8 Useful Money Habits Worth Keeping.
Last year, my new year’s resolution was to save enough to start a project I have been holding off for a while now, while I work hard to clear off my debts. Did I achieve my goal? Not entirely, but I was able to pay off my debts and start saving. What I am working towards is to have enough savings, investments, and cash on hand to afford the lifestyle I want for myself and my family—and have a growing nest egg that will allow me to retire well or pursue whatever career I want. I learned, however, that achieving financial freedom requires building strong money habits which also require strong discipline.
On the other hand, I also learned, during my journey – which I am still on – that life happens to us all, and as the street will put it, “Problem no dey finish.” But then, having the right money habit can help you weather any financial storms and set you on the right path to financial freedom.
In this article, I’ll go over 8 money habits that helped me put my finances in order last year. I hope they work for you too.
1. Have an Emergency Fund
In 2020, when the pandemic hit and businesses started to lay off workers, I was among those that were affected. Having suddenly lost my job was a tough blow on me, as I had no savings or emergency funds. I was the type you would call a “laulau spender” (a reckless spender). I would spend more than I earned and ended up with loads of loans hanging on my neck. Life was tough throughout the pandemic, but every situation presents an opportunity for learning. I learned the importance of saving for a rainy day. I learned to always have cash in an easily accessible savings account to provide a financial safety net in the case of an emergency and for essential expenses like rent, foodstuff, and important bills.
2. Record Every Transaction
Before I spent any kobo, I made it a habit to have an app to track my spending. Imagine what a monthly expense tracker can do for you. If you are the type who has the time and a knack for manual accounting, you can keep track of your spending by recording every Naira that goes in and out of all your accounts in a spreadsheet.
3. Pay Off Costly Debts First
Remember I mentioned having multiple debts hanging on my neck at the start of 2021. I’m sure you might be wondering how I was able to clear off the debts and still have some savings. Firstly, I understood that if I have debts weighing down on my finances, trying to save would be a hard task to accomplish. It was even harder because I had more than one debt and was trying to decide which debt to pay off first.
So, I did my research and discovered two very effective strategies. One of them is known as the Debt Snowball– which goes thus:
A. Organize your debts from the smallest to the largest.
B. Every month, make little payments to all your debts but allocate a big chunk of your income to the smallest debt.
C. As you pay off each small loan, use the same money you have been devoting to the previous debt on the next-biggest debt.
D. Repeat the process until your debts are completely paid off.
I realized that as I paid the smaller debt, it became easier, and I was more motivated to pay the next.
The second strategy is known as the Avalanche strategy. This strategy is like the Debt Snowball strategy with one major difference: Instead of paying off loans from smallest to largest balance, you pay off loans from the highest-interest rate to the lowest.
For instance, if you have a loan of ₦100,000 with a 5% interest rate and another ₦500,000 loan with a 10% interest rate, you are better off paying off the ₦500,000 loan first. When you input the numbers on a spreadsheet, you will find that this strategy will help you cut costs that would have accrued on interest in the long run.
So, whether you decide to use the Debt Snowball or the Avalanche or both strategies, what is most important is that you find the motivation to clean up your finances in time to start building your wealth
4. Use an App to Aggregate Your Accounts.
Between my savings, current, pension, and investment account, I used to have my money in hundreds of different places (not literally, but you get the point, right?). To manage my account more seamlessly, I downloaded an app to aggregate all my accounts into one place. There are several apps out there that you can also take advantage of, but be sure to use a safe and regulated app.
5. Set up Automatic Withdrawals for your Saving
Instead of forcing myself to save money every single month, I had money directly withdrawn from my account into a High-Interest Savings Account (HISA) on i-invest – which pays a market-leading 8% interest rate and is designed to help customers develop a savings habit and build financial capability. What I did was to set the “auto-save” feature which automatically transfers the set amount into my locked savings account within whatever period I specified.
6. Learn the Skill You Need to Make Extra Income
During the pandemic, I took advantage of the time I had to learn some extra skills. Seeing that some of my colleagues who were in the same boat with me when the layoff happened were able to thrive because they had skills that people needed. So, I decided to take up free online courses in Digital Marketing. Learning skills that are in high demand and earning the necessary certifications helped me to stay afloat thereafter and increased my earning potential after I got a job. That way, I was able to have a more balanced financial life.
7. Start Investing Now
Market conditions can make people question if investing is a good idea. However, over the years, investing has proven to be the best means to grow money. Before I started investing though, I did my research. I invested in knowledge and tried as much as I could to avoid fraudulent investment schemes – Truth is, if it sounds too good to be true, it is. I followed up with financial news and developments in the stock market and started building and adjusting my portfolio accordingly.
During my research, I found this useful report on 2021 market activities and performance, and also attended an Investment Clinic which was organized by Parthian Securities’ Research Team. Those resources are for a fact, one of the best guides for me this year on which sectors and what stocks to look out for. You can click here to watch the recorded session.
Although I totally dislike frequent emails, I love when they are about growing my money (…and I bet you do too), I subscribed to useful financial newsletters that make it easy for me to learn how to invest and help me stay updated with market happenings. If you believe you are ready to start investing, you can open a brokerage account, or you can buy Nigerian Treasury bills, equities, and other financial instruments with as little as N10,000 on apps like I-invest – which by far is one of the safest and highly regulated investment apps in Nigeria currently.
8. Have Someone You Consult With
Unless you are a financial expert, you will agree that managing finances can get very complicated sometimes. For someone like me who only sees figures flying around in my head when it comes to numbers, having an expert look into my finances helped me see things from a different perspective.
If you’re like me, I recommend you reach out to the experts at Parthian Securities via email at info@parthiansecuritiesng.com. You can thank me later.
To sum it up, my resolution this year is to keep up these habits and hopefully save enough to start my dream project this year. Sooner enough, I can start to live the life that I always wanted to live. I hope you try them too if you haven’t started already.
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