Personal Finance Basics: Learn How to Start Managing Your Money
It is never too late to make a financial fresh start. If you feel that your spending is getting out of control, it is high time you reconsidered money management. Review your annual spending patterns to see where the cash is going and find new ways to boost income. Here are six steps to map out and manage your finances in 2022.
![](https://i0.wp.com/www.nationalaccordnewspaper.com/wp-content/uploads/2022/03/image-1.png?resize=600%2C456&ssl=1)
- Understand Your Current Financial Situation
You cannot move forward without knowing where you are. Review your income, savings, investments, etc. — all incoming and outgoing cash flows. You don’t need to hire a professional financial planner to do this — just write down all your income and expenses per month.
To calculate your spending, save all the receipts beyond utility bills. You may be surprised by the results. For many people, putting pen to paper is already a wake-up call. - Set Priorities and Goals
Does the way you spend money correspond to your values? For example, paying for housekeeping makes sense if you prefer spending weekends with the family, but these services are redundant if you travel a lot.
What are you hoping to achieve financially in the next 12 months? Determine clear goals to work out a strategy for achieving them. - Work out a Budget and Stick to It
The hardest thing about budgets is not calculating them, but following them. This challenge requires self-discipline. You may feel that planning spending in advance feels restricting. If you are prone to impulse purchases, limiting shopping sprees will be especially hard, but you will thank yourself later.
Keep your eyes on the goal. By adhering to your budget, you will ensure there is cash available to spend on the items you like. Following a plan with a breakdown of expenses is always easier when it is written.
If there is not enough money for what you need, reconsider your expenses. You might find some small unimportant purchases like streaming services or takeaway coffee. If you are renting an apartment, consider moving somewhere cheaper if it won’t change your quality of life dramatically. - Establish an Emergency Fund
Save up for a rainy day. You need to set aside some cash for force majeure events like illness, unemployment, or broken car. This fund must cover 3-6 months of your typical expenses.
The easiest way to set up an emergency fund is via online banking. Open a special account and include savings in your budget. How much you put aside will depend on the amount of extra money per month. Generally, around 10% of your income should go into emergency savings.
If you take up online trading, set aside a portion of your profit. Global brokers like Forextime help financially savvy Nigerians make money in the global financial markets without leaving their homes. You can start with a modest investment of 20,000 nairas and grow your volumes (and profits) gradually. Visit https://www.forextime.com/education/online-stock-trading-guide to learn more. - Pay off Debt
Deal with debt before tackling bigger financial goals. Compare the interest rates on all of your credit cards and loans to prioritize them. If you can only afford to make minimum payments, consolidate your cards into a single interest loan or line of credit. This way, you will pay it off faster and spend less in the long run.
However, if you have skipped loan payments in the past, banks may be reluctant to provide consolidation. In this case, the best solution is to focus on paying debts one by one — for example, put any extra money on your credit card each month until you pay it off.
If you have to take out a new loan, choose the shortest term possible. Otherwise, paying will seemingly take forever. Choose loans that allow early repayment without fees.
![](https://i0.wp.com/www.nationalaccordnewspaper.com/wp-content/uploads/2022/03/image-2.png?resize=602%2C399&ssl=1)
6. Save for Retirement
Sooner or later, you will want to retire comfortably. In Nigeria, employees do not have the benefit of workplace retirement plans with tax incentives like 401(k). Experts recommend putting aside another 10% of income for retirement.
If you want to make that money grow through investing, speak to a financial professional. Do not let emotions like greed and fear dictate your actions. Create an investment strategy (for example, a forex trading plan) aligned with your needs and goals and start saving!
DISCLAIMER
The OPINION / COLUMN is authored by independent contributors to the National Accord Newspaper. While contributors adhere to our editorial guidelines, they are not employed by the National Accord Newspaper. The perspectives and opinions expressed herein are solely those of the author and do not represent the views of the National Accord Newspaper or its staff.