MANAGING PERSONAL FINANCES IN RECESSION

MANAGING PERSONAL FINANCES IN A RECESSION

Over the last 5 years, Nigeria has continued to witness a persistent increase in the price of goods and services, this is happening at a geometric rate. This is owing to the fact that the fall in oil prices in the global market is piling pressure on Nigeria to devalue the Naira, as such this has seen the Naira weaken from N199.56/$ in 2015 to N385.91/$ in 2020.

The reality today is that while goods purchased 5 years ago have either doubled or tripled in prices the average salary of Nigerian citizens have either remained unchanged or witnessed a minimal increase.

How the Recession Affects Personal Finances:

While salaries remain constant and the prices of goods continue to increase, you will realize that one can only do a little with the same salary compared to the number of things he can a few years ago.

Let us look at Mr XYZ's personal budget below to understand how the recession hits our personal finances. His salary as of 2015 was N50,000 and at that time he was able to budget his income such that he could afford to save up to N12,000 after all expenses but over time, the economy began to have a negative impact on his budget. See the table below:

Table Showing Personal Budgeting in 2015 and 2020

From the table above, you will realize that the same salary that made it possible for Mr XYZ to save about N12, 000 at the end of the month in 2015 is not able to cater for the same expenses in 2020. Therefore there is a need to take necessary steps in order not to fall into the trap of living in debt.

Managing Personal Finances in Recession

The BRIT strategy has been identified as a strategy to apply in managing personal finances during the recession. BRIT is an acronym for four key points i.e. Budget, Reduce unnecessary expenses, Increase your revenue, and Track your expenses.

Budgeting: As you can see from the table above, personal budgeting helped us to have a clear idea of Mr. XYZ’s monthly expenses, therefore, making it easy to identify when the budget is no longer realistic. Making provision for unplanned expenses and ensure you stick to the specified amount is also important in budget planning. Without clearly outlining and prioritizing your expenses, you will never be in control of your finances and this oftentimes marks the beginning of financial struggles.

Reduce unnecessary expenses: Another action required from you in managing your finances during a recession is to ensure that you reduce all unnecessary expenses. Areas you can cut down on expenses include:

-         Establishing a cooperative with friends and colleagues to contribute and buy things (especially foodstuffs) in bulk in order to enjoy huge discount and save more

-         Reduce or completely avoid eating out by ensuring you prepare your meals and take to work

-         Apply the do-it-yourself principle to some of your homework that you would ordinarily have contracted to technicians and laborers

Increase Revenue: One of the ways you can is by investing your funds into petty businesses that will help you generate additional income. Example of such includes identifying cheap sources of products that you can display your social media pages and you make purchases to deliver to your customer online when orders are made. There are lots of other petty businesses you can establish and cash in on. For a guide on this, read my article on how to identify small businesses with potential

Track your expenses: Don’t just spend without keeping track of every kobo or penny spent. Make sure you keep a record of your expenses as this will help you stay in control of your finances and help make the necessary adjustments when you go off track.

Tunde David Animashaun

babatundeee12@gmail.com