It’s been quite the year with plunging oil prices, a global pandemic and the resulting lockdowns and restrictions on movements which have all had a negative impact on businesses. The growing inflation rate has led to sky-rocketing prices, while the slow economic growth has led to reduced spending capacity. Not a pretty picture right?
Based on all the macro-economic indications and projections, the state of the economy is not likely to change dramatically anytime soon. So what does this mean for you and your family?
Just to help set you on the right path, here are 5 key tips for surviving this period:
- You need good financial habits: Now more than ever you need to develop and practice good financial habits. The age-old principle of having a monthly budget will serve you well. Do you know where your money is going and what it is doing for you? Make a detailed list of the essential expenses (rent, school fees, petrol/transportation, etc.) and non-essentials (entertainment, extra-curricular activities, spontaneous purchases, etc.). Putting this simple discipline to practice will show you areas where you can manage your budget better.
- Make saving a priority: Difficult as it may sound, you should set aside as much of your income as possible. Do you immediately spend all you earn or have you created a separate saving account you have limited access to? There will always be bills to pay so it’s key that you always pay yourself first – the rule of thumb is to set aside at least 10% of your monthly income, but you can start by putting a fixed amount aside weekly. Yes, it is possible to achieve if you set your mind to it.
- Cut down on excesses – Things are more expensive now and it’s very unlikely your income has increased so you really need to stretch your pay. Take a hard look at the non-essentials and decide which ones you are going to reduce/eliminate completely. If you have kids, bear in mind that they don’t understand financial matters so you will need to help them through the adjustment period. Also, look at your household structure especially with respect to utilities and domestic staff: are there areas you can cut down on? For example, some friends share the services of a cleaner and also share the cost. Do you have the option of working remotely so you don’t have to spend too much on transportation?
- Boost your income: You definitely need to create multiple streams of income. If you’re employed, think about what you can start on the side. If you run a business, how can you expand your product or service line to include additional areas you can generate revenue from? What problem do you see around you that you can create a solution for and charge people to use? Also, look at how to get the best returns from the money you are setting aside. Interest rates are quite low right now, have you explored investing in mutual funds or commercial papers for higher returns? Talk to a fund manager and explore all possible options.
- Learn how to say NO: You can’t afford to say yes to every request/desire, whether it’s buying yet another aso-ebi fabric or pair of shoes, sponsoring friends to a day/evening out or being unduly generous with financial gifts. When the chips are down, you are solely responsible for taking care of your finances and since the noose has clearly tightened on the economy, I’m sure you’ll agree with me that we all need to adjust our lifestyles accordingly.
Do you have any other ideas or tips that will be beneficial to others? Send me a message, would be great to hear your thoughts.