Managing personal finances is a struggle for many people especially young people in Africa who have just started earning . Impulsively young people would want to meet their immediate wants first without looking out for their future self. Now there is absolutely nothing wrong in flexing your self once in a while. It makes no sense to work so hard without being able to enjoy your hard earned money but you also need to consider the opportunity cost of spending all your money in the heat of the moment.
Back in the days, while in primary school, we were exposed to a topic called compound interest. Many of us took that as just another subject to pass and get over with, if only we where told that this is the basis for managing our personal finances, we would have taken it more seriously.
Let us examine an example to buttress this point;
If you are 25years old and you earn a salary of N100,000 per month and you make a commitment to save 20,000 every month in the regular savings account, by the time you are 45years old, you must have saved 4.8 million naira roughly.
Now, imagine you decide to put your N20,000 in a savings plan that gives you 10% p.a . This means that, by the time you are 45years old, you would have saved 15.3 million naira.
By making the wiser decision to choose a more effective savings plan, you would have earned an extra 10.5million naira extra within the same time.
Becoming wealthy has been proven to be a matter of mindset and planning and not luck. Research has also shown that wealthy people spend about 1–2 hours every day, planning their personal finances while the average person spends 7–15minutes per day doing the same thing. This difference in time spent is what result in the difference you see in the monthly bank statement.
Some of us might give excuses of not having a lot of money to invest, you would often hear young folks saying ‘My salary is very small’, ‘I don’t have enough’. The big question is, ‘how can you make the best out of your current income and still be able to save and invest for your future self?
The answer to this, is in the 50:30:20 rule. This rule states that, you spend 50% of your income on recurrent expenditure, 30% on your wants and luxuries and 20% on savings and investing.
To make this rule work for you, it is important to have self discipline towards sticking to your budget. To help you stick to your budget, you can turn on the auto save functions, this way you would have authorized your bank or savings partner to debit a pre-agreed amount from your account each month.
Remember, creating a better future for your self is beyond savings, you would have to consider investing your savings. This would help you beat inflation and ensure your money yields more value on the long run. You can explore investment options such as agricultural investments, treasury bonds, stocks, real estates e.t.c.
Regardless of how much you currently earn, the right time to start investing is right now! Sign up on www.reaprite.com to get started.
