The complex nature of our nations turbulent economy has impacted all Nigerians and leaves many feeling confused and anxious. The good news is that no matter how uncertain things may be, the basic fundamentals of personal financial management still apply, so do stay focused on this.
Have you made your New Year resolutions? Did you include any financial ones? All major life events such as getting married, having a baby, educating children, losing a job, getting divorced, buying a home, losing a loved one, planning for your retirement and your estate, come with financial consequences that must be prepared for. Here are 16 resolutions to consider for 2016. Don’t try to tackle them all at once. Select just three or four to bring you closer to financial security.
1. Organise your documents
We all have some particularly important personal documents such as passports, birth certificates, title documents, educational certificates, your marriage license and so on; scan these documents and save them electronically as well as in your household files. It is important to protect the original documents from the risk of fire, flood or other disasters; store them securely in a fireproof safe or with your bank if it offers such a service. You don’t need to go overboard in trying to create Fort Knox at home, but at the same time you should avoid having sensitive documents lying around in cardboard boxes at the bottom of your wardrobe.
2. Establish a budget
Living as though nothing has changed during challenging times can make a bad situation worse; changing your spending habits must be a priority. Budgeting is one of the most important tools for financial security; a good budget will help you to plan for, and monitor your expenses so you can identify where to cut back if necessary. Where does your money go? Can you cut back a little?
3. Build and emergency fund
An emergency fund is a must-have particularly during times of financial challenge. Build a fund with at least six months’ worth of your expenses in an accessible, interest bearing account. If you are suddenly faced with unemployment, medical expenses, or other unexpected events, you will have this financial cushion to fall back on. If you can’t manage 6 months, focus on 3 months. The key is to have something set aside.
4. Automate your savings
Can you set aside a minimum of ten percent of your monthly income for savings? One of the most effective ways to increase savings is to automate the process by having the funds deducted via a direct debit into a savings, money market or mutual fund account. Remember to automate your regular bill payments as well, so that you are always up to date.
5. Reduce your debt
Getting out of debt, or at least reducing it, is another key step to taking control of your finances. List all your debt, and prioritize by focusing on the debt with the highest interest rates first. Are you one of those people who has borrowed from your family and friends and then starts to avoid them by ignoring their calls and reminders? You need friends and family during difficult times, so don’t damage relationships. If your debt has become overwhelming, contact your lenders to discuss the possibility of coming up with more palatable repayment arrangements.
6. Invest for the future
If you have some savings and your debt is under control, consider investing for the long term in the stockmarket either directly or through mutual funds. Many stocks are currently selling well their true value so it is a good time to take advantage of such discounts. Bear in mind, however, that stock market investments, whilst they have provided higher returns over the long term than other assets, come with greater risk.
Seek professional advice to build a diversified portfolio that spreads your investments across the various asset classes including cash, bonds, mutual funds, stocks and real estate to mitigate some of the risk. Mutual Funds offer a professionally managed, diversified portfolio and you can invest with sums as little as N10,000.
7. Invest in yourself
You are your greatest asset. Whether you are unemployed, in full or part-time employment, or running your own business, it is essential that you continue to develop yourself. Constantly seek additional training and knowledge through seminars, conferences in various areas of interest or more formal courses as appropriate; there is so much that you can achieve with commitment and discipline. Identify, develop and leverage on your talents and skills; those things that you are passionate about and can naturally excel at, they may well become a significant earner.
8. Learn about money matters
There is no excuse for being totally ignorant about your finances with the plethora of information around you – both in print, online, television, radio and through workshops. Seek guidance from an experienced, qualified professional; but remember that ultimately, you are responsible for your finances. If you do not already discuss financial matters with your partner or spouse, try to include this in your relationship. Children too should be introduced to the basic principles through pocket money, holiday jobs, from their earliest years.
9. Improve your health
There is a very direct connection between your physical and your financial health. Indeed in the U.S, the leading cause of bankruptcy is attributed to medical bills and other health care costs. One wonders what the statistics here would reveal. A heather lifestyle means fewer medical expenses and will give you brighter prospects in all aspects of your life. Do you need to lose weight, eat healthily, or exercise more regularly? Make your health a priority and take concrete steps to improve it.
10. Put health insurance in place
If you or a close member of your family fall sick, will you have to pay out cash for expensive medical treatment, or do you have insurance in place. Even if your employer does not provide this for you, try to get some medical and dental cover for your family. One serious illness can wipe out your savings. You should have adequate insurance cover for your health and for your life, particularly if you are your family’s primary breadwinner.
11. Protect your assets with insurance
Is your property including your car and home insured? Things happen; you cannot afford to be careless. With a small premium each year you can reduce the risk of loss from fire, flood, burglary and other mishaps.
12. Maintain your assets
Don’t wait until a strange noise from your engine becomes so bad that the engine needs replacing. Regular maintenance of your assets will help identify any festering problems before they become critical and require expensive repairs. Treat your car, your home and other expensive assets with care, so you can enjoy them for a long time.
13. Protect your finances from fraudsters
Cybercrime is real and we are all very vulnerable particularly as we navigate the internet and social media. From shredding sensitive documents to changing passwords regularly and protecting your PIN numbers, there are deliberate steps to take to reduce the risk of being targeted. Put these in place.
14. Plan for your retirement
Most Nigerians do not have enough money saved by the time they face retirement. Your retirement income will have to come from money you set aside and invest when you are young and through out your working life. Even though the future seems so far away now, if you save and invest when you are young, you have an opportunity to build significant wealth.
15. Put an estate plan in place
No one wants to think about death at the start of a new year, but you owe it to your family to put something in place should something untoward happen to you. Meet with a lawyer who will put you through what is a relatively simple process. If you already have a will, review and update it to make it is still relevant to your circumstances. If you have acquired or sold any assets or you have new beneficiaries then this must reflect in your estate plan.
16. Build philanthropy into your plans
In spite of how difficult things might be for you, there are always people worse off. Philanthropy is a powerful and effective way to change lives. Determine your area of interest and identify ways in which you can make a positive impact.
As you face this New Year, it is important to note that the most important things in life have little to do with money. Remember to count your blessings in 2016. May God grant you good health, happiness, and peace this year and beyond.
Happy New Year!