Taking charge of your finances

 BY UDEME EKWERE 

   

 

To ensure that you are financially secure, you need to consider some essential steps, Udeme Ekwere writes

If you cannot wait for your salary to come in at the end of the month, it is probably time to refocus on how you manage your finances.

A situation where one lives from paycheck to paycheck indicates that the time is right to take control of your funds.

Investment managers believe that if an individual finds himself overwhelmed at the idea of managing his cash, or is only concerned about living for today while ignoring what his/her bank account will look like tomorrow, then it is time for a rethink.

According to them, it is important for an individual to be disciplined in his finances, with great effort towards ensuring that you do not spend more than you earn.

They are also of the opinion that no matter how little, it is always important to set out some part of your income on a monthly basis as savings.

This, they add, would act as a buffer in case there is any unforeseen occurrence.

Experts have listed the following as major steps to adhere to in order to properly take control of your finances.

Evaluate your income

A Business Consultant, Mrs. Bisi Shoneye, says that it is essential for an individual to critically assess his income.

She says, “Pertinent questions that you need to answer in this situation are; How much money do you have coming in? Including your paycheck is a given, but don’t forget other income such as second job, a side business, alimony, child support, or any other miscellaneous cash that you might have coming in.

“Write it all down and add it up. This will give you a clear picture of what you receive on a monthly basis.”

Calculate your expenses

Shoneye explains that one of the most difficult steps in establishing a budget is determining how much money one is actually spending, that is how much money is going out.

She says, “First make a list of all your fixed expenses. This would include rent, mortgage payments, car payments, insurance, utilities, cable, and others. Next, include variable expenses such as food, gas, entertainment, and lastly, do not forget about miscellaneous and maintenance expenses like property taxes, car maintenance, tag renewals, birthday gifts, among others.

“Once you have added up your out-going monthly expenses, subtract them from your income and that will tell you whether or not you are spending more than you earn, and help you get a better idea of what and where you can cut back.”

Reduce the inessential

At this point, it is time to look at where you can cut back and adjust. Experts say that if for instance you are spending N12,000 getting two meals from a food mart, you could consider indulging only once and trying to fix some meals at home yourself.

They add that an easy way to determine areas that you may be able to cut costs is to evaluate which expenses are actual ‘needs’ versus ‘wants’ or ‘nice to haves.’ This can add a whole new perspective to your budgeting efforts and give you the extra push you need to cut the expenses that aren’t necessarily ‘needs.

Pay yourself

In today’s economic environment it’s more important than ever to have a financial cushion for emergencies. Don’t forget to leave room to pay yourself.

Financial advisers say that setting aside enough money for savings or an emergency fund can make all the difference in the world especially in a situation where there could be an unexpected job loss or financial emergency.

According to experts, If you want to reach real financial success, you need to ensure you prioritise saving over spending. Get into the savings habit sooner rather than later, and you’ll reach your goals faster and find it easier to guard against lifestyle inflation.

Once any outstanding debt is paid off, you can switch your focus to aggressively accelerate your savings. Start with establishing an emergency fund, then think about other big financial goals and funding your retirement accounts.

“Ideally, you should aim to have at least three to six months’ salary in your emergency fund, but even having about N300,000 as a back-up is better than no back-up at all. If you are struggling and can only afford a little each week, setting aside even N5,000 a week is better than nothing,” experts say.

Stick to it

Experts advise that once you have established a solid budget and have a great plan in place things must be put in place to ensure strict adherence to such plans. They add that although it will probably take some effort or dedication on your part, the reward is well worth the effort.

“If you have a spouse, work together to hold each other accountable for any spending oversight. If one of you overspends, set rules that the guilty party has to contribute more to that month’s savings fund – a sort of quarter jar method with a twist,” Shoneye says.

It is much easier to do when you are working at it together and you can make it more of a competition to keep it interesting.

She adds that for singles, it could be wise to consider creating a support group amongst your friends with a monetary reward for reaching your budgeting goals.

“Whether it’s a vacation fund or a night out on the town, the extra incentive will help keep your eyes focused on the goal and make it fun in the process,” she explains.