• Times are hard lately as the cost of living keeps rising without a relative increase in income. If you find yourself struggling to survive with the same income you’ve been okay with, you’re not alone. The key to surviving this period is to follow some basic personal finance rules you may have ignored in the past. Here are some basic personal finance principles you can apply to stay financially stable during this period.

  1. Keep it simple

  The more investment accounts you have, the less attention you can give to each one, and the more likely it is that you’ll miss a big problem.

  2. How much is your time worth?

  Figure out how much you earned last year after taxes. Subtract from that all of the costs of commuting and other expenses you paid out of pocket. Then, figure out how many hours you worked, plus the hours you commuted and attended other business meetings. Divide your after-expenses income by your total hours of work to get your true income value.

  3. Renting vs. home ownership

  Rent, unless your total monthly cost of home ownership is lower than renting. It’s easy to get sold on the homeownership dream, but if it’s going to jack up your bills, it’s probably not a wise move. 

  4. The 10-second rule

  Whenever you’re tempted to splurge on something, simply hold it in your hand for 10 seconds and ask yourself honestly whether you need it or not. Try to think of reasons you shouldn’t buy this item. Will you really get enough value out of it? Usually, just 10 seconds will convince you that you don’t really need the item, but if it passes the test, feel free to buy it!

  5. Build the right budget

  Build a budget based on your actual spending over the previous few months. Get real numbers, not estimates. Dig through your bank statements and credit card statements and figure it out. This will easily show you the areas where you actually overspend.

  6. Cancel unused memberships and subscriptions.

  Unused subscriptions and memberships do nothing but devour your money month after month. If you’re too busy to watch TV, keeping your Netflix and DSTV subscriptions is a waste. Cancel and renew when you need to use them.

  7. Invest in stocks and hold

  Money in stocks, over the long term, tend to offer very good returns, but stocks are very volatile, with lots of short-term jumps and falls in value. However, stocks become profitable if left for the long term. So, hold on and be patient.

  8. Spend less than you earn.

  Spend less than you earn and put away that difference for the future so that you can still survive and thrive when you’re older and don’t have the opportunities and energy of today. Without your earnings being greater than your expenses, you simply cannot achieve big financial goals without some sort of miracle – and you should never bet your future on a miracle.

  9. Have an emergency fund

  You certainly should have an emergency fund sitting in a savings account always because an emergency can happen anytime. You can start building an emergency fund by setting up an automatic weekly or monthly transfer from your salary account to your savings, then leave the savings alone until an emergency rear its head.

  10. Reduce investment losses with fixed income investment

  It’s good to have at least some of your money in safer investments like highly rated bonds and FGN Treasury notes. Fixed income investments tend to increase in value steadily over time and are far less volatile than stocks. However, if you have a very high-risk tolerance, or you’re young and your financial goals are still quite distant in the future, this may not be very crucial.

Most of us still have memories of our mothers stashing money in weird places back in the day — some of us benefited from stumbling on them as kids (if you know what I mean.) Saving was more predominant while investing was left for the wealthy, and if you own some stocks, omo you have arrived.

Only the rich could afford to own an investment portfolio, as this entails having a large sum as capital, a stockbroker who would earn an exorbitant fee on his portfolio, and several time-consuming procedures. The ordinary man could not afford these luxuries, so they merely work, spend, save, and repeat, while the wealthy man keeps his fortune.

Thanks to the recent advancements in fintech solutions, a wide range of investment opportunities are now open to everyone to invest and grow wealth even with little money. However, having access does not always guarantee success in investing. The rich go the extra mile by following some standard rules. Here are 7 of them.

Here are five golden investing rules you can adopt on your wealth-building journey.

Map out an investment plan.

Our situations are unique, and so are our goals. What works for one investor may not work for you. Before investing, assess your current situation and future goals, including your income, career, travel plans, family, risk tolerance, and time horizon. These will help you determine how much you can invest and how often as well as the type of investment to stake your money in. 

Remember to periodically review and adjust your investment plan along the way to determine if it still suits your goals and needs. Talk to a financial advisor.

