The beginning of a new year is often the time for personal and organizational projections, especially financial planning for the year ahead. Indeed, making a rock-solid financial plan should be at the heart of any smart year plan, as financial security has far-reaching implications for our lives and the organizations we operate in.
In the light of today’s economic realities, certain financial measures, such as budgeting, personal savings, savings for retirement, investments and mitigation of financial loss, have become measures we must prioritize as we lay out our year plan. Although analysts posit that the Nigerian economy has reversed the trend of negative growth, we must take into cognizance that this positive economic growth is yet to be sustained. The risk of sliding back into a receding growth regime still looms. The need to take control of our finances through smart planning is ever more imperative.
To help you do this well, we have highlighted factors you should consider as you push your plans for the year.
- Know how your money flows: You cannot adequately plan for the year without first knowing how your money comes in and goes out. The first and probably most important step to take when planning your finances is to develop a budget with the details of your income and expenditure.
- Get SMART with your goals: The SMART method is anchored on making Specific, Measurable, Attainable, Realistic, and Time-based plans. Use the data gathered from your budget to determine where you are and where you want your finances to be at the end of the year. Avoid setting vague goals like “I want to be rich” or “I want to make money”. Instead, set goals like “I want to save X amount by December to pay for my xx”. That way, you can measure your success at the end of the year.
- Manage your spending behavior: Most of our financial outcomes are as a result of our spending habits, which, if not properly managed, can have a long-term implication on our financial goals. How much do you spend on data, on junk food and outings? Study your budget and look for efficient ways for cost cutting.
- Prepare for the unexpected: Life is full of uncertainties, and not having adequate protection for you and your family can wreak havoc on your financial plan, should you face an unexpected difficulty. It is important to identify the risks that can threaten your finances, risks such as asset loss to theft or accidental damage. In order to militate against these kinds of risks, it is wise to procure an insurance policy from a trusted insurance company to protect your finances. With the launch of micro-insurance schemes, anyone, no matter their income profile, can now get an affordable insurance policy that suits their assets and income levels.
- Start a Savings Plan: The idea of saving when your current income is barely enough may seem absurd. However, saving is an essential way to financial security. A smart way to go about savings is to set aside 10%-15% of your income. Also, because we cannot predict what the future has in stock for us, saving money provides that safety net in the face of eventualities. As you accumulate savings, your worries about financial responsibilities lessen
,as long as you live within your means.