Low-Income Earners: How ‘Financial Tips’ can aid your ‘Financial Freedom’


Friday, August 15, 2014 5:14 PM / Research


I do experience routine and habitual headache each time i take a look at my personal balance sheet, having at the back of my mind that i would be 40yrs old anytime soon. My balance sheet is not really in a buoyant state, though not doing bad at all if we were to go by average Nigerian and United Nation standard. I am comfortably above poverty level. 


If I could go back in time, I would do certain things differently. I'm not saying I have a lot of regrets. But with the financial knowledge, investment insight and money management skills that i have accumulated in the last 10-12yrs, i believe i would be better-off, now that i know better.


If you are feeling the same way, i would say you are not guilty as charged, because the real knowledge we need to survive in the real world (outside the school world) were absent throughout most of our formative and learning stage in life. I mean throughout our nursery, primary, secondary and even university education stages, financial or money management knowledge was not part of the information and education inscribed into our brain stem. How i wish someone had sat me down and told me a few things before now.


Notwithstanding, if you are still holding on to this as an excuse, you will obviously sleep on your bed the way you have laid it. If you are not seeking/craving for financial knowledge/information at this information age, you are on-your-own (OYO).


If you're interested, take a seat and listen up. These researched financial tips below will help you on your quest for financial success.


Track your Net worth Your net worth—the difference between your assets and liabilities—is the big-picture that can tell you where you stand financially. Keep an eye on it, and it can help keep you apprised of the progress you’re making toward your financial goals—or warn you if you’re regressing.


Have live/long term savings planning Apart from statutory retirement/pension plan by your employer, setting up an automatic contributions/savings plan to either one of insurance/investment vehicles at an early age will help you build wealth painlessly. This tip is so important towards achieving a financial freedom in the future.


Limit your overhead If you want to have enough money for emergencies, it's important to limit your overhead. Keeping your "must-have" expenses - the costs for shelter, transportation, food, and loan repayments -- to 70% of your income isn't easy, but doing so can ensure you have left over cash for other goals. Caveat: it is best to first separate 30% of your income for investment purpose and use the remaining 70% on important necessities.


Emergency savings Consider setting up separate savings accounts for irregular and non-monthly expenses- car repairs, Entertainments, vacations payments. Online banks make this easy. You can set up automatic transfers, so money is funnelled into each account every payday. That way, the cash to cover bigger and unexpected expenses is there when you need it.


Boost your emergency fund Once you're on track with your savings and your monthly debt has been fully liquidated, then start channelling the money you once dedicated to debt repayment into your emergency savings account. Accumulating an emergency fund equal to three months' cost of living could take you a few years, but that cash can help you sleep better at night.


Set specific financial goals Always set goals for your financial adventures. Use numbers and dates, not just descriptions or words, to describe what you want to accomplish with your money. How much debt do you have to pay-back and when? How much do you want saved, and by what date? It’s a method that helped me throughout last year.  A goal driven savings records more rewarding progress. Note that an unwritten goal is as good as no goal at all. So, i assume you know that all your financial projections and savings plan must be in black and white. You can as well outsource that function to the Microsoft Excel on your PC.


Structure your Debt repayment plan well Start with small debts (if you must incur any) to help you conquer the big ones. If you have a mountain of debt, studies have shown that paying off the little debts can give you the confidence to tackle the larger ones.


Do not take cash out of your savings/investment account early Dipping into your investment funds early will hurt you many times. For starters, you’re negating all the hard work you’ve done in saving some funds—and you’re preventing that money from being invested. Second, you’ll be penalized for an early withdrawal, and those penalties are usually pretty much.

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