Ever wonder why some people seem to have their finances together while others are constantly struggling? Well, here's the secret sauce: it’s not about how much you make; it’s about how much discipline you have with what you make. Morgan Housel, in his brilliant book The Psychology of Money, reminds us that wealth isn’t just about income—it’s about behaviour. So, let's dive into how you can cultivate financial discipline and habits that align with your goals, especially if you're a young Nigerian hustling your way to financial freedom.
Assessing Your Financial Starting Point
Before you start building your financial empire, you need to know where you stand. It’s like mapping out a journey—if you don’t know your starting point, how do you plan the route? Grab a notebook, an app, or a spreadsheet and get real with your numbers: income, expenses, debts, and savings. No sugar-coating!
Steps you can Take:
- Conduct a full review of your income, expenses, debts, and savings. Yes, that means looking at those bank charges too.
- Set specific, measurable financial goals. Want to buy a house in five years or pay off your student loan? Write it down.
Actionable Advice:
- Use financial tracking apps or good old spreadsheets to monitor your cash flow. Trust me, your bank alerts aren’t enough.
- Schedule a monthly financial review to adjust your goals. Treat it like a date night—order in if you must. The idea is to get comfortable with your money.
Creating and Sticking to a Budget
Budgeting gets a bad rep like it's some boring thing only “serious” people do. But here’s the deal: a budget is just a plan for your money. You wouldn’t drive from Lagos to Abuja without a plan, right? So, why would you do that with your money? Check out our course on budgeting– Budgeting 101 on InvestNaija.
Steps to Take:
- Develop a budget that aligns with your income and goals. This isn’t a one-size-fits-all deal; make it yours.
- Categorise expenses into needs, wants, and savings. You’ll be surprised how much you're spending on “wants” when Jumia sales roll around.
Actionable Advice:
- Start with the 50/30/20 rule: 50% needs, 30% wants, 20% savings. Adjust as necessary. This rule is a guide, not the gospel.
- Automate bill payments and savings transfers. Set it and forget it—you’ll thank yourself later.
Building Consistent Saving and Investing Habits: The Money You Don’t See
Savings and investing aren’t just for the big earners—they’re for everyone. The trick? Make them automatic. If you wait to save what’s left over after spending, you’ll be waiting forever. Save first, spend later.
Steps to Take:
- Start with a small, regular savings amount and increase it as your income grows. Don’t despise the days of small beginnings—remember, Rome wasn’t built in a day, and neither is your investment portfolio.
- Explore investment options like mutual funds and direct equity market investing. You don’t need to be a stock market guru to start.
Actionable Advice:
- Set up automatic transfers to your savings and investment accounts.
- Start with blue-chip stocks or ETFs for a balanced approach. They’re like the jollof rice of investments—safe, satisfying, and always a good idea.
- Reinvest any earnings or dividends to grow your investments over time. Compounding is the ultimate money cheat code.
Managing and Reducing Debt: Kill the Debt Before It Kills Your Vibe
Debt isn’t necessarily the enemy, but it can be if it’s out of control. Whether it’s small loans from friends and family, car loans, or that “too-good-to-resist” credit card, you need a strategy to tackle it.
Steps to Take:
- List all your debts and prioritise them. Avalanche or snowball method—pick your fighter. Avalanche means paying off the highest interest first; snowball is about clearing the smallest debts first.
- Avoid new debt like you avoid 419 scams. Seriously, if you can’t afford it with cash, think twice.
Actionable Advice:
- Set up automatic payments for loans. Late fees are just extra punishment you don’t need.
- Negotiate with creditors for better interest rates or payment plans. Don’t be shy—it's your money on the line.
Maintaining Financial Discipline and Adjusting as Needed: It’s a Marathon, Not a Sprint
Financial discipline isn’t a one-time event; it’s a lifestyle. You’ll have wins, and you’ll have setbacks. The key is to stay adaptable and keep your eyes on the prize.
Steps to Take:
- Regularly review your financial progress and adjust as needed. Maybe you’ve gotten a raise (congrats!), or maybe unexpected expenses popped up. Pivot as needed.
- Build a mindset of delayed gratification. That new iPhone can wait, but your financial goals shouldn’t.
Actionable Advice:
- Schedule quarterly check-ins to assess your financial plan. Think of it as a health checkup but for your wallet.
- Reward yourself in small, budget-friendly ways when you hit key milestones. Discipline doesn’t mean deprivation.
Key Takeaways:
- Know Where You Stand: Assess your financial starting point and set clear goals.
- Budget Like a Boss: Your budget is your roadmap to financial freedom.
- Save and Invest Automatically: Make saving and investing a non-negotiable habit.
- Tackle Debt Strategically: Be proactive about managing and reducing debt.
- Stay Disciplined and Flexible: Financial discipline is a journey—stay committed and adjust as life happens.
So, there you have it. It’s not about being perfect; it’s about being consistent. Start small, stay focused, and keep moving forward. Your future self will thank you!
