Reaching certain financial objectives during inflation will need a considerable amount of time. But the result is achievable and could be immediate too. You’ll feel a lot better as soon as you start finding a way to tackle the money issues that have been bothering you.
Nine out of ten respondents in a 2019 poll said that getting their money in order was the single most important factor in their happiness and sense of self-confidence. Read this checklist, and you’ll have no trouble getting things right.
1. Make both short-term and long-term plans
Whether you choose to keep track of your short-term and long-term objectives on a sticky note or by writing them down in a message draft on your phone, the choice is yours. Make sure you allow yourself some time alone to mull things through.
Of the several financial objectives you may be pursuing, some will be of the highest priority. Other objectives may not be completed for another decade or more, but they nevertheless need to be started as soon as possible.
You should begin by making a comprehensive list of your money goals. When you know exactly what you want to accomplish, figuring out how to get there is a lot less of a guessing game.
Now think of What would make you the happiest monetarily speaking? That’s what a good financial plan is all about. think of something that gives you peace of mind so you can enjoy life without constant anxiety.
QUICK ADVICE FOR SHORT-TERM FINANCIAL GOALS
- short-term goals that can be accomplished in a year or months. Put up a savings cushion that spans three months’ worth of spending just in case.
- Do not borrow more than you can afford to pay off in full each month for your debt.
- Resolve any outstanding credit card bills.
- Make and stick to a spending plan.
QUICK ADVICE FOR LONG-TERM FINANCIAL GOALS
- Put down ten percent (10%) of your annual earnings immediately.
- Put money down in a separate account for your kids (or grandkids) and also for their future college expenses and health insurance.
- If you intend to buy a house, put a reasonable amount of money aside as a down payment.
Recommended: Why Having an Emergency Fund is a Must?
2. Create a spending plan
adopting a spending plan or budget is the one move that makes it possible to achieve any other monetary objective.
A spending plan is an itemized list of your earnings (from your regular job, any other gigs you may have, and any investment gains) and outgoings (from your other sources of funding).
A budget on the other hand is a plan for allocating and monitoring monetary resources in order to achieve certain objectives.
When it comes to budgeting, you might want to adopt the standard 50-30-20 budgeting method. The idea is to devote half (50%) of your disposable income (what’s left over after taxes) to necessities like housing, food, and transportation, and the other part (30%) to luxuries like cell phones and streaming service plans and eating out.
The remaining 20% should then go into savings, such as an emergency fund, retirement contributions, or a down payment on a home, vehicle, or acquisition of other assets.
Here is another idea called the 60% Solution which is another concept that emphasizes the need of investing in the future without sacrificing short-term gratification.
You should give some thought to how to alter your expenditure or boost your income if your personal pie charts appear quite different from either method. With that, you’ll be well on your way to achieving both your immediate and long-term objectives.
Some people monitor their budgets with the use of an Excel or Google Docs spreadsheet.
This helps them keep better tabs on their spending habits in real time by using budgeting software that syncs with their bank account or bank statement.
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3. Set aside some kind of emergency savings
Okay, you probably don’t need convincing that having some money stashed away for life’s endless stream of financial curveballs such as pandemic layoff, health, and replacing whatever your mechanic tells you is probably the ultimate money stress reducer. There are several trusted online savings apps you can start with.
But how do you create that buffer zone? You aren’t the only one feeling overwhelmed right now in this period of global inflation. Sixty percent of respondents to a survey said Most Nigerians don’t have up to N75,000 (close to $100) available to pay for an unexpected expense.
Furthermore, it’s even unlikely that N100,000 will be sufficient in severe emergency cases to offset house rents and other bills.
The first step in creating a rainy-day fund is to determine how much security you need. Having three months’ worth of living costs saved in an emergency account is a good idea, and having six is even better.
If you can’t fathom how you would manage to start making these emergency savings, then here is what you should do. Just reserve or suspend your long-term financial objectives for now and quickly set up an auto debit for your account into your emergency account. The key is to set up regular deposits into your emergency fund account. You can walk into the banking hall to talk to your bank about how to do this perfectly.
