Have you set your financial plans for the New Year? It is clear that we face economic challenges with the decline in global oil prices, the devaluation of the naira, a volatile stockmarket, increased interest rates, serious security issues and a general air of uncertainty in the land. This will inevitably have an impact on the individual financial lives of all Nigerians.
As Nigeria is largely an import-dependent economy, the devaluation of the naira will lead to an increase in the cost of imports; this will be inflationary as the price effects will largely be passed on to the consumer. The insecurity in some parts of Northern Nigeria have significantly affected food production so this was already a major issue that we were facing even before this latest crisis in our foreign exchange market.
As banks face higher operating costs, they will be forced to pass this on to the borrowing public. This will directly affect all business owners but particularly the small businesses who already struggle under the punitive lending rate regime as they have little in the way of reserves to fall back on.
As the cost of living rises with its attendant effect on disposable income and purchasing power, the standard of living of the average Nigerian is likely to fall. It is thus imperative that we all begin to brace ourselves for some challenging times and immediately start to adjust our individual lifestyles accordingly.
An even more worrying issue is that at times like this, companies are often forced to scale back their operations as their import and borrowing costs go up, and sales slow down; employees unfortunately tend to be the first to be affected and there is the very real possibility of salary cuts and significant job losses.
A new year brings with it a sense of renewal and the age-old tradition of new-year resolutions helps you to focus on making positive changes in various aspects of your life. Financial resolutions are often ignored; here are a few to set you on the right footing for what is likely to be a challenging year. Do not try to initiate them all at once; just elect say three or four that you can begin to address.
An annual review of your personal finances is necessary as finances are dynamic; needs, goals, jobs, and family situations change. Do you have a clear picture of where you stand financially? Start by gathering and organizing your paperwork: bank statements, investment certificates, insurance policies, title deeds, your will, and other financial documents.
Determine your networth, by listing and adding up all your assets, including cash, mutual funds, savings and investment accounts, valuable personal possessions and real property. Subtract your liabilities, such as your mortgage loan, and any other debt. Reviewing your net worth periodically is a good indicator of how effectively you are managing your finances over time.
Set financial goals
What are your short, medium and long-term financial goals? Are they still appropriate for your current situation? Your short-term financial goals will consist of what you seek to accomplish in the coming year. This could include reducing your debt, or paying for a vacation. Longer-term goals include putting a down payment on a new home in three years, or planning for your retirement in ten. Prioritise your goals and assign them a value and a target date. Setting clear goals brings you closer to achieving them.
Create a budget
Budgeting is one of the most important tools for financial security and to plan ahead could mean the difference between achieving financial freedom and experiencing financial failure.A good budget will help you to plan and monitor your expenses so you can identify where your money goes and where to cut back if necessary. If you do not already have a budget, try to make one, and stick to it.
Improve your knowledge of money matters through books, magazines, newspapers, seminars, the internet and by seeking professional advice. Whether your interest is in learning how to manage your money, how to get out of debt or how to plan for your children’s education, there is a plethora of information that will guide you and put you in control of your finances, bringing you closer to achieving your goals.
Be in control of your debt
Getting out of debt or at least being in control of it is another key step to taking charge of your finances. List all your debt, and prioritize; it is important to tackle the most expensive debt with the highest interest rates first. Having your debt under control gives you greater freedom to seize new opportunities.
Saving is key to financial success. Try to build up at least six to twelve months’ worth of your expenses in a safe, accessible, interest bearing money market account. If you are suddenly faced with unexpected job loss, or other unforeseen expenses, you will be better prepared with a financial cushion to fall back on.
This year, try to develop a strict habit of setting aside a minimum of ten percent of your income each month for savings or investment purposes.Automate your savings by putting a direct debit in place so that you won’t be tempted to spend every thing you earn.
Invest for the future
Make it a priority in 2015 to put some long term investments in place. Inspite of market volatility, continue to invest in the stockmarket to meet long term goals, such as for your children’s education or for your retirement. However, do pay attention to your asset allocation and ensure that you are well diversified across the primary asset classes including cash, bonds, stocks and real estate.
Do you have an estate plan in place?
It might sound like a morbid way to start the New Year, but do you have a will or a living trust? Putting your last wishes down in writing should be a top priority, particularly if you have dependants. If you already have a will, it is a good time to review and update it to make sure you have included any recently acquired assets or new beneficiaries.
Remember…it’s not all about money
Just one last bit of advice: In all these money matters, do remember that the best and most fulfilling things in life have nothing to do with money. Remember to count your blessings, not just your money!
HAPPY NEW YEAR!
Nimi Akinkugbe, Money Matters with Nimi , is a Money Management and Financial Specialist.Website: www.moneymatterswithnimi.com | Email: [email protected] |Twitter: @MMWITHNIMI | Instagram: MMWITHNIMI | Facebook: MoneyMatterswithNimi