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Smart Money with Arese: Balling on A Budget

Arese Ugwu

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Being financially responsible doesn’t have to be boring! Let’s be real, no one works hard, day in day out, endures Lagos traffic, bills, bills and more bills so they can suffer! We work hard so that we can enjoy the nice things life has to offer. ‘Who no like better thing’ but sometimes we go about it the wrong way because we have an abusive relationship with money.

In the words of Kevin Hart…. ‘Let me explain’! Investing is like dieting, for it to be sustainable it has to be a part of your lifestyle. For example, my love affair with ‘starch and banga’ is legendary but I know if I eat it everyday I will be obese. (Trust me, the struggle is real!) Therefore, I TRY to make healthy food choices most of the time, so I can earn the right to enjoy my ‘starch and banga’ on cheat days.

This is just like investing in your financial freedom. You must have the discipline to set aside a proportion of your income every month (20%) towards purchasing assets (long-term financial goals), so that you can earn the cheat days that are your short-term financial goals (10%, the proportion of your income you set aside towards those seemingly frivolous expenses).

The key is understanding that you can have ANYTHING you want but not EVERYTHING you want! You need to decide what you value in life and ruthlessly cut expenses on the things that don’t matter to you so you can spend on the things that do.

Ivie doesn’t particularly fancy expensive watches? Simple! She doesn’t over spend there! But she loves holidays because they help her avoid burn out and create an escape from the reality that is Lagos life. So, she makes travel her SFG (10%) of choice and contributes a percentage of her income every month towards making that happen. It’s a smart way of allocating money for big purchases over a period of time instead of impulse buying.

Therefore learning to be smart with your money is not about extreme frugality. It’s about making intelligent decisions that allow you strike a balance between building wealth systematically and enjoying a lifestyle that your income can support.

There’s a science to balling on a budget!

Smart Money Formula:

Actually, I kid! (I’m not a mathematician) it’s more of an art! These are 5 steps that’ll help you get there without breaking the bank.

Create a travel vision board
If you were financially on top of your game and you could visit any country in the world, where would it be? Which hotels would you stay at? What activities would you take part in? Where would you go shopping?

Just because you can’t afford something today doesn’t mean you can’t dream about it! You can attract anything you focus on and believe in. Plus, dreams give you something to look forward to while you are working hard. So, using images and words create a vision board of what your ideal holiday would look like.

Scale it down
Maybe, your name is Arese and your ideal holiday is lying on a beach in the South of France, yachting in St. Tropez and eating food with names you can’t pronounce but after a realistic assessment of what is achievable a year from now, you put that on the back burner and create an intermediate goal that mimics certain aspects of your original goal but costs less i.e. lying on Bojo beach, Ghana eating ‘banku’.

Plan!
Everything is expensive but it’s more expensive when you don’t plan. So people who make last minute purchases on tickets and hotels tend to pay more than people who planned ahead.

For example, on a Virgin Atlantic flight in July, Tunde is sitting in economy (ticket N400k) looking at Musa in Premium economy (ticket N400k) thinking ‘that guy get money o’ not realizing that Musa bought his ticket 6 months prior, in anticipation of the yearly hike in ticket prices in the summer time. Worse still, he is sitting next to Morenike in economy who also planned ahead. (ticket N250k).

Down the aisle is the crown prince of the ‘air miles gang’ Niyi, sitting in upper-class who is an advocate of sticking to one airline so he can rack up his miles and bought a premium economy ticket months earlier but used his miles to upgrade to upper class. So who was smarter with their money? Ultimately, price is what you pay but value is what you get.

Research
We tend to make assumptions about how expensive things are, instead of doing the research to figure out which options give us the best value for our money. This is what my brother and I often refer to as ‘price fear’.

For example, scouting for deals on booking.com and hotels.com for your holiday to New York could mean paying 4 star hotel prices for 5 star hotels, i.e. paying less for the Trump (Central Park) than you would the Hilton (Midtown). For holidays in Africa, I recently discovered @africholidays on Instagram; they offer package deals for amazing prices.

Start a travel fund
All the vision, planning and research in the world mean absolutely nothing if you can’t put numbers to it! Create a travel budget that provides a rough estimate for what your holiday will cost. Then, make a commitment to save a proportion of your income (10%) towards this goal each month.

Saving towards a goal can be tricky, so it might be helpful to open a targeted savings/investment account. The goal is not to become a billionaire from this particular short-term investment but to give you the discipline required to reach your goal while making sure your money is working as hard as it can.

It helps to save early because the longer the time span, the less impact the monthly contributions will have on your income and save automatically by setting up a direct debit with your bank for your monthly contributions.