Just like I said earlier, the basic approach to do this is to create a separate bank account that you designate as your emergency fund. This type of account shouldn’t be your normal savings account which creates the temptation to utilize the money for non-emergencies. I highly recommend a fixed deposit account
The best rates of return are often offered by online savings institutions. It is possible to create a high-yield online savings account and link it to your main checking account for automatic deposits.
Refusing the debit card the online bank may provide may further reduce the incentive to spend.
4. Reduce your hefty Loan App Outstandings
Loan app interest rates in Nigeria are sometimes referred to as “crazy” by those who have had difficulty paying down their accounts.
While banks typically pay depositors less than 1% interest on savings accounts, the average interest rate they charge on loan apps with a balance is almost 30%.
With loan app, interest rates averaging 30% in Nigeria, carrying that load is a major impediment to creating financial stability, and paying it off is one of the smartest decisions you can make.
If you can’t figure out how to do without loan apps, I will suggest you work on your daily/monthly budgets and spendings to cut the cost of living for some time so as to quickly make that sudden leap out of debt. Perhaps certain costs should be eliminated entirely, or take some bold steps in making regular commitments in payments that add up to a smaller total amount each month to get out of debt.
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5. Set aside money for old age
The time to start saving for retirement is now, regardless of how many years are still left. The longer you put off getting serious about this massive objective, the more money you’ll have to save each month just to land well in retirement.
Having a certain percentage of your pay put away at various ages is a good rule of thumb for how much you will want or need to have saved for retirement, but there is no hard and fast rule.
When you reach the age of 35, you’ll be well-positioned for financial success if you have saved at least two times your annual income in retirement accounts. At age 50, you should have six times your income saved for retirement, and by your late 60s, you should have ten times your salary saved.
There are various banks and financial institutions offering retirement saving packages to working-class Nigerians. ARM pension and Crusader Sterling Pension are one of them.
You can talk to your employer to lias with Pension Schemes to set up a savings account with these institutions for you and other staff as well.
Planning for retirement and actions you need to take
- Put retirement savings into long-term investments. The amount you’ve been able to put away for retirement is the single most important element in determining how easily you can get off the rat race. A significant factor, though, is how you choose to invest the funds in your retirement accounts.
- There are two main options to invest for retirement: stock investments and bond investments. While stock prices might fluctuate wildly, it’s important to remember that equities have traditionally provided larger returns than bonds over the long term (10 years or more).
- Bonds are more stable. They aren’t volatile like stocks and really tend to go up when markets are down. They don’t lose money, but they don’t make as much as stocks.
- If you’re trying to decide how much of your portfolio income to allocate to stocks and how much to allocate to bonds, inflation is a hidden risk you need to factor also. It’s frustrating that prices always seem to go up over time. Stock market gains over extended periods of time have historically been the greatest way to combat inflation.
- You should determine your investment objectives, risk tolerance, and investment horizon (how long you want to keep your money in the market) before deciding how much of your portfolio to allocate to stocks and bonds.
Legendary Vanguard creator and dedicated supporter of individual investors Jack Bogle proposed the following rule of thumb: Reduce your age by subtracting 110. That’s around the proportion of your portfolio that you should be putting into equities.
Recommended: 25 Investing Mistakes and How to Avoid Them
6. Smart borrowing
Getting a loan is common practice when making a major purchase. Whether it be the home you’re looking to purchase, Vehicles you use regularly, or Contributing to your children’s university expenses.
If you want to get your financial house in order, borrow just what you need. This is where things may become complicated since lenders tend to be laser-focused on informing you how much money you can borrow just when you need it to make a large purchase like a home, vehicle, or college.
No one will give you direct eye contact while suggesting you cut down on your borrowing. Loan officers are not concerned with how taking out a loan may affect your capacity to pay for school, buy a house, or travel.
If you did it, you have only yourself to blame. It is always preferable to borrow as little as possible to reach your objective. When you reduce your borrowing, you free up capital to use toward other priorities.
When you minimize your borrowing costs, you’ll have plenty of cash to devote toward anything else you choose.
After deciding how much you can afford to borrow, improving your loan credit score in advance can help you get approved for the best rate.
