The times we live in now demand that you become financially wise. It requires the application of knowledge and skills gained from understanding finance and accounting principles in the business world and how money is being used effectively. It has become very important more than ever, that financial intelligence, extra effort, and skills be acquired to enable one to successfully manage his or her personal finance. Personal finance is the term that covers planning and managing personal financial activities such as revenue generation, expenditures, budgeting, savings, investments, and other financial-related actions. It is one’s ability to make very smart financial decisions and properly plan your financial dealings. Organisations both profit-making and non-profit-making pay attention to their financial statements to enable them to determine whether their operations over a period are successful. To understand and appreciate your net worth, you must pay attention to your personal financial statement which shows your assets and liabilities.
Events of the past few years globally, including covid-19 pandemic, created myriads of economic difficulties with phenomenal dimensions, resulting in numerous hiring freezes and layoffs and many other recorded disruptions. Recent government economic policies in Nigeria have continued to mount unimaginable pressures on businesses and personal finance. The future ahead of us does not present itself as one that can tolerate recklessness in how we spend. It is a future that demands that you take care of the “kobo”, and the “naira” would take care of itself. Extreme times require extreme measures to guarantee survival and avert financial stress. Financial stress can be caused by several factors ranging from debt, unexpected expenses, or compulsion to make purchases we cannot afford. It is not in doubt that many would be experiencing financial stress in the days and months ahead but without the right coping strategies and support, it can be impossible to get through it. It is however possible to feel in control of your personal finances if you are already suffering financial stress or about sliding into it.
There are ways you can adopt to ensure control, discipline, and more income.
- Budget for everything and anything.
When you take care of the “kobo”, the “naira” would take care of itself. This suggests that every kobo counts and must be seen as such. The best and easiest way to keep your finances on track is to make a detailed, realistic budget that you can discipline yourself to stick to. Although this may appear evident, for many people, the experience of financial stress creates a vicious cycle. Many would want to avoid thinking about money because it is a stressful subject that gets them into more debt and then cause more stress.
The most fundamental thing to keep in mind while creating an effective budget is not to set unrealistic goals about how much you are going to save and how much extra income you will earn. Rather you must use your budget to correctly track and define how your finances should work. This is a period you must be authentic to yourself, in knowing how much money you truly have, spend, and can save. This guarantees your successful journey toward survival.
Having a mental picture of what you earn and how you would spend your money is not enough, but rather you start by putting things down. You must put your spreadsheet to work. Painstakingly write out your monthly expenses in as much detail as possible i.e., loan repayments and interests, groceries and other necessities, gas, fuelling costs, internet subscription, phone, insurance, savings, ecclesiastical commitments, social works support, and other obligations. Then assign the amount to spend on each of the items you have listed above. You must ascertain that you are not spending more than you are bringing in. You must be ready to adjust your spending. Remember, the game here is “Survival”.
- Prepare yourself for the unexpected by setting up an emergency fund.
Life is often confronted with emergencies. When these emergency situations are not well handled, they tend to increase financial stress. Another effective way to reduce financial stress is to start building an emergency to cover unexpected expenses. Setting up an emergency fund is critical regardless of how much one earns. Building up a huge fund would appear unrealistic especially where you are not earning big enough money, but you can consistently put aside a small amount of money monthly that can form a useful nest egg over time. The game here is “Consistency”. Set a good realistic target for yourself and plan to increase your savings into the emergency fund as your income increases. Financial advisers often suggest that you should strive to maintain at least six months of living expenses in your fund. You can do more.
Emergency funds you have built over time can, and likely will, alleviate your stress in several ways. Most importantly, it will provide you with the psychological security you need to face stressful situations. Should any eventuality occur that demands unexpected spending, you will have the money to meet them. This prevents you from getting into more debt and financial pressure.
- Be authentic to yourself and get real.
The reality is that cost pressure is not lowering any time soon. The spiral effect of the recent economic policies will invariably affect every facet of your personal finance. Many would be in deep financial trouble with pressure to pay existing debt and some others are faced with fears of how to meet certain recurring obligations. The fears are real. The fears may make the bad-debt situation even worse. Undoubtedly, you may be spending more than you are earning or facing additional stresses, like supporting family members or other people in your life. The fear in many people has continued to increase as they look at the worst possible scenario with no inkling of how to surmount them. You are not alone I must tell you. Both individuals and businesses are facing varying degrees of bad situations. Behind the smiles on people’s faces are pressures in different dimensions. The first thing you need to do is to lose your fear, brace up and stay positive. The good news is that it is much easier to earn extra income today than it was in the past, largely due to the increase in extra income opportunities.
That said, in the short to medium term, your spending is going to be easier to change than your income.
Reducing costs means doing some obvious things:
- Avoid making compulsive purchases.
- Avoid those expensive nights out with friends.
- Resist all attempts to get you to incur expenses not planned for.
- Avoid spending to impress. But it also includes making some less obvious choices.
