December 3, 2020 All Things Fintech in Africa

How to Manage your Personal Finance

Managing finance is somewhat still difficult for some of us. We are awful spenders. No budgeting, spending on the go, whenever and however. Impulse buying is one of the horrors why we go broke occasionally. Yet, little importance is being given to our finances.  Some of us, if not all, are still unaware about how to manage our finances in the first quarter of 2019. For instance, Ayodele earns 70,000 naira every month. But before the first week of the month ends, he has spent thirty thousand naira shopping for essentials he doesn’t really need.  During the third week of the month, he says, his salary is down to 20,000 naira. While he anticipates for the next month’s salary he would spend it in his head. Many of us are like Ayo, no budgeting, investment or projecting. Being deliberate about your finances helps you to smash your financial goals; it just requires a systematic approach.

Ways to manage your finances

Track your net worth:  

Net worth is the difference between your assets and liabilities. How good is your financial well-being? Are your liabilities however greater than your assets? You can create an excel sheet where you track them.  Net worth = Assets (cash, bank balance, investments, real estate, e.t.c) – Liabilities (loans, outstanding bills, credit card bill e.t.c). You should track them monthly, quarterly or yearly. If you become aware of where you stand financially, you can position yourself to achieve your long term goals.

Make Extra Income:

Why don’t you utilize the extra time to make extra income? I think, if you can spend three hours watching three episodes of game of thrones every day, you can build a side hustle too. Don’t just watch random videos online, be productive and make more money. A side hustle can actually create a balance to your income, and the best part is that you don’t have to rely so much on your salary for emergencies. There are hundreds of ideas you can explore to make extra money.  Even reviewing books online can make you some money.

Start Investing:

The simple rule is to invest before you spend. And you don’t have to compromise on the “baby boy or girl” lifestyle before you invest. Firstly, have an investment goal you wish to achieve, know the investment duration and decide on which asset class of investment to pursue. Any of your investment depends on your risk appetite. You can take advantage of cowrywise.com to start investing in Treasury bill or government bonds for a start.

Create an emergency fund:  

Unforeseen circumstances occur; you have to plan ahead in cases of such emergencies like loss, accident, medical contingences.  The first situation can stop inflow of money or income, this is a categorized under job loss. The second situation leads to unexpected expenses beyond your budget.  Your emergency fund should cover expenses for a particular period of time. If you spend 50,000 naira every month you should multiple it by, let say, six months

50 ,000 × 6 = 300000.  

Under no circumstance should you withdraw money from your emergency fund expect it is really an emergency.

 

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