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  Managing our finances can often seem overwhelming, especially in a country like Nigeria, where most of the things we know about money are from the things we observe from our parents. We spent over 20 years going to school from Nursey to the University, and there is little or no course on personal finance management. And just like the Rich Dad in Robert Kiyosaki’s Rich Dad, Poor Dad, observed,
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“One of the reasons the rich get richer, the poor get poorer, and the middle-class struggles in debt is because the subject of money is taught at home, not in school. Most of us learn about money from our parents. So what can a poor parent tell their child about money? They simply say “Stay in school and study hard.” The child may graduate with excellent grades but with a poor person’s financial programming and mindset. It was learned while the child was young.”
With the fluctuating exchange rates and economic instability in Nigeria, there has never been a better time to pay attention to one’s finances than now. However, managing your finances will require a well-informed approach. This article will answer some common questions about personal finance to help you better manage your finances.

1. What is Personal Finance?

Personal finance involves managing your money, including budgeting, saving, investing, and planning for retirement. It encompasses everything from daily expenses to long-term financial goals. Personal finance also includes understanding how to navigate local banking systems, investment opportunities, and economic conditions.

2. Why is Budgeting Important?

Budgeting is important because it helps you track your income and expenses, ensuring you don’t spend more than you earn. By creating a budget, you can allocate funds to different needs, such as rent, utilities, food, and savings. In Nigeria, where unexpected expenses can arise, a well-planned budget can prevent financial stress and ensure you have funds available for emergencies.

3. How Do I Start Budgeting?

To get started with budgeting, start by identifying and listing all your income sources and expenses. Categorize your expenses into essentials (like rent, utilities, and groceries) and non-essentials (like entertainment and dining out). Use budgeting apps like Money Lover or Goodbudget, to track and manage your spending. It is advisable to review your budget regularly (weekly or monthly) and to make necessary adjustments.

4. Do I Need To Save and How Can I Start?

Saving is the art of keeping away safely, a certain amount of money out of the total amount available to you per time, in a manner or place that they can be easily accessed for future use. So, saving is simply putting away today, the finances for tomorrow’s expenses. Everyone with income and expenses needs to save. Saving money requires discipline and a clear goal. Start by setting realistic savings goals based on your income. You can use automated savings apps like PiggyVest or Cowrywise to help you save. These platforms help you save a fixed amount regularly without much effort. On what amount to save per time, the 50/30/20 rule is a great guideline: allocate 50% of your income to needs, 30% to wants, and 20% to savings. Additionally, saving goes beyond just putting funds away. It also involves cutting unnecessary expenses and prioritizing essential ones.

5. What Is Financial Education and How Much Do I Need It?

Alan Greenspan, an American economist who served as the 13th chairman of the US Federal Reserve from 1987 to 2006 stated, “The number one problem in today’s generation and economy is the lack of financial literacy.” Everyone who earns income, no matter the amount, and has one form of expense or the other, needs to be financially educated. Financial education or financial literacy is simply the acquisition of the knowledge, skills, habits, and mindset that allows you to make informed decisions regarding money. Informed decisions about saving, investing, and spending. It helps you understand the complexities of financial products and services. Banks and NGOs offer many financial literacy programs that can improve your knowledge and skills, leading to better financial health.

6. How Important is an Emergency Fund?

While we do not pray or wish for emergencies, the truth is that emergencies do occur. It therefore becomes expedient that as individuals seeking to better manage our finances, we have a certain percentage of our income set aside as an emergency fund. There are so many benefits of an emergency fund to you, including helping you maintain your financial stability. Many financial experts recommend putting aside at least three to six months’ worth of living expenses as an emergency fund. However, feel free to get started with the amount you can at the moment until when you can put away large sums. The whole idea is to set aside a certain amount as a safety net during unforeseen circumstances such as medical emergencies or job loss. Keep this fund in a high-yield savings account for easy access and better interest rates.
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7. How Can I Invest My Money in Nigeria?

