The much awaited 2016 began with the inevitable belt tightening. With the exchange rate hovering around N350 for 1 US Dollar and crude oil at below $30 per barrel, no one needs to be told to review their personal expenditure and look for ways to create additional income.
Adapting to The New ‘Normal’
A friend of mine ran through a quick calculation of her income and expenses and realised that even though she was earning the same salary, she was now ‘poorer’. Why? In 2015 the company she works for increased the tax rate on her salary to align with the government’s recent focus on being compliant on PAYE tax. In addition, her house-help and driver had both asked for a salary increase as they complained things were more expensive and so could no longer survive on their current pay. Being a working mum, these were two key parts of her support infrastructure she could not afford to lose so she increased their salaries. In one month, her actual take home pay went down and expenditure went up. What to do?
You’ll be surprised what you can save
She immediately started looking at areas she could cut back on and realised:
- She could save almost N10K a month by having a long-term hair style such as braiding her hair instead of the weekly salon trips. Another friend went a step further and invested in a couple of wigs (we’ve still got to look good right) so she just does traditional cornrows and is good to go.
- She could save N20K a month by not having weekly mani/pedicures. Good grooming is important, so she decided she would do her change of polish, nail filing etc. at home and limit professional services to when she had a function to attend.
- By taking lunch from home rather than buying at the office, she saves about N2k daily which came to almost N40K a month. She’s already paying her house-help more money so why not get more value from it?
- She could cut down her power costs by simply making sure lights were switched off in rooms not being used and not leaving electronics on unnecessarily.
In total she saved about N100k in a month which she was able to set aside in a savings account as capital build up for her personal business.
You need to create wealth
Speaking of personal businesses, while saving is an important discipline, you need to actively explore additional avenues of wealth creation. If you already run a business and are looking for additional capital to support your business growth, you should explore sources of relatively cheap funds. There were a few questions from my last article with respect to the Central Bank of Nigeria N200 Billion MSME Fund so I have put together this guide to answer the most frequently asked questions. Look through this, do your homework and talk to your bank.