- You must downsize – evaluate your huge overhead, a big house you service, lots of cars, and lots of expensive toys. These give you real fun but are at the same time costly. Pay attention to money spent in acquiring it, maintaining it, insuring it, and moving it. But, if you are sure this is not eating deep into your income, “you can keep the fun”. You must consider other major monthly expenses and look for affordable options that can help you downsize your huge overhead. Negotiate for a reduction in loan payments and interest rates to reduce your monthly payments.
- You can get help – Ask for it.
A lot of people are concerned and troubled by the guilt and embarrassment financial stress causes them. In our today’s society and social media fantasies in which many people live pretentious life, it can be difficult to admit that you are not extremely rich, let alone that you are struggling to balance your personal finances. The spurious life we choose to live in other to earn acceptance and commendation from real and imaginary admirers may no longer be supported by the turn of events. Many times, you borrow money you know you cannot pay back just to finance a pressured lifestyle. It is time to check your financial temperature, get rid of the fear, and get help.
Overcoming this fear is essential to getting out of debt and relieving your stress. There are plenty of services out there that can help you take back control – from financial planning and credit counselling services to debt management advisors. So, think about getting a counsellor (leveraging other people’s power). This provides you with opportunities to access vital information and expertise to help you reach not only your debt-reduction goals but also your wealth goals. This is also a good strategy for reducing the stress that results from too much bad debt. You get help to create a solid plan for your personal finance and obtain help to implement it.
- Live by the economic principles of wealth creation.
More important than ever, the times call for desperate measures and steps to ensure that money at any given opportunity creates more money. Would the pressure dip? It is still time that would tell. However, the uncertainty of the times does not guarantee survival if what you earn gets all consumed or slips through your fingers in your quest to service your lifestyle and to project unreal social status just to maintain relevance in the public eye. In other words, “Don’t eat with your ten fingers”. With the frenzy of social media mounting up, you may not get out of the trap soon. Yes, celebrities make a lot of money, but being in the public eye and getting recognized all the time has its drawbacks. We have seen notable celebrities go bankrupt shortly after they exit the scene, and you begin to wonder what could have happened. When you ask the question, what went wrong and probe further, you will find out they never lived by the economic principles of wealth creation even with the mammoth “wealth” they appeared to have amassed over time. The point is of course that the victims of money mismanagement are not just celebrities, but there are highly successful corporate executives who fell off the cliff and got eclipsed in the same way. The mind trap that many easily fall into is believing that a high salary will eventually lead to accumulated wealth. Rationally, it possibly will not be. We all want a high salary, no doubt, but building wealth requires being intentional about managing your expenses and investing your money. This brings me to the known and agelong principles of wealth creation which are pivotal to survival. They include:
- The Principle of Multiplication: You must know how to multiply money through savings and investments. It is not only the rich who should cultivate the habit of making investments. Money earned has the potential to multiply. The money you set aside for investment becomes tangible capital that can be doubled. You must carefully and consciously build capital. In addition to building capital, you must learn the craft of managing capital. Avoid actions and habits that can destroy capital. You do not invest for the fun of it, but you must be guarded to ensure you invest only in things you understand. You can seek professional advice as well make diligent research for appropriate investment vehicles to consider. Guide against making losses. Losses erode capital. Warren Buffet once told the managers of his capital two rules they must live by. Rule 1 – Do not destroy capital. Rule 2 – Refer to rule 1. Your investment decision must be failproof.
- The Principle of Value: Money gravitates towards value. The quality of your earnings is a function of the value you bring to the table or the value you create. This applies to both individuals and businesses. Value commands the direction of the flow of money. This is a basic economic principle. Your value is a measure of your skills, gifts, or abilities which can be acquired through formal or informal education, vocational training, and research or may be inherent. Value refers to your capacity to deliver exceptional results, create innovative alternatives, and stay competitive. You must seek to increase your value consistently. This demands that you train and retrain yourself. It is not enough to desire promotion and pay raise but also to ensure you are creating commensurate value or more. Wealth honours value.
- The Principle of Productivity: The fundamental truth is that the corporate world does not forgive. Once your productivity begins to decline and performance starts to plunge, it is only natural for a corporation to consider alternatives to arrest the dip in performance. The principle of productivity involves refining your value in such a way as to ensure that you deliver great performance consistently. Delivering an optimal level of productivity consistently demands a certain level of creativity, innovation, competence, and excellence on your part. Go for these and stay productive.
- The Principle of Networking: In life, there are certain enablers that make achievements possible. When you have the right people, certain successes come almost effortlessly. Connecting with the right people and enablers is very essential and determines to a large extent how you navigate the unchartered waters. Networking though desirable and has proven to be a great enabler requires that you possess the requisite skills, right attitude, and qualities. Your network, they say, determines your net worth. You need social capital to create wealth.
- Measure Progress and Keep on Keeping On.
You know it is a journey and you need not be discouraged. Do not be hard on yourself. It is fun tracking the progress you have made from time to time. Take your eyes back to the budget and evaluate the adjustments you have made and how they have paid off. Push to get better at managing your expenses. Push to earn more income and pay down your debts. Have more positive relationship with money and your financial stress will decrease. Keep on keeping on and you will succeed at it.