There are several investment opportunities in Nigeria, from stocks and bonds to real estate and mutual funds. To get started with investments, it is important to spend time studying investments and understanding how they work. There are so many resources online that can teach you about investments and how you can get started. Investopedia has a curated list of courses on investing that could benefit you greatly. I have used Learn by My Wall Street and I recommend it. When you have obtained sufficient knowledge about investing the right way, you can check out some of the registrars in Nigeria who can help you invest in Nigerian companies through the Nigerian Stock Exchange. And if you would like to invest in foreign companies like Google, Meta, and Apple, platforms like Bamboo and Chaka allow you to invest in international stocks. No matter what investment option you choose, it is important to have an investment plan in place to ensure you are able to make the most of your investments. My colleague, Grace, wrote an educative piece on how to set up an investment plan that works.

8. Should I Consider Insurance?

Insurance is a critical component of sound financial planning. It acts as a safety net, protecting you from potential financial hardships. In Nigeria, health insurance, particularly through the National Health Insurance Scheme (NHIS), can significantly reduce your medical expenses or those of your spouse and children, ensuring you receive necessary care without overwhelming costs. However, it is rather saddening that most Nigerians are ignorant about insurance, especially health, and the benefits. Beyond health insurance, consider other types of coverage based on your individual needs and assets:
  • Life Insurance: Provides financial security for your dependents in the event of your untimely death, ensuring they are not left with financial burdens.
  • Auto Insurance: Mandatory for vehicle owners, it covers damages resulting from accidents, theft, or other incidents, protecting you from substantial out-of-pocket expenses.
  • Property Insurance: Safeguards your home and possessions against risks like fire, theft, or natural disasters, offering peace of mind and financial protection.
Choosing the right insurance policies can protect you and your loved ones from unforeseen financial challenges. This will significantly contribute to a more secure and stable financial future for you.

9. Should I Take Out a Loan?

In general, it is advisable to avoid taking out loans whenever possible. Instead, focus on living within your means and reducing unnecessary expenses. Here are some key strategies to manage your finances without relying on loans:
  • Housing: Choose a living situation where you can comfortably afford the rent.
  • Transportation: if you can’t afford a car, move around with public transport or ride-hailing services. If you do get a car, ensure it is a car that is within your financial means to maintain and operate.
  • Education: it is unwise to take out loans to pay your children’s school fees. No matter your financial level at the moment, there is an option for you at that level. Enroll your children in schools with fees that fit your budget.
Loans can create a cycle of debt that is difficult to escape. Only consider taking out a loan in dire emergencies, such as life-threatening situations. In such cases, prioritize seeking support from family and friends, and ensure you repay any borrowed money as agreed.

10. What Are the Best Ways to Manage Debt?

Managing your debt requires discipline and having the right plan in place. In the last point, I advised against taking out loans. However, if it does happen that you take out loans or incur any other form of debt, here is what you can do. First, make a comprehensive list of all your debts, noting the interest rates and minimum payments. Knowing the terms of each debt helps you strategize more effectively. Second, adopt a repayment strategy that helps you pay off the debt as soon as possible. There is what we call the snowball method and it involves paying off the smallest debts first. One benefit of this is that it can provide a psychological boost and momentum to tackle larger debts. Also, we have the avalanche method that focuses on paying off debts with the highest interest rates first, saving you money on interest in the long run. Third, as you pay off your debts, avoid accumulating new debt. Resist the temptation to take out new loans while you’re focused on repayment. By being disciplined and maintaining a clear plan, you can effectively manage your debt and work towards a debt-free future.
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Concluding Thoughts:

Understanding and managing personal finance is essential for achieving financial stability and growth. By implementing the strategies outlined above, you can make informed decisions and ultimately secure your financial future. Don’t forget to always remember to review your financial management strategies from time to time.
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This article was first published on 5th July 2024 and updated on July 8th, 2024 at 10:09 am


Ifegwu-Mbonu Victor is a Personal Growth and Leadership Trainer who provides training and coaching to individuals and organizations.

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