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Salary in Nigeria: How to save money in Nigeria.
To be honest with you, surviving in Nigeria with a low salary can be extremely difficult. And its even more difficult when you live in big metropolitan states like Lagos, Portharcourt, Bayelsa etc. It takes a whole lot of discipline and understanding plus good friends around (in my personal opinion though) to overcome the problems that comes with low salary income in Nigeria.
Everybody wants a good life, a good time with friends, a little shopping here and there and of course, a wardrobe full of goodies. But when there is a limited source of income available to cater for these needs of ours, The best solution we need is to practice the art of BUDGETING. Discipline and self-regulation are the cornerstones of a successful Budgeting plan in Nigeria. We know it is difficult to Keep away money when everyone around you is spending as if there is no tomorrow.
Monthly budgeting and planning can be challenging at times because it takes discipline, focus to stick to it. In an article I previously wrote, It explains Ideas on how to make more money in Nigeria.Well, today, we would be focusing more on things you need to do in order to survive on a low income in Nigeria.
1. Salary in Nigeria: How to save money in Nigeria as a low income earner.
- Save before you spend
Many people are not able to save enough because they don’t have anything left after all their expenses. Their financial equation is: Income – Expenses = Savings . A simple solution is that the equation should be changed to Income – Savings = Expenses. Instead of saving what is left after expenses, you should spend what is left after you are done with your savings for the month.
We know controlling expenses is easier said than done. However hard you may try, there will be some expense that will gobble up the surplus and prevent you from saving. The solution lies in automating your savings. This is one of the reasons that make the Provident Fund such an effective tool for long-term savings. Every month, the employee’s contribution is deducted from the salary and deposited into his PF account. The money keeps growing till the person retires. He can access the corpus before retirement only in certain circumstances.
2. How to save money in Nigeria as a low income earner.
- Wait before you splurge
The urge to buy something you like can be overwhelming. Easy financing options and plastic money prevent an individual from distinguishing his wants from his needs. Whenever you want to buy something expensive but not essential , follow the 30-day rule. Just postpone the purchase by 30 days. During that period, think hard whether you really want the item. At the end of the month, if you still want to buy it, go ahead and purchase it. However, if the item was not really essential, you will get over the urge to buy and will probably junk the idea.
This simple rule works very effectively in case of gadgets, apparel, footwear and accessories. It’s also not very difficult to follow because you don’t actually deny yourself the item. You merely postpone the purchase by a month. As a fringe benefit, you also get to research the item over the next 30 days. There is another guideline that can help you know the difference between wants and needs. The 30-minute rule says that if you are unlikely to use an item for a least 30 minutes a day on average , you should not buy it. The fancy coffee maker is really no use if you take it out once a month. Of course, this rule is only for gadgets and appliances and should not apply to other essential household items.
3. How to save money in Nigeria as a low income earner.
- Avoid using plastic money
Credit and debit cards are essential because an increasing number of our financial transactions take place online. However, plastic can be dangerous in the hands of a reckless spender. Studies show that people tend to overspend if they use a credit card for a purchase. If they have to make the payment in cash, they feel the pinch. Since the credit card user only signs on the slip, the full impact of the purchase is not felt.
To suppress the shopaholic inside you, leave your debit and credit cards behind when you go to the mall. Take cash instead. Experts recommend some extreme measures for serious shopping addicts. Some say you should just note down the card details and then cut the card into pieces so that you can’t use it anymore. Others suggest you keep the card in a paper sleeve and stick pictures of your kids or spouse on it. You will be reminded of the other goals you may be jeopardizing when you swipe the card for an unnecessary purchase. “Keep in mind that every craving sets you back when it comes to reaching your longterm goals,” says Godwin, financial trainer, Nigeria. One bizarre idea is to literally freeze your card inside a block of ice. It won’t damage the card, but the user will have to wait for the ice to melt before he can access it. However, we believe the average spender won’t have to resort to such extreme measures. Just keeping the card in a safe place instead of carrying it around in the wallet is good enough.