Even if you are going to your village the rules still apply. i.e. my nanny, Patricia is from Akwa Ibom and its important to her to travel at Christmas, to visit her family so we have a ‘village fund’ to make sure she doesn’t spend all her life savings and come back broke, to start looking at me with ‘googly’ eyes.

We live in a society where all fingers are not equal. So obviously, there’ll be people whose incomes can legitimately support going on an expensive holiday on a whim and that’s great but there will also be people who make financial mistakes like taking a loan to go on a holiday but that’s none of my business! For the rest of us…. There’s balling on a budget!

Arese is the author of the bestselling financial chick lit The Smart Money Woman. She is also the founder of smartmoneyafrica.org a personal finance blog tailored to the African millennial. Arese serves on the boards of House of Tara International Ltd and The Nigeria Higher Education Foundation as a non-executive director and is an associate member of WIMBIZ (Women in Management Business & Public Service). Arese Ugwu has an M.Sc. in Economic Development from University College London (UCL) and a B.Sc. in Business and Management from Aston Business School, Birmingham. She is also an alumna of the of the Lagos Business School, INSEAD Abu Dhabi and The London School of Business executive education programs. www.smartmoneyafrica.org . Follow on Twitter: @smartmoneyarese and Instagram - @smartmoneyarese

29 Comments

  1. Aibee

    August 13, 2014 at 4:57 pm

    If only someone had told me all these 3 years ago. Well, better late than never.

    • adelegirl

      August 13, 2014 at 5:43 pm

      I feel you! I wish I knew all of this 3years ago too, when I earned considerably more than I do now. I spent my monthly earnings on frivolities and helping friends and family, dinners, treats for my friends and I, without saving a dime, The only sensible thing I did back then was helping to fund the building of my mum’s house, Wasn’t until my mum and younger sis practically shamed me into saving that I adopted a savings culture. At the beginning it seemed almost impossible and it was hard adjusting the first couple of months but it is doable! I now save 25% of my monthly income and only have access to it at the end of the year. I am aiming to do more now – starting a specific travel fund, health fund, car/home maintenance fund, education fund for my unborn kids and now mortgage fund. All, whilst still faithfully paying my tithe, Funny that back when I earned more I had a poor tithing habit. I believe in tithing and the blessings attached to it. Thanks for this article Arese. Very timely!

  2. chidinma

    August 13, 2014 at 5:05 pm

    thanks

  3. Tincan

    August 13, 2014 at 5:08 pm

    Price is what you pay, value is what you get. I like this. Brilliant article. Thanks.

  4. Mummy.

    August 13, 2014 at 5:20 pm

    Hey arese!!!! My woman crush anyday anytime! See the way i jumped when i saw you’ve posted something today. I actually ran to your website hoping i’ll find it there, but here i am. Always on point, always! I can’t have enough of this o, i want you to work for me! I sent you an email on this but it seems you still don’t understand, I’ll keep disturbing you.(you should already have a clue of me). Anyways, God bless you real good! More grease to you elbow. #WomanPower

    • Ruth

      August 14, 2014 at 12:20 pm

      why dont i work for u instead hehehe

  5. Dee

    August 13, 2014 at 5:40 pm

    Great read. Off to set aside a travel fund.

    • ada1

      August 14, 2014 at 10:41 am

      Yep. absolutely. me too

  6. Koenigin

    August 13, 2014 at 5:42 pm

    Excellent article! Raising awareness amongst Africans about Financial literacy/discipline and promoting a saving habit is always a good idea. Budget planning and being smart about your money is the way to go and this is how even rich people are able to keep their wealth. They don’t really go around, spending unnecessarily. Planning and investing is the only formula for Financial Wellness whilst living above your means would be the ultimate formula for disaster.

  7. Mostest

    August 13, 2014 at 6:03 pm

    I wish more women like thus were involved in media so we can get important life lessons to help our youth, not half baked inarticulate women who only teach our girls to bleach and party.

  8. Vics

    August 13, 2014 at 7:15 pm

    Thanks Arese! This was really helpful

  9. fifi

    August 13, 2014 at 7:39 pm

    Well well well..

  10. Joy

    August 13, 2014 at 7:55 pm

    Lovely article. I was too happy to read it. I’m off the same belief, I preach it all the time. Planning is key, u can never go wrong with proper planning. I enjoy my life because I have carefully planned it to suit me. I don’t go beyond my budget. Lastly, u don’t have to break bank to enjoy life.

  11. omoibo

    August 13, 2014 at 8:03 pm

    Great write up! I think the struggle a lot of us have had with finances has to do with our upbringing… Our parents never discussed the importance of having a solid financial foundation i.e saving & investing etc. All that that I know about financial responsibility has been self taught, sometimes I this involved learning the hard way!
    One of the many skill set I plan on imparting in my off springs is being financial savvy, and learning the basics of making money work for you instead of working your whole life for it.
    I tell my friends whenever they say I’m tight with my ward, “just because I can afford it doesn’t mean I have to buy it”.

