The A to E of Excellent Money Management as a Nigerian in 2024

Nigeria has faced significant economic challenges this year, with changes in fuel subsidies, inflation, and fluctuating interest rates affecting the lives of millions. Amidst this financial storm, effective money management has become more crucial than ever.

In this series, we’ll walk you through the A to E of Money Management—simplifying key principles that every Nigerian can adopt to navigate the current economic landscape with peace of mind. Whether you’re earning the minimum wage, running a small business, or profitably employed, these tips are designed to help you achieve financial stability and excellent money management. Let’s get started!

A For Awareness: Know Where You Stand Financially

To manage your money effectively, the first step is awareness—knowing exactly where you stand financially. In Nigeria’s current economic climate, it’s easy to lose track of spending and saving, especially with rising costs. But before you can make any meaningful changes, you need a clear picture of your financial situation.

Let’s Meet Tunde

Tunde, a 40-year-old civil servant in Lagos, noticed that his salary, which once comfortably covered his expenses, now barely lasts the month. The removal of the fuel subsidy in January 2024 led to an increase in transportation costs, which in turn affected the prices of goods and services. Tunde used to enjoy weekly outings with friends, but now finds himself cutting back on these social activities.

Instead of panicking, Tunde decides to take stock of his finances. He lists all his income sources and expenses, including the small but frequent ones that often go unnoticed, like airtime and family requests. By tracking his spending for a month, he realizes that he’s been overspending on non-essentials. This newfound awareness helps him make informed decisions about money management and where to cut back on funds.

Take-Home

Is Tunde’s situation relatable? Awareness is the foundation of financial management. Take full stock of your finances, from your income to your expenditure. Create a detailed budget that reflects your actual income and expenses and review it regularly to stay on top of your finances.

B For Budgeting: Allocate Your Money

Budgeting is a skill that can make the difference between financial stress and financial success. In today’s Nigeria, where prices seem to rise every week, sticking to a budget can help you prioritize your spending and ensure that your money lasts the month.

Let’s Meet Chidinma

Chidinma, a young professional living in Abuja, noticed that her monthly grocery bill had skyrocketed due to inflation. In March 2024, she spent ₦50,000 on groceries, but by July, the same items cost her nearly ₦70,000. Realizing this trend, Chidinma decided to revisit her budget.

She categorized her expenses into essentials (rent, utilities, groceries) and non-essentials (chilling with friends and buying artworks). By cutting down on non-essentials, meal planning, and buying in bulk from the local market, Chidinma was able to keep her grocery expenses under control without compromising on her quality of life.

Take-Home

A well-structured budget is your roadmap to effective money management. Allocate your income to essentials first, then decide how much you can afford to spend on non-essentials. Revisit and adjust your budget regularly (every 3 to 6 months) to reflect changes in your financial situation.

C For Credit Management: Master the Art of Reducing Debt

Credit management is crucial in personal finance, especially in a country like Nigeria, where access to credit can be both a blessing and a curse. Understanding how to manage credit/loans wisely can make a significant difference in your financial health.

Let’s Meet Kabir

Kabir, a young entrepreneur in Kano, took out several loans in early 2024 to expand his business. However, with rising interest rates and a slowdown in sales, he found it increasingly difficult to meet his monthly repayments. Realizing that his financial situation could get worse, Kabir sought advice from one of his friends, an investment banker.

His friend helped him create a repayment plan that prioritized his loan payments while still allowing him to cover essential business expenses. He started by listing all his debts, from the smallest to the largest, and created a repayment plan. By using extra income to pay off the smallest debts first, Kabir gradually reduced his debt.

Take-Home

Managing debt responsibly is key to maintaining financial stability. Avoid overextending yourself and focus on paying off high-interest debt first. By staying disciplined and committed, you can clear your path to a more secure financial future.

D For Diversification: Spread Your Money

Diversification is a key principle in personal finance, especially in an unpredictable economic environment like Nigeria’s. By spreading your investments and savings across different assets, you can reduce risk and increase your chances of financial stability and growth.

Let’s Meet Eno

Eno, a product manager living in Ibadan, was initially focused on saving all her money in a single bank account. However, with inflation eating into her savings, she realized she needed a different approach. In March, after doing some research, Eno decided to diversify her financial portfolio.

She began by spreading her savings across various assets—investing in fixed investments, purchasing government bonds, and even setting aside some money in foreign currency savings. This diversification strategy helped her with money management whilst balancing the risks involved in the different investment types.

Take-Home

Diversification helps you manage financial risk and protect your wealth against market fluctuations. Don’t put all your eggs in one basket; instead, consider a mix of investments. This approach can provide more stability and potential for growth in uncertain economic times.

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E For Emergency Fund: Your Financial Back-up

An emergency fund is an essential part of managing your finances. It’s the cushion that protects you from unexpected financial shock, whether it’s a sudden medical expense, job loss, or urgent car repairs.

Let’s Meet Sandra

Sandra, a mother of two, experienced a sudden health scare recently. With medical bills piling up, she was grateful she had built an emergency fund over the past year. Despite rising inflation, Sandra had made it a priority to save a portion of her income every month. When her health emergency occurred, she was able to cover her medical expenses without going into debt.

Take-Home

An emergency fund is your first backup against financial crises. Aim to save a part of your income in an easily accessible account. This fund will give you peace of mind and the flexibility to handle unforeseen situations.

In conclusion

Money management is a powerful tool. Continuously seek out new information, whether it’s through books, seminars, or online resources, to improve your understanding of money management and make better financial decisions.

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