This quarter my article will focus on how you can manage better on a low income while working to
improve your finances. I also hope the article
will address some comments received from readers of this column resident in
Nigeria.
“…I love that many people are promoting financial literacy in
Nigeria but something missing in the conversation is how Nigerians have
external families and dependents at every stage of their lives, that makes
basic saving and wealth creation such a struggle….”
I have received some feedback (like the one above) suggesting that
financial literacy efforts by finance coaches recommend tips on savings without
considering the low income earned by many in this part of the world. My
position is that “no matter the level of one’s finances, there is always room
for improvement”, and this forms the basis of some of the tips I want to share.
To move from one level of financial
comfort to another, there must be sacrifices. It is dangerous to accept a low
income as an irredeemable or permanent situation by saying “my income is
insufficient and, therefore, I cannot improve my financial situation”. This
article will discuss the little things that can be done to help people manage their
income more prudently. Some avoidable habits can
save unnecessary costs, thus freeing up more of your monthly income. There are
also some habits that can be inculcated which can improve your current level of
income. The Finance Coach will be sharing 12 simple tips that can be applied to
better manage your “low” income.
Many of those who need these tips may not have access to this article, I,
therefore, urge readers to share these tips with those who need to know in your
immediate circle of influence. You can share in family meetings, religious
gatherings and other social events.
1. Take
personal responsibility for your finances.
Do not make yourself a
liability. Acknowledge that you are personally responsible for your financial
circumstances and for improving this. Irrespective of your age, no one owes you
anything. We must eliminate the entitlement mentality that is so common among
us. This has the tendency to make folks dependent on family members. Knowing no
one owes you anything keeps you on your toes and motivates you to work harder
and make better choices. Do not live your life with your eyes set on a
relative’s purse or financial status. It is even unsafe to put such reliance on
a relative as disappointments from such sources can negatively affect your
health.
2. Handle family pressures with wisdom.
Discourage impromptu requests from family members except for unavoidable emergencies. What you tolerate
grows. Let them know your finances are organised and that you work within a
budget. No matter what you earn, there are people around you who believe
you are more comfortable than you are or should be and so can spare some money
for their use. Unfortunately, the culture of family members expecting
support from the perceived more comfortable relatives will not leave soon.
However, you must balance meeting such requests with your personal needs. No
one gives what he does not have. There is no need to feel guilty when you
cannot immediately meet the demands of less privileged family members. A good
approach will be to discourage impromptu requests. If you must assist, you
should consider having a budget for requests like this. This guides you and
helps you manage such pressures better. Be careful to ask questions and be sure
that you are supporting genuine needs. Ensure that welfare support or financial
support to family members are not mere handouts but targeted at improving their
capacity to earn and empower them to generate income. Be careful to identify
and differentiate lazy family members from those with genuine financial burdens.
3. No
matter what you earn, put something away as savings.
Most people say “how
can I save anything when my pay packet is not enough to meet my immediate needs”.
The truth is if you are earning 80 per cent of your current pay, you will still
find a way to survive. It is important to make some sacrifice to “power” your
next level by making some form of savings. Simple budgeting ahead of your next pay
goes a long way in helping you to save. Allocating funds to the different
classes of bills would be helpful in identifying excesses. Learn to allocate
funds to basic expenses like food, transport, utilities, entertainment,
miscellaneous and see the window for possible savings. For example, you are
likely to stay within planned budget for
telephone costs if you have a target figure for this than if you buy your phone
credit as you exhaust it. If you have a budget for your telephone bills, you
will not engage in frivolous telephone conversations or mischievous forwarding
of text messages and video clips. One area of possible savings for folks in
Nigeria is in the area of data costs. Some might say it is not a significant
cost, but every kobo counts. Many
people who struggle to save are in the category of those who spend
without a plan. Savings options include the popular “Ajo/esusu”,
cooperative savings and target savings schemes. Another way to save is from
unexpected financial bonuses and gifts. Instead of applying all of a bonus or
gift to long-standing desires, a
percentage can be saved.
4. Cut
your coat according to your cloth.
I have noticed that most
people come under financial pressures from expenses above their income levels.
For instance, financial decisions relating to rent and child education. People
are encouraged to put their wards in schools they can afford and also take
apartments they can afford. This might be an uncomfortable
but necessary sacrifice to move to the next level. It is also important not to
follow the Joneses but to buy only what you need. There is no point buying
expensive telephone sets with sophisticated facilities which you will not use.
Such purchases mean you are tying down funds that can be put to better use.
5. Get
the best value for your 24 hours.
My advice is that you get the best pay out of the utilization
of your work hours. Try and avoid inadequate compensation for your time and
labour. This means you should seek and commit to the employment that pays you
the most out of your available options. For instance, if working on a building
site as a daily paid labourer will earn you more money than sitting in an
office as an office boy or a driver, by all means,
go for it. It may also be more profitable to be a farmer than staying in the
city to do lower paid office jobs. Where possible, combine two or more options
to make the most of the available working hours in a day.
