According to CBN, Nigerians demonstrate a positive savings habit with household and institutional savings deposits totaling NGN 18.19 trillion and a gross savings rate of 22.9% of GDP in 2022. Sometimes the hardest thing about saving money is just getting started as we know even to save money is tedious.
In this article, we have listed 10 possible tips on how to save your hard earned money for future purposes and future unexpected contingencies.
1. Avoid debt
Avoiding debt is important for your financial health. Debt may include money you owe on bank credit cards, loans, or mortgages. It can be very expensive due to high interest rates and fees which might make it harder to save and manage money.
Here’s why you should avoid debt
i. Financial Freedom is guaranteed: When you avoid debt, you have more freedom with your money. You can save and spend on what matters most without worrying about debt payments.
ii. Less Stress: Debt can cause a lot of stress. Managing multiple payments and high interest rates from can be problematic. Avoiding debt helps reduce this stress and gives you peace of mind.
iii. Save Money: By avoiding debt, you save money on interest payments. This means more money stays in your pocket for savings or other important expenses.
iv. Better Credit: Managing debt responsibly improves your credit score. This makes it easier to get low-interest loans and better financial opportunities in the future. Recently in Nigeria, Credit score was introduced for citizen wishing to travel out of the country.
Here are practical tips to avoid debt
i. Have a Budget: Make a plan for your money. Know how much you earn and spend. Budgeting helps you prioritize saving and avoid overspending.
ii. Build an Emergency Fund: Save money for unexpected expenses. Having an emergency fund means you won’t need to rely on credit cards during tough times.
iii. Use Credit Wisely: If you use credit cards, pay off your balance each month to avoid interest charges. Only use credit for necessary purchases, not for wants.
iv. Pay Off Debts: If you have debt make sure you focus on paying it off first. Start with debts that have high interest rates such as mortages, loan apps etc.
v. Learn About Finance: Educate yourself on managing money. Take courses or read reliable sources to improve your financial knowledge.
Avoiding debt is a smart way to secure your financial future. It gives you more control over your money and helps you achieve your financial goals with confidence.
2. Set savings goals
Setting savings goals is crucial to achieving financial and realizing your dreams. This involves planning and committing to save money for specific purposes which may be short-term or long-term goals.
Why Set Savings Goals?
i. Be focused and stay motivated
Setting clear savings goals gives you something specific to work towards. Whether it’s vacation you are saving for or deferred payment on lands, houses. Having a defined goal helps you stay motivated and disciplined in your saving efforts.
ii. Priotize and Plan financially
Goals act as a roadmap for financial journey. Golas can help you prioritize where to allocate your money and resources. By setting savings goals, you can align your spending habits with your long-term aspirations to make sure you’re making progress towards achieving these goals.
iii. Emergency Preparedness
Having savings goals includes setting aside money for emergencies. This ensures that you have a financial safety net to fall back on in unexpected circumstances like as medical expenses, car repairs without resorting to borrowing money and going into debt.
How to Set Effective Savings Goals
i. Define Your Goals
Start by identifying what you want to achieve financially. Your goals should be specific, measurable, achievable, relevant, and time-bound (SMART). For example, instead of saying “I want to save money,” specify how much you want to save and by when.
ii. Break Down Your Goals
Large goals can be daunting but you can break them down into smaller, manageable milestones. For instance, if your goal is to save 100,000 naira for a down payment on a house in two years, break it down to saving approximately 10,000 naira per month. This makes the goal more achievable and helps you track your progress along the way.
iii. Develop a savings plan that outlines how you will achieve your goals.
Determine how much you need to save each month and adjust your budget accordingly. Consider automating your savings by setting up automatic transfers from your checking account to your savings account from your bank account e.g OPAY, KUDA, UBA etc.
iv. Monitor and Adjust
Regularly review your savings goals and progress. Track your savings against your goals to ensure you’re on track. If necessary adjust your plan based on changes in your financial situation or unexpected expenses.