  12. Yinka

    August 13, 2014 at 8:55 pm

    Nice article! I used to be bad with money and had to learn to save after I moved out on my own, and unluckily it was during recession. The fear of getting laid off and becoming homeless made me save and I saved so much I was surprised and impressed with myself. I also applied the same method during my wedding planning which I had a year to plan. We paid the vendors every other month from our wedding savings. By the day of the wedding, we didn’t owe a dime and didn’t rely on anyone to help foot the bills.

  13. @edDREAMZ

    August 13, 2014 at 10:32 pm

    a.k.a EDWIN CHINEDU AZUBUKO said…
    .
    Making sense article no doubt…..
    .
    .
    ***CURRENTLY IN JUPITER***

  14. random anne

    August 14, 2014 at 12:04 am

    lol i was going to throw some shade when I saw the Chanel in the back, but this is an excellent article! thanks so much – I’m better at saving now than I was before, but somehow I still find myself dipping back into the savings budget – because I was missing long and short term goals!

    ladies a tip for you if you are like me – a spender to zero. In addition what Arese has said her, think of your savings as a bill that you must pay first. I do a direct deposit of my savings amount (saving over 50% of my salary now) into an online only account, no atm card, no bank branch, nada!. If I need my money, I can only get it in three business days – takes my impulse purchases down. However if you have credit cards with a large limit, this can backfire as you start racking up credit card balances because you know you have the dough somewhere. If this is your situation I suggest using the strategy above for your 10% and keeping that in the online only bank account and then moving your long term money into whatever vehicle you like. For me right now, I’m not so concerned about earning interest, I just want to keep the money away from my thirsty shopping habits, so I’ve put the money in a CD. This should force me to be disciplined with credit card spending while still having that 10% to do fun things.

  15. Feirooz

    August 14, 2014 at 8:00 am

    Thanks this is sooo helpful

  16. Thelma

    August 14, 2014 at 8:50 am

    Fantastic article,very relevant.Please put a book together for those of us who don’t see your feature often enough.
    “The best from arese”

  17. Thelma

    August 14, 2014 at 8:53 am

    Oo you have a blog.i will go there then.thanks again.can I invite you to speak to a group of ladies?

  18. Aderonke says #Bring BackOurGirls#

    August 14, 2014 at 8:54 am

    Yeah well said Arese. I totally agree with you. I am terrible with money even when I save it in the bank. The fact that I have access to ATM makes it easier to reach. So when a colleague approached me that we should start a monthly “ajo” savings with credible colleagues. I quickly joined and I choose to pick last so as to enable me save enough and meet the time I want to make my trip. I had a wonderful and restful trip because I knew I had no pending bills to pay afterwards nor owed any one. There’s nothing as peaceful as knowing you achieved a goal with no debts to pay.

  19. Ema

    August 14, 2014 at 10:06 am

    Thanks Arese for this great piece.

  20. Stylefash25

    August 14, 2014 at 11:05 am

    Very insightful/informative. I’m learning to plan better and do a lot of research; its hard though but usually worth it at the end of the day. There’s indeed balling on a budget.

    stylefash25.blogspot.com

  21. fokasibe

    August 14, 2014 at 11:32 am

    Good job! Like this piece….

  22. sum1special

    August 14, 2014 at 12:18 pm

    I culdnt agree more. Ladies spend so much money on clothes and i wonder if that is ther only priority. Its good to look good but be wise on how you spend on looking good. There are other things to spend money on.clothes come and go,,,,buy what you can wear for a long time and not just what is in vogue. It will go out of fashion soon.

  23. Ann

    August 14, 2014 at 1:01 pm

    Great write-up,thanks. Please,i have a question. i rli want to learn more. Plz,how can ds work for a 50k (naira) below earner?

  24. eunice

    August 14, 2014 at 10:44 pm

    Brilliant write up…learnt a lot

  25. agril

    August 15, 2014 at 9:56 am

    This is so me..i am 24 yrs old, i got a car this year and please ask me ,i started planning ds car parole wey back a yr ago..lol..funny.. my friends were travelling to dubai and all., asking me to go with em but i gave them excuses knowing fully what i am planning for, i am not saying traveling is not good but one step at a time, now i am cruising around lagos with my baby toyota..next stop is applying for yankee visa..i cnt come and die..YOU ONLY LIVE ONCE

  26. lucy

    August 15, 2014 at 11:09 am

    Thanks so much for this post.
    I learnt a lot.. Very brilliant write up. I’m glad i didn’t skip it.
    More grease to your elbow Arese.

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