Never buy all at once. Never sell all at once

To maximize your profits, stage your buys, work your orders and try to get the best price over time. If your goal is to buy 10,000 units MTN shares, you can buy it in units of 1000 while trying to get the best price.

Stay Consistent.

It’s important that you continue to invest over time, in good or rough time, even if you it’s only a little amount. By continuing to invest regularly, you’ll learn the habit of living below your means as you build up a nest egg of assets in your portfolio over time.

Have an emergency fund.

The concept of making money from investing can become thrilling that you get tempted to put in all your money for more returns. Be careful not to give in to such temptation. Always have money in easily accessible savings account to cover unexpected life events. You can ensure that you always have adequate cash for emergencies by automating a small portion of your salary into a savings account. 

Start automated savings

Don’t put your eggs in one basket.

Diversification comes in various forms — the types of assets you buy and the individual assets within each class. Putting your money in different assets and investment types can help minimize risks and shields your portfolio from the impact of downturns in any one or more of the asset or market type. 

Diversify your investment across asset classes like Stocks, Bonds, treasury bills, Real estate, etc.

Stop timing the market

Smart investors understand that time in the market is more important than timing the market. The idea here is that you need to stay invested for the long term to get strong returns instead of jumping in and out of the market.

Make compounding work for you.

Compounding lets earn returns from your returns. If you have no urgent need for income from your investments, you may want to consider reinvesting it to buy more of your investment. Doing this will help increase the value of your investment and boost your overall returns. Bear in mind, however, that reinvesting income from capital appreciation or dividends rather than taking it as cash means you risk losing it or seeing its value fall — or rise. 

Read Also: What is Compounding and How Can it Work for You

If it seems too good to be true, it is.

Beware highly speculative investments that seem too good to be true. Be careful not to follow the herd and try not to fall into the trap of investing because other people are doing so. 

Similar article: Common Investment Red Flags Most Victims Ignore

Only invest in what you understand.

Warren Buffet used this rule to become the wealthiest investor in the world. His mantra: Never invest in a business you cannot understand. Warren believes that as an investor, you must understand the company you want to invest in and know if it is within your circle of competence or not. You must align with its values and trust its growth potential.

The only way to know this is to DO YOUR RESEARCH properly. Research the products, the financials, the leadership, the trends, and everything that makes the company you are about to invest in tick or suck.

The good news: You do not have to dive into the investment pool alone. The research team at Parthian Parthian securities has eyes on the market and can give you valuable insight to help you make better investment decisions. Subscribe to the Parthian newsletter for stock market updates, company updates, investment tips, and more

When I completed Youth Service about 10 years ago, I was ready to swing into action and start building my lifelong dream immediately. I had dreamt that as a first-class graduate, I would work hard at earning six figures, buy my dream car, and get married to the love of my life within a couple of years.

Fortunately, my dream came true – at least a part of it. I got a good-paying job in a multinational firm. In the first year, I moved into a bigger apartment in a more expensive part of town. Naturally, my lifestyle moved with this change. I needed a more tasteful wardrobe, so I upgraded it. My clique needed an upgrade, so I attended every high society ‘owambe’ to get acquainted with the affluent and important people in town.

However, all these did not come without a high cost. With little or no knowledge of how to manage or grow my income, it suddenly dawned on me that I was overspending and before I could stop myself, I was knee-deep and almost drowning in multiple debts.

Where and how did I get this all wrong? It was time for some deep reflection and when I did, here’s what I found out.

1.       Early Financial Literacy is Key:

According to a publication by BusinessDay, 53.4% of Nigeria’s adult population does not know, or only has a rough idea of, what they have spent in the past week. Additionally, over 50% do not know how much money is available for their daily expenses.

Looking back, I realize now that I could have avoided many money mistakes if I had known what I know today, but financial literacy is just something that I wasn’t taught at an early age either at home or in school.

Many people fail to understand the importance of early financial literacy and are unaware of how to grow generational wealth through early financial management and investing. Very early on in life, people need to understand how money works beyond the basics of receiving it and spending it; and know the relationships between money, wealth, time, and skill. Interestingly, anyone can obtain financial literacy with the right resources and attention to detail.

Get useful financial resources here. Subscribe today.

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