According to the recent GDP report released by The National Bureau of Statistics (NBS), the economy recorded a positive growth after five consecutive quarters of contractions since Q1 2016, signifying that Nigeria is technically out of recession.
As the economy begins to emerge from recession,so too should consumer confidence in the market, which will lead to greater consumer spending. However, It is too early to start to celebrate, as it will take some time to fully bounce back from the recession and before the impact of growth begins to be felt by households.
In many ways, the change in our spending behaviour, even though forced, has been an important lesson and a stark reminder of the importance of financial planning.While recessions can certainly disrupt your usual lifestyle, planning ahead and showing discipline during a recession can help you come out relatively unscathed.
Recessions are cyclical so it will happen again. You cannot completely recession-proof your finances but you can certainly take some steps to take the edge off the sting.Here are a few:
The recession forced most families to look critically at their expenses, to down size and cut back. Some were paying rent that they were struggling to afford and had to move to more affordable accommodation. Some children had to be transferred from schools that were crippling the family budget to more affordable options with decent standards and which the children are thriving and happy.
If you have learned some lessons about being more frugal and conscious of your spending, it is a good thing to maintain this and ease the pressure you find yourself under. Ask yourself the hard questions and answer them honestly. Would your standard of living fall drastically if you moved to a smaller apartment in a more affordable neighborhood? Do you need all that office space or can you sublet part of it? Are your children in a school that you cannot afford and is their education causing you to go into debt that is spiraling out of control?
Have an Emergency Fund
Make saving a constant, no matter how little. We all need that cushion to tide us over during unexpected events. Things happen where you need some cash; expect expenses like car repairs and new tyres, doctor’s bills, home repairs that suddenly appear and must be taken care of; you don’t want to have to sell assets to meet those needs. Ideally, it should be six months of your expenses set aside in an easily accessible account. If you have no savings, you really need to get started.
Diversify your Investments
Seek professional advice and review your investment portfolio and consider rebalancing, if necessary. Are all your investments in the stock market, in one company, or in one currency?If all your money is in one asset class, it is almost impossible to mitigate risk. Asset classes tend to perform differently. With a diversified portfolio, you are generally in a better position to ride the market volatility without being forced to sell at a loss. Always think long term in your investment outlook so that short-term crisis do not cause shocks.
Invest in Yourself
You are your greatest asset and you owe it to yourself to continue to improve yourself. When last did you invest in yourself? Don’t wait for your employer to develop you; indeed many companies cut back on training and it will take some time in the recovery for companies to increase spending. Fortunately, there is so much information and great material online; you can enroll for some outstanding courses that are relatively inexpensive.
“Your network is your networth”.Invest in your network and the people that you spend time with. Networking provides you with new ideas, opportunities, and contacts. Make this a way of life and not just when you need assistance or during difficult times.
Create Multiple Streams of Income
There are only two ways to make more money; cut back on expenses or to increase your income. With the number of lay-offs experienced during the recession, it is clear that job security is a thing of the past. Even if you feel that your well-paid job is relatively secure, it is a good idea to have a back up plan, an alternate source of income so that if one source is threatened, you have others to fall back on.
There are endless possibilities for creating additional income streams. Be creative and determine what skill or knowledge you have that others would pay for and what problems you can provide solutions for. It is then that you can focus on building this into a marketable opportunity.
As long as there is no conflict of interest, your employer is in the know, and does not affect your productivity, consider freelancing, consulting or putting one of your talents to use on the side. For most people,it is unlikely that your salary will meet all your needs. Every extra little bit helps.When extra money comes in, you can start to pay off your debt and invest for the future.
Careful financial planning underscores the importance of managing money in ways that allow us to enjoy the good times and be prepared for the inevitable challenging one. If you develop these habits and make them a way of life, you will be much better prepared for the next recession; there certainly will be one.