Saving money in Nigeria isn’t a matter of arithmetic- it is a matter of priorities. We often tell ourselves we’ll start saving once we reach a certain milestone, like when we get our degrees, we get married, we get a bumper pay rise, we pay off our debts, or the kids move out. Most times, we keep kicking the ball forward then, procrastination sets in.
Realistically, there is no easy time to save because saving requires herculean efforts and sacrifices. To be frank, without healthy money habits, you won’t still save money when you get a salary bump, when you own your car, or even when the kids are grown. You must know that your future needs are more important than your current wants.
You may ask,”when should I start saving?” The answer is simple, start NOW!
It’s not as overwhelming as it sounds. Yes, it requires dedication. But with a few tweaks to your spending priorities, you’ll be on the fast track to saving money in no time.
Why Nigerians Aren’t Saving Money
The economy of the country is a key factor because a lot of people earn meagre income which isn’t enough to care for their basic needs. The minimum wage of eighteen thousand naira is certainly too small due to the inflation and instability that ravage the country’s economy. Yet, low income shouldn’t be a reason not to save because it isn’t what you earn that makes you rich, it is what you save.
A lot of times, the goal to save money isn’t a big enough priority to delay the purchase of that new smartphone (everyone wants to use the latest smartphones), kitchen table, Gucci accessory or TV. So we spend our nairas away or, worse yet, go into debt to buy the latest want. That debt then becomes monthly payments that control our paychecks and eventually, our lives.
However, some people can’t just help but watch as their hard earned money melt like ice. Why? You guessed right- bad spending habit. A lot of people will rather spend their salary at clubs, on alcoholic beverages, buying expensive things and gambling. This is as a result of making bad choices and inability to clearly define what their needs are.
HOW CAN I START SAVING?
You can stop the cycle of living paycheck to paycheck with a simple secret: Make a zero-based budget before the month begins. A budget is all about being intentional. It helps you create a plan to control where your money is going and how much you can save each month. It’s never too late to take control of your money!
What Is a Zero-Based Budget?
According to the Instant Business Dictionary, a budget is an estimate of the income and expenditures for a period of time or a limited allotment or appropriation for a specific purpose.
A zero-based budget is simply when your income minus your outgo equals zero. Zero based budgeting involves creating a budget from nothing and starting from the scratch where every function within an organization is analyzed for its needs and costs.
Start with your most important categories first.
- Shelter and Utilities
- Basic Clothing
Saving needs to be a line item in your budget along with your basic needs. After you’ve set aside funds for your savings and basic needs, fill in the rest of your budget with what’s left in order of relative importance ( this is called the scale of preference). As you progress, you may decide to forego some things on the list because you feel you can do without them or you can attend to them later (this is called opportunity cost). When you plan this way, it prevents you from running out of money before you even start saving!
It really doesn’t matter how much money you make—it matters how you spend the money you make.
Practical Ways to Save Money
1. Pay your debt.
Monthly debt payments are the biggest obstacle to saving money. The fastest way to pay off debt is by paying off your debts in order of smallest to largest (The debt snowball method). It sounds intense, but it’s more about behavioral change than numbers. Once your income isn’t tied up in monthly debt payments, you can finally use it to make progress toward your savings goals. Paying your debts as fast as possible frees you from the financial and psychological burden that comes with it.
For more information on debt management, read the article, “How to get out of Debt in Nigeria”.
- Review subscriptions and memberships.
Chances are you’re paying for multiple subscriptions, like music streaming, gym memberships, trendy subscription boxes, or Amazon Prime. It may also be that you pay membership fees to affiliate organizations or unions. Ask yourself these questions, do I really need these subscriptions and memberships? Can I do without them? How often do I use them? Cancel any subscriptions you don’t use regularly. If you really miss one, subscribe again—but only if it fits into your new budget.
- Don’t be deceived by brand names.
In most cases, the only thing that’s better about brand-name products is the marketing. Store-brand medication, staple food items, cleaning supplies, clothing, gadgets and paper products cost far less than their brand-name. Don’t be swayed by trademarks, there are less expensive items with similar or same quality.
- Automate your savings.
You can save money without thinking about it. Set up your bank account to automatically transfer funds from your checking account into a savings account every month. Or set up your direct deposit to automatically transfer 10% of each paycheck into your savings account. That’s less stressful, isn’t it?
- Spend your bonuses wisely.
When you get a work bonus, inheritance, or tax refund, put it to good use. You’ll be better off using those funds to pay off student loans or your credit card balance than stashing it away. If you’re debt-free, use those extras to build up your emergency fund. What determines your prudence isn’t only how you spend your hard earned income but also how you spend your bonuses and allowance.
- Unsubscribe from tempting emails.
It is often believed that temptation to spend begins from what we see. Email marketers are really good at what they do. They know the irresistible temptation of a flash sale, a colourful ad or exclusive coupon. If you can’t resist when you see a special offer, click the unsubscribe link at the bottom of the email. Not only will you be less tempted to spend, but your inbox will be a lot less cluttered. It’s a win-win!
7. Ask about discounts.
You’ll never know unless you ask. Next time you’re getting a loan or tickets at a movie theater, museum or sporting event, ask if they have any special discounts for seniors, students, civil servants, military, or AAA members.
Saving money is not easy and most times, we need the help of a professional to manage our finances. Why not check out our investments section on how to maximize your savings. You may like to read our latest article on Choosing the right Loan in Nigeria.
8. Getting a Piggy bank (also known as kolo)
This is a small metal, wooden or plastic object with a hole in it for passing money through. This method is adopted by many people who wants to save towards an event like their upcoming birthday or for a new year cloth. It is very possible to stick to your terms by not going near the money and saving for your intended purpose but this method is also unreliable because there will always be a need that arises all of a sudden and then you remember that you have a money saved up somewhere, then you break it and that breaks your saving routine. It is less reliable but better than nothing.
9. Opening a savings account
Apart from the normal account where everyone gets the miracle alert, for someone who wants to save up, it is advisable you open an account where you specifically save. Using the same account where you make your transactions is very unreliable because an unwanted need will arise and since it is your money, you spend it hoping to replace it back soonest but it reduces the chance of you saving more than what you should save reducing your budget. This is more reliable than a piggy bank because you get to decide if you want to save lock it till when the time for the intended budget has elapsed.
10. Local contributions (also known as ajo):
Some people would not want to go through the stress of going to a bank all because they want to save up that extra money and some also feel that banks remove interests from their money which reduces the money from increasing so they prefer to go through the local way. This process is when a group of people come together and save a specific amount which would be collected in a specific time and they gather it to give a specific person, one at a time, till it reaches every of the groups members contributing. This process is very reliable if the person with the contributions is trustworthy and also unreliable if it is vice versa.
11. Consulting a financial institution:
This process is the most reliable and this process is what top businessmen and women do. They know their spending habits and they seek help in consulting someone who will help them calculate their income and save lock the rest. This financial institutions will have access to information’s on when the next money is coming in and they alert you ahead. So no matter your spending habits, once the percentage you intend saving out of your income is removed, you settle down to think smartly on how to plan yourself depending on what is left. This is the best option of saving.