Practical Tips for Achieving Savings Goals
i. Cut Expenses
Identify areas where you can reduce spending and redirect those savings towards your goals. This could include eating out less often, cancelling unnecessary subscriptions, or finding more affordable alternatives for everyday expenses.
ii. Increase Income
Consider ways to boost your income like taking on a part-time job, freelancing, or selling items you no longer need. Adding extra income can accelerate your progress towards achieving savings goals.
iii. Stay Disciplined
Stick to your savings plan even when faced with temptations to spend impulsively. Keep reminding yourself of the rewards of achieving your goals and stay committed to your financial plan.
iv. Celebrate Milestones
Celebrate each milestone you achieve along the way to stay motivated. Recognizing your progress reinforces positive financial habits and encourages continued dedication to your savings goals.
3. Budget for taxes
Budgeting for taxes components of saving money effectively. Taxes are mandatory contributions levied by governments on income, transactions, property, and various activities. Properly budgeting for taxes ensures individuals or businesses set aside sufficient funds to meet their tax obligations without financial strain.
Why Budget for Taxes?
i. Avoid Financial Surprises: In-other to estimate and budget for taxes, you must avoid unexpected tax bills and penalties.
ii. Maintaining Cash Flow: Budgeting for taxes ensures that enough funds are available when taxes are due which allow the prevention of cash flow disruptions.
iii. Compliance and Peace of Mind: Proper tax budgeting promotes compliance with tax laws and regulations which can help in reducing stress associated with financial uncertainty.
Practical Steps to Budget for Taxes
i. Calculate Estimated Taxes: Estimate your annual tax liability based on income sources, deductions, and credits. Use tax calculators or consult with a tax professional for accuracy.
ii. Set Aside Funds Regularly: Allocate a portion of income or profits regularly to a dedicated account for tax payments. Automate transfers to ensure consistency.
iii. Monitor Changes: Stay informed about changes in tax laws that may affect your tax liability. Adjust your budget accordingly to reflect these changes.
Setting Savings Goals
Setting savings goals provides clarity and direction for financial planning and management. It helps individuals prioritize spending, track progress, and achieve desired financial milestones.
How to Set Effective Savings Goals
i. Define Specific Goals: Clearly define what you want to achieve, whether it’s building an emergency fund, saving for a vacation, or funding retirement.
ii. Make Goals Measurable: Quantify your goals with specific amounts and timelines. For example, aim to save 50,000 naira for an emergency fund within one year.
iii. Ensure Goals are Achievable: Set realistic goals that align with your income, expenses, and financial capacity. Break down larger goals into smaller, manageable steps.
iv. Revisit and Adjust: Regularly review your savings goals and adjust them as needed based on changes in income, expenses, or financial priorities.
Practical Tips for Achieving Savings Goals
i. Create a Budget: Develop a budget that allocates funds towards savings goals. Identify areas where expenses can be reduced to increase savings capacity.
Iii. Automate Savings: Set up automatic transfers from your checking account to savings accounts dedicated to specific goals. This ensures consistent savings contributions.
iii. Track Progress: Monitor your savings regularly to track progress towards your goals. Celebrate milestones to stay motivated and committed to your financial plan.
iv. Seek Professional Advice: Consult with financial advisors or use online resources to gain insights into effective savings strategies and investment opportunities.
4. Track your spending
Tracking your spending is a fundamental practice in finance that helps individuals understand where their money goes and make informed financial decisions.
Why Track Your Spending?
i. Awareness and Understanding
Tracking spending gives you a clear picture of how much you spend and where your money goes each month. It helps identify spending patterns, habits, and areas where you can potentially save money.
ii. Budgeting and Financial Planning
By knowing your spending habits, you can create a realistic budget that aligns with your income and financial goals. Budgeting allows you to allocate funds efficiently, prioritize expenses, and avoid overspending.
iii. Identifying Opportunities for Savings
Tracking spending reveals unnecessary or impulse purchases that can be minimized or eliminated. It empowers you to make informed decisions about where to cut back and redirect those savings towards financial goals.
