Financial Strategies for Stages of Your Career

Starting Your Career

Now you are done with school and you have finally landed a job, you’re officially considered a full-fledged adult. You are now your own person, responsible for many areas of your life and in particular your finances. For many people, parents, older siblings etc always took charge of your financial obligations and now you’re expected to do it by yourself. So how do you go about this?

The first thing to realise is that this is just the beginning of a long journey and there are financial strategies for every career stage in life. You need to have a long term view, but first things first – what financial strategies do you need when you are starting your career?

• Understand your Salary: Typically when you’re made an offer, your employer communicates your gross salary – the total amount you are supposed to get paid before your employer deducts taxes, insurance etc. This is different from your net salary (the amount you actually get paid). When you are discussing your salary make sure you understand how much you’re actually taking home and check your payslip once you get paid at the end of the month.
• Make your Budget: Now that you know how much you actually have available, the next step is to calculate how much you need for fixed expenses. This could include rent, transportation, electricity, water, and savings. The rule of thumb is not to spend more than 70% of your salary, so you have something in your account once all your expenses have been taken care of. Whatever is left can be used to start setting up a pool of savings. If 70% is too much of a stretch, try as much as possible to live below your means, especially if your job doesn’t pay so well.
• Plan for the future: When it’s time to rent a larger place, plan a wedding, add personal funds to a loan for a car or another asset, the money won’t magically appear. You need to start saving at least 10% of your salary as early as possible so you have a pool you can dip into for your future expenses. To make it easier to have target savings, banks like FCMB have Apps that help you save automatically. Just enter the amount you want to be deducted from your account every month, as well as the saving account number, and you’re good to go. This way, you won’t be tempted to spend it.
• Monitor your Cash Flow: Track each purchase you make for the first few months at your job. This accountability helps you see what you’re spending on that isn’t necessary, helping you to cut down on frivolous or spontaneous buying. Make you record more savings than expenditures. Apps like Reach are pretty useful in achieving this.
• Add to your income stream: If your company pays for overtime, going for it won’t be a bad idea. If you have a skill you can monetise that’ll give you income without hampering your efficiency at work, explore that also. These will give you some extra cash in the bank.
• Start an Emergency Fund: An emergency fund is different from your savings. This fund is strictly for unexpected emergencies, like a sudden illness, or a major repair at home or on your car. With an emergency fund, you wouldn’t need to touch your savings when unforeseen circumstances come up. That’s why it’s important not to spend everything you earn.
• The magic of consistency: This may all sound like theory, but do you realise that if you don’t spend N500/week, you’ll save N2K per month and N24K annually. Now imagine saving this amount consistently for 5, 10 or 20 years at an average 4%?

Now, what if you went a step further and invested the money in something that gives you 10% per annum returns? See the power of consistency? Don’t get bogged down by how much you have right now, just start setting an amount aside and be consistent.