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I don’t know about you, but I have been so worried about the Nigerian economy post COVID-19. So many sectors of the Nigerian economy are suffering from the effects of the lock down and although it is gradually being lifted, so much has already been lost. I now find myself wishing that I had saved some money from my monthly income to help me cope with the coming recession.
According to the International Monetary Fund, the Nigerian economy is projected to contract by 3.4% and inflation is predicted to go as high as 13.4%.
What does all this mean for your present salary/income?
Well, it means that if you are earning N100,000 per month, as a result of the projected inflation rate, your N100,000 will be worth much less than it is currently worth. All these prediction of doom and gloom makes me value the importance of an emergency fund to get through the uncertainty.
What is an emergency fund?
An emergency fund is cash savings that adds up to at least 3 to 6 months of your monthly household expenses.
For example, if you spend N70,000 per month from the N100,000 you get every month, your emergency fund should be at least N210,000. Given Nigeria’s peculiar circumstances, an emergency fund for a Nigerian should be at least 6 months to 1 year of your monthly household expenses. This means that for Nigeria, a good emergency fund will be at least N420,000. This principle also applies to businesses and persons who are self-employed .
Now that we have a background, let me tell you how to save from your salary/income.
Step 1 -Create a budget
Yes, I know. A lot of people run away from creating a budget. Some people think it’s not realistic in this economy or they earn too low to start budgeting . But really, a budget is just a guide – a spending plan for your income, no matter how low or high you think it is. When creating a budget, every single kobo/cent/pence of your income must be allocated to a category. All expenses must be listed out, no matter how irrelevant you think they are. If you are going to spend money on it, then it should be in your budget. There are various applications(“apps”) available which can help you track your spending. Let me know in the comments section if you want me to share the top apps I use to track my spending.
Step 2- Balance your budget
Once you have created a budget, the next step is to balance your budget by cutting costs. Go through your budget and identify areas where you can reduce your expenses. You should be able to cut costs on items that are not fixed such as your airtime, data, transportation or food bill. If you spend a lot on data, consider reducing that figure by half. Check out all the data providers and evaluate which service provider offers you more for less. You can also consider being more active during off peak hours.
You can also reduce your food budget. It might sound difficult at first, but it can be done. Always take a shopping list with you to the supermarket and do not go to the supermarket when you feel hungry. I find that I put extra junk food that I do not need in my shopping cart whenever I shop hungry. Try reducing how often you buy fast food and take packed lunches to the office. If you have a freezer, start freezing food, you will be amazed at how much you will save just by cooking in bulk and freezing it. I recently started doing this and I can almost slap myself for waiting this long.
Step 3 – Save! Save! Save!
I do not know how else to over emphasise this step. All the money you have managed to cut out in your budget can now be channeled towards saving. A great way to do this is to ‘pay yourself first’. As soon as you receive income, the first thing you should do is to send money to an interest yielding savings account. It helps to save towards a purpose so I’d say do not just save for the sake of saving. Save towards a financial goal. It could be towards your house rent, an emergency fund or to buy your own property. Once your financial target has been determined, calculate how much you will need to save per month in order to reach your goal. Do not worry if at first it seems impossible, just start no matter how little it is and start now!
Search for a very good interest yielding account and then set up debit orders that run automatically. That way you do not have to worry about doing it yourself. Even if you start with N5,000 a month, just keep at it. Also, save at least 10% of any extra income that you earn and by the end of the year you will amazed at how much you would have saved.
All you need is discipline and determination. So what are you waiting for? Go ahead and start saving and do let me know how it is going. Will love to hear from you!
Mojisola Jaiye- Gbenle is a Maritime Lawyer, with particular interest in financial literacy. From time to time, Mojisola advises startups and individuals on personal finance and helps them structure their finances to achieve profitability and financial independence. When she is not resolving shipping disputes in court, or advising on matters of compliance in the maritime industry; Mojisola is searching for opportunities to educate people on the importance of saving and investing to create generational wealth. She lives and works in Lagos, Nigeria.
