving and it is flawed. Many people tell
themselves that they do not earn enough money and that if they made
just a little bit more, things would be much better. This excuse would
hold more water if you have already placed yourself on a tight budget
and are paying careful attention to your spending, and are still broke.
The truth is that
many young adults are simply not paying enough attention to their
personal finances. They assume they will earn lots more as time goes on
and things will begin to fall into place. This attitude means that they
don’t really consider what comes in and where it all goes. Yet, it is
not the amount of money that you earn that matters, but how much of it
that you keep. If you establish poor spending habits when you are
young, it will be no different when you begin to earn a significant
amount of money.
Are you spending more than you earn?
Do you track your
spending? Start tracking what you spend for a month and a startling
picture will emerge of where all your money is going. When you do this,
you will have a clearer idea what you need to cut back on or do without
altogether.
Note that it’s easy
to track spending on set expenses, such as transport costs or rent. But
you can easily lose track of how much you are spending on eating out or
mobile phone re-charge cards especially if you always pay with cash.
Thirty-two year old
Shade lives rent free with her aunt in Lagos, and earns N165,000 a
month yet, she is always broke. When friends visit her office armed
with clothes, shoes, bags and jewellery for sale, she can’t resist and
it is quite easy to acquire the items as they let her pay over three to
six months. At first, these impulse purchases may seem affordable but
before long, the expenses spiral out of control and hundreds of naira
spent in this way grows into hundreds of thousands of naira. It was
glaring why Shade was always penniless and in debt.
She decided to log her expenses for the month of January 2011; it highlighted her typical monthly expense pattern.
Tithes: N17,000;
Hair / Beauty: N32,500; Eating out Entertainment: N30,000;
Take-away meals: N20,000; Aso-ebi: N45,000; Mobile phone re-charge
cards: N16,000; Transport: N30,000; Clothes: N25,000; total: N215,500.
Budget
One of the best
ways to ensure that your expenses are not exceeding your income is to
budget. List all your routine monthly expenses, and other spending, and
subtract those amounts from your income. By making small, manageable
changes in your everyday expenses, you can make a huge impact on your
financial situation.
What is really important?
If you are living
on a tight budget, prioritising your spending is essential. Of course,
it is nice to eat out often with friends but it doesn’t have to be
everyday. If there is an item that you have set your mind on, ask
yourself if you really need it. A useful tip is to shop with a list.
Before shopping, make a list of only those items you need and buy only
those, otherwise chances are that you will end up picking up what you
don’t really need. The key is to begin to differentiate between needs
and wants, and being brutally truthful to yourself about your personal
finances.
Pay yourself first
You are probably tired of hearing about this concept but it cannot be over-emphasised, as it is a key first step to saving.
Each time you get
paid, no matter how much it is, try to keep at least 10% aside for
yourself. Instead of waiting until the end of the month to see if you
have any money left, make your savings an urgent bill that must be paid
as soon as you get your salary. This will be the foundation of your
savings. It can be difficult, but once you get started, you will see
the savings adding up and this is self-enforcing; you will be
encouraged to continue saving.
Put your savings on autopilot
Many people don’t
have the discipline to physically set money aside. One solution is to
automate your savings. Talk to your bank about setting up a direct
debit from your salary or current account to your savings account or a
mutual fund each month, preferably the day after payday. You won’t have
to worry about pay-in slips or visiting the bank; which could be an
inconvenience.
Make your savings hard to get at
Even when you make
enough to save just a little money, you will be tempted to spend it if
it is easily accessible. Put your savings in a vehicle that makes it a
little difficult for you to get at. This may be that you have to visit
the bank or observe a notice period to make a withdrawal. Don’t tie
your savings to your debit card as once you pass an ATM you will be
tempted to withdraw. This will help you to curb your impulse spending.
The art of saving
money is really a state of mind. Like any skill, it takes some effort
and practice to improve. If you are disciplined enough to commit to it
in the first place, the process would already have begun. Investing
even small amounts of money at an early age will grow into a
significant sum over time. The sooner you start saving, the better.
Write to
personalfinance@234next.com with your questions and comments. We would
love to hear from you. All letters will be considered for publication,
and if selected, may be edited.