6. Make
more money! Seek multiple streams of income.
For most people in Nigeria,
one income stream is not enough; hence the recommendation to have more than one
source of income. There is a better chance of coping with financial
responsibilities and pressures when you earn from more than one source. Couples
should both earn money for the family. Assets owned can be deployed to earn
revenue. A lady in a paid employment registered her car with Uber and switches
on the app on the way to work and after work. She also switches it on when free
at weekends. This extra income goes a long way in meeting some of her needs, and she is able to save and improve on her
current level. A young university graduate I know runs a photography/video service but also registered his personal
car for Uber services. While the photography business keeps him busy at
weekends, he switches on the Uber app during the week.
7. Improve
your skills, education and certification.
It is important not to remain at
the level of competence you were hired at. Your job is more secure, and you are a candidate for promotion
if you demonstrate to your employer that you have invested in self-development.
You also make yourself more marketable in the job market. Be eager to learn new
skills outside your immediate area of responsibility. Make an effort to
harness other skills to add to the single income stream or whatever you do. For
example, do you work in a salon as a hair stylist? You can learn nail care,
make-up skills in between assignments. This way, you can offer more than one
service and become more valuable to your employer. Such skills are also
available for you to render outside work hours. Money earned from such hard
work will contribute to improving your financial status if well saved and not
spent on frivolous things.
8. Don’t
accept a job if the salary won’t cover your expenses.
Do not accept just
any job. It gives you the false impression that you have a job and restricts your
desire to get an adequately paying job. It is better to channel one’s physical
energy to earn more as a labourer than be
a dignified office worker in “shirt and tie” earning poorly. Recently, I was in
a friend’s car and she wanted me to help
counsel her driver who was constantly broke. Upon interrogation, I discovered
the driver earns 35k with a wife and four children. The enormity of the
financial pressures from home and the “helplessness” of his situation resulted
in momentary outburst of tears. I analysed
his situation and discovered his full-time job does not provide him with a reasonable
pay to meet his family needs. My suggestion to people in this category is to
seek temporary alternative jobs that will earn them more money, even if it is a
daily paid job on a building construction site. This will earn him some respite
until he can find a reasonably paid job.
9. More
than anything else, Stay healthy.
Most people in the employment of private
companies and individuals do not have a medical insurance cover or allowances. Consequently, in the event
of illnesses, such people have to fund their medical costs. The safest way to
avoid such expenses is to make the right
choices to stay healthy. Eat right, exercise right and rest well. If you have
been placed on regular medications to manage an ongoing ailment (diabetes, high
blood pressure etc.), ensure you always
have enough and do not stop these without a doctor’s approval. This may just
result in being penny-wise, pound foolish. In the event of occasional
health breakdown, seek the attention of a proper doctor and not quack doctors
or nurses. The cheapest medical option is to seek timely attention from government
hospitals.
10. Family planning.
Gone
are the days when your wealth was measured by the number of children you had.
These days, even the wealthy are very careful about the number of children they
have. Reasonable spacing is also important for the financial and physical well-being
of the parents. It is cheaper to visit a hospital for a family planning session
than to birth children that become heavy
financial liabilities.
11. Preserve your business brand.
Do you own a business that renders services? You earn more when you keep your
commitments, and you lose money when your
clients cannot rely on you. Be conscious
of delivering when you promise to and at the right quality. You are the best
advert for your service or product. Once you deliver on your promise, the word
is spread that you don’t fail on your commitments and people will seek you out.
On the contrary, when you fail to deliver
as promised, your clients also help you spread the news reducing your
patronage. Everyone wants a service provider who will give good value for the money paid.
12.Understand that Time is Money.
It is often said that time is money, but money is also time. Understand that
your pay at the end of a period is tied to the working hours in that period.
This requires that you spend with care bearing in mind the number of work hours
behind every amount spent. A man in paid employment who earns say,
#90,000:00 a month, earns about #3,000:00 a day. So if such a man, out of
impulse, buys an item he does not necessarily need for #6,000, he has thrown
away two days of his thirty hard working days. Unfortunately, since he is in paid employment, the wasted two days will not
be reimbursed till another payday. When a
man keeps this in mind all the time, when spending, he will likely be more
careful not to spend his money on frivolous things. The above points are not exhaustive, and I
recommend that people should seek financial
advice as often as possible. There are many free services available from
experts.
***Managing My Low Income - FinanceCoach Quarterly (Q4-2018)
***Bimbo Komolafe FCA, FCIB writes from Lagos. She has over thirty years’
experience in finance and business and has a passion for seeing people succeed
in managing their finances.
For more Financial tips from the finance coach follow
her on:
Instagram -@financecoachtoday
Twitter -@financecoachbk