How to Track Your Spending Effectively
Choose a Method
i. Manual Tracking: Keep a detailed record of expenses using a notebook or spreadsheet. Write down every purchase, categorize expenses (e.g., groceries, utilities), and tally totals regularly.
ii. Digital Tools: Use budgeting apps or online platforms that automatically categorize transactions from linked bank accounts and credit cards.
Set Categories and Goals
i. Categories: Divide expenses into categories like housing, transportation, groceries, entertainment, etc. This helps you see where your money is going and identify areas for potential savings.
ii. Goals: Establish savings goals for each category based on your budget. For instance, allocate a specific amount for groceries or entertainment each month and track your progress towards staying within that limit.
Monitor Regularly
i. Weekly or Monthly Reviews: Schedule regular check-ins to review your spending against your budget. Analyze trends, identify deviations, and adjust your budget or spending habits as needed.
Adjust and Improve
i. Identify Patterns: Look for recurring expenses or trends in your spending behavior. Are there months when spending spikes? Understanding these patterns helps you plan better.
ii. Make Changes: Based on your analysis, make adjustments to your budget or spending habits. Consider renegotiating bills, switching to more affordable alternatives, or cutting discretionary expenses.
Benefits of Tracking Your Spending
i. Financial Awareness
Tracking spending increases your financial awareness and accountability. It will help you stay mindful of your financial health and make proactive decisions to improve it.
ii. Budget Accuracy
Accurate tracking ensures your budget reflects your actual spending habits which making it more effective in achieving financial goals and preventing surprises.
iii. Goal Achievement
By controlling spending and reallocating funds towards savings or debt repayment, you can make significant progress towards achieving financial milestones.
5. Determine your financial priorities
Determining your financial priorities is crucial for effective money management and achieving your long-term financial goals.
Why Determine Your Financial Priorities?
i. Clarity and Focus
Identifying your financial priorities helps you clarify what matters most to you financially. It allows you to focus your resources and efforts on achieving specific goals, whether it’s buying a home, saving for retirement, or funding your children’s education.
ii. Strategic Planning
Knowing your priorities enables you to create a strategic financial plan. It helps you allocate your income and savings towards goals that align with your values and aspirations, ensuring that you make progress towards achieving them.
iii. Decision-Making
Understanding your financial priorities guides decision-making processes. It helps you evaluate spending choices, investments, and financial opportunities based on how they contribute to your overall financial objectives.
How to Determine Your Financial Priorities
i. Reflect on Your Values and Goals
Personal Values: Consider what matters most to you in life. Are you focused on stability, experiences, giving back, or something else?
Financial Goals: Identify specific goals you want to achieve, such as saving for a down payment, becoming debt-free, or traveling the world.
ii. Assess Your Current Financial Situation
Income and Expenses: Evaluate your income sources and current spending habits. Determine how much you can realistically allocate towards different financial priorities.
Debts and Savings: Review your existing debts, savings accounts, and investments. Determine how they impact your ability to pursue your financial priorities.
iii. Prioritize Your Goals
Short-term vs. Long-term Goals: Differentiate between immediate needs and long-term aspirations. Prioritize goals based on urgency, importance, and feasibility.
Financial Independence: Consider goals that contribute to financial independence and security, such as building an emergency fund or investing for retirement.
iv. Create a Plan of Action
Set SMART Goals: Make your goals Specific, Measurable, Achievable, Relevant, and Time-bound. Break down larger goals into smaller milestones to track progress.
Allocate Resources: Allocate your income and savings towards each priority based on its importance and timeline. Adjust your budget accordingly to align with your goals.
Benefits of Determining Your Financial Priorities
i. Focus and Motivation
Knowing your financial priorities keeps you focused on what’s important. It motivates you to make disciplined financial decisions that support your goals.
ii. Better Financial Management
Prioritizing allows for effective financial management. It ensures that you allocate resources efficiently, optimize savings, and minimize unnecessary expenses.
iii. Long-term Success
By aligning your actions with your priorities, you increase the likelihood of achieving long-term financial success. It positions you to navigate financial challenges and opportunities with confidence.