4. How to save money in Nigeria as a low income earner.
- Start small to save big
At the beginning of your career, your income may not be very high. In many cases, there is a very small investable surplus after the all the expenses. Still, this should not hold you back from saving . For a young investor, the low quantum of investment is more than made up by the long period available for the money to grow. The magic of compounding ensures that even a small sum grows into a gargantuan amount over the long term. The investment can be scaled up as the income grows in the coming years. However, it is difficult for the average investor to maintain the discipline required for this approach over a long period of time.
5. How to save money in Nigeria as a low income earner.
- Don’t be pressured to spend
Everybody’s financial situation is different . Just because your colleague has bought a new car or booked a flat in a fancy location does not mean you should follow suit. I learnt this early in my career. “When I started working, there was a lot of peer pressure to go out and splurge. However, my father and senior colleagues advised me against blowing away my entire income,” he says. When it comes to big-ticket items like cars and houses, do the math carefully before committing expenses. For instance , the total cost of ownership of a car is much higher than the price quoted by the dealer. You also have to include the cost of fuel, insurance, servicing, spares and repair. There are a few rules for buying a car. The price of the car should not be more than 60% of your annual household income.
Other helpful resources:
- ways to make your business idea profitable in Nigeria.
- How to start a lucrative goat farming in Nigeria.
- How to start a profitable rabbit farming in Nigeria.
6. How to save money in Nigeria as a low income earner.
- Levy luxury tax on yourself
The intention of this article is not to make you deny yourself the very luxuries that you have worked for so hard to attain. Every now and then, you need to treat yourself and your family to some some fun as well. Take the case of Matthew Abiola. He has found a novel way to boost his savings every time he spends. No, we are not talking about credit card reward points here. Every time Matthew indulges in some discretionary spending, he socks away an equal amount for his savings. If a dinner and movie with the family costs him 2,000, another 2,000 is put into his savings. There is another advantage of this rule. The luxury tax that Matthew levies on himself helps him get over the guilt of spending on discretionary items.
7. How to save money in Nigeria as a low income earner.
- Don’t spend to de-stress
For many people, spending can be therapeutic . It is a way to unwind after a stressful day and gives the person a sense of control. However, the aftermath of this de-stressing exercise can be even more stressful if it burns a big hole in your pocket. Worse still, if the bills you pile up remain unpaid, because it will definitely hurt your credit score and you might find yourself denied a bank loan if you happen to require one. “You must use your credit card wisely and with caution. If you use more than 30% of your total available credit card limit, it will affect your credit score adversely,” says Godwin, Founder & CEO, incomenigeria.com. Do you also frequently head to the mall and pick up stuff to fight depression and anxiety? Get a grip on the situation and look for healthier (and less costlier) alternatives to unwinding. When you feel overwhelmed by the urge to go on a shopping spree, go for a stroll in the park or do some light exercise. This will act as a distraction and ease the urge to spend.
8. How to save money in Nigeria as a low income earner.
- Fix a budget and stick to it
This should have been the first mantra, but has been deliberately brought up at the end because Gen Y is put off by the B word. The fact is that setting up a budget is the first step towards prudent financial planning, and it’s not too difficult . You have to just set a limit on how much you are going to spend on your clothes, travel, movies and eating out in a month, and stick to your budget. Budgeting also helps you keep tabs on the itsy-bitsy expenses, such as casual shopping for clothes, eating out, gifting, and entertainment. Most of the time, these smaller items go unnoticed even though they take up a large portion of the total monthly expenditure.
In the good old days, financial planners advocated the ‘envelope’ method, where the outlay for each head was put in separate envelopes. Now you can sign up with a money management portal. These websites aggregate all your finances, from savings bank accounts and credit cards to loan payments and mutual fund SIPs. They help you keep track of your money, alerting you when a payment is due or when you have overspent under a certain head
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Compiled by Godwin, C.E.O incomenigeria. Click here to read about my journey so far as an internet entrepreneur.
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Have a blessed week.