The Nigerian economy is growing at a snail pace, having recovered from its second recession in four years in December 2020. The stagflation (slow economic growth and accelerating inflation rate), which the country is currently battling, is hurting the finances of many. A lot of Nigerians are barely surviving. This has made many cut the expenses as their purchasing power continues to dwindle due to the rising inflation rate, which was 17.3% as of February.
Cutting expenses alone cannot save you from the current quagmire. There are some lifestyles that you have inadvertently adopted, which are making the economic hardship hit you harder. One of them is how you handle your money. Whether you would survive a meltdown is a function of the way you handle your finances.
Here are some financial mistakes you must eschew if you would be buoyant despite the present downturn:
Many people do not draw up a budget, so they spend spontaneously as they make money. They want to buy anything once they can afford them. Some buy things they don’t even need just they feel they are cheap, despite not having them in plans beforehand. This kind of lifestyle is bound to leave you to impoverish in on distant time.
Always budget before you even earn the money. And adhere to your budget strictly. Always remember that failure to plan is a plan to fail. Don’t be tempted to buy a thing because you feel it is cheap. And never spend to impress anybody; spend because it is necessary. Excessive spending would leave you in a financial crisis.
Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television and video games, cell phones, etc. can force you to pay unceasingly but leave you owning nothing. How long do sit to watch that cable TV that you pay close to N20,000 subscription for every month? You have to spend on fueling your generating set to enjoy the cable TV. And come to think of it, what value do you actually derive from these subscriptions that are gulping your finances?
When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning you from financial hardship.
It may not be wrong to borrow to meet some pressing needs. But when it becomes a habit, then, it is a challenge that would harm your financial life. Some people don’t mind obtaining a double-digit loan to just throw parties. Many have almost nothing to take home after deductions have been made at the end of each month.
Learn to live within your means if you must have financial freedom. And if you must borrow, let it be to fund investments that offset the debts.
Buying a New Car
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years and lose money on every trade.
Sometimes a person has no choice but to take out a loan to buy a car, but how much does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel.
If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive. You might need one, but if you’re buying more car than you need, you’re burning through money that could have been saved or used to pay off debt.
Paying too much house rent
While is good to live in a decent house, it is bad to spend a large percentage of your salary on rent. It is wasteful to rent a 4-bedroom flat when you are only a family of four. Don’t go for a house that would put holes in your pocket at the end of the day. Don’t say because your contemporaries are living in duplexes when you cannot afford them. Your rent should be a small fraction of your salary.
Attending every party
Many people run into financial problems because they want to simply please everybody around them. They want to attend every party they are invited to. And they don’t just attend, they also every cloth chosen for these parties. People who have this lifestyle would always live from hand to mouth. To avoid falling into this trap, select the invitations you honour. It is cheaper to give a celebrant gift than attending his party.
To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn’t the same as being able to afford the purchase.