We’re at the point at which the year typically seems to race to an end and a lot of us begin to intensify activities, so we can still meet our goals and plans for the year.
One of the areas people tend to struggle with is their finances. Although the year often starts strong with grand plans for savings and investments, unfortunately, a number of people set ambitious financial targets without putting the necessary structures in place to make them happen. Here are 3 key things to look out for when setting financial targets.
How realistic is your target?
There are several times I’ve come across some saving targets that I know upfront will not happen. For example, let’s look at Mimi who earns N100,000 a month, and at the start of the year set herself a target to save N600k in the year because she felt it was important to set bold audacious targets. While I agree that it’s important to stretch oneself, but it should not be to the breaking point. Mimi’s target broken down into monthly chunks comes to N50k per month which is 50% of her monthly income. Her total monthly expenses (transportation, feeding, upkeep, etc.) come to N75k per month leaving her with N25k a month. Meeting her target means she would have to cut down significantly on all the non-essentials in her expenses to come up with the additional N25k. She had two options, either review her target or find the areas to cut back on severely – which isn’t always realistic.
Find Money to save
Mimi opted to keep her target because of what she wanted to do with the money, so I’ll share below some of the pointers I gave her to help her find extra cash:
- Keep track of everything you spend for a week. You might be surprised by what you’re buying, and what you can do without. Like the occasional snacks, traffic treats, or unplanned lunches.
- You can get a pre-paid card and fund it only with the amount you’re going to spend that week. Leave every other card at home! Simply decide ahead of time how much you want to spend and then set aside that amount before you go shopping. This can help you stick to a budget and avoid impulse purchases. This is a simple but key practice to ensure you stay within your budget.
- Conserving electricity/airtime/data payments can make a big difference. The less you pay for your utilities the more you have in savings. In fact, a survey by the National Bureau of Statistics shows that mobile phone talk plans constitute a major expense line for a majority of households. So, this is a major area to pay attention to and reduce. For example, make calls using data on platforms like WhatsApp, etc.
- Rank your nonessential expenses. Keep the ones you like the best and cut the items at the bottom of the list. Please make sure that this list is as short as possible. The less you spend on non-essential the more you have for the essentials. This does not encourage you to not live, it just encourages you to make better spending decisions.
- Pack your lunch or cook more meals at home. Eating out at restaurants can ‘eat’ up a lot of money that could be saved.
Put it away first
Whatever you do, don’t keep the amount you want to save in the same account as the one you use for expenses. Open a separate account for your savings – preferably with no cards or online banking attached to it so it will be inconvenient to withdraw money. Once you’ve done that, make your savings your priority. As soon as the money hits your main account, transfer it immediately to your savings account.
Most banks have made this process easy and you can have your bank set up a standing instruction and automatically transfer funds from your income/salary account to your savings account, so you don’t even have to plan your budget with your savings.
Start putting these tips into action and see the impact it makes on your bank account. They really helped Mimi and I’m confident that with consistent practice, they will help you too.
