Opinion

Managing Personal Finance- Successful saving and budgeting

self finance

You don’t grow big to manage well, you manage well to grow big. As an entrepreneur, being able to effectively manage your personal finances is very crucial, most especially because it determines how the business would be managed. Being financially successful means you are in control, of your money instead of it controlling you. Your income doesn’t necessarily determine how financially successful you are, your choices and priorities do. As an entrepreneur, being able to separate personal finance form organizational matters, and once that is settled, saving and budgeting are the next steps to take. If you are struggling, financial success may seem like a distant dream, but by following the steps highlighted, you can make that dream a reality.

Saving is income spent and kept aside for a later use. Saving is essential to building your long-term personal and business wealth, and it is important to save early in life and very often. Regardless of your age, you should save a percentage every time you receive money, whether it is from a paycheck or monetary gift. The everyday decisions you make about money can have a lifelong impact. Saving allows you the freedom and flexibility to fulfil your goals and helps you develop good personal finance habits.

Even if you’re not a natural saver, it’s not a problem. Getting started is easy. There are many ways to scale back your spending and various resources to help. Start small and see how quickly your money can grow.

Why savings?

It helps you to become financially independent

It helps to get out of debts

Have an extra reserve for emergencies

It helps to live a good life

It allows for expansion of your business

 

Saving tips

saving

Record your expenses: The first step to successful saving is to figure out how much you spend. Keep track of all your expenses, every drink, credit, foodstuffs bought, etc. If you have a small startup, this is very easy, you could decide to do this manually, or by using excel spreadsheets, google docs, etc. Other expense tracker apps are available for larger businesses.

Make a budget: Once you have an idea of what you spend in a month, you can begin to organize all your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income so you can plan your income and limit overspending. As an entrepreneur, it is important to have a personal budget and also an organizational budget. The organizational budget could be made yearly, indicating the most probable expenses for the year and also leaving allowances for miscellaneous expenses.

Make savings automatic: Setting up automatic savings is the easiest and most effective way to save and it puts extra cash out of sight and out of mind Each time you get paid, automatically transfer to your savings account, so you can save before you spend.

Aim for short-term savings goals: start with setting short term goals like saving #15000 a week or saving #50000 a month, rather than a longer term savings goal. People save more successfully when they keep short term goals in sight.

Make a savings plan: Those with a savings plan are twice as likely to save successfully. Choose something to save for.

Save your loose change: Try to save and accumulate your loose change, before you know it, it would amount to something big.

Start saving for your retirement as early as possible: Few people get rich through their salaries alone. It’s the miracle of compound interest (earning interest on interest for many years) that builds wealth. The earlier you start saving for your retirement, the better.

Watch your savings grow every month: Check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you to identify and fix problems quickly.

Budgeting

budget

Budgeting is basically making sure that you’re spending less than you’re earning and planning for both the short and long term. Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do.

If you don’t have enough money to do everything you would like to do, then you can use this planning process to prioritize your spending and focus your money on the things that are most important to you.

Why budgeting?

Budgeting ensures that you always have enough money for the things that you need.

Budgeting helps you to avoid business chaos
Budgeting helps you keep your eye on the prize.
It ensures that you don’t spend the money that you don’t have
It leads to a happy retirement
It helps you prepare for emergencies
It sheds light on bad spending habits

Budgeting tips

Financial success begins with creating and sticking to a budget. A budget, also known as a spending plan, allows you to plan for your monthly expenses and keep better track of where your money goes.

Below are some tips for budgeting

Know your monthly income: Income can come from a paycheck, or unexpected cash in the form of gifts, profits, investments, monthly turnovers from your business, etc. If your monthly income varies because your work hours constantly change or you work on commission, budget based on your base salary or take an average of your last three paychecks.

List and prioritize your financial responsibilities What expenses do you have each pay period and how much do they typically cost? Don’t forget to include expenses that occur periodically, like insurance premiums, school fees. Your fixed expenses are easier to track because they stay the same each month like electricity bills, etc. Your variable expenses, like groceries, fuel and entertainment, are trickier because they change from month to month. Don’t forget about savings. Pay yourself first before paying bills. The only way to pay yourself is to save.

Review your spending and eliminate unnecessary expenses: Do a review and determine exactly how much money is spent on a regular basis and what the money is spent on. Once you’ve gotten a sense of where the money goes, it’s time to tighten up. All cutbacks should start with items you wouldn’t miss or habits you should change anyway – like reducing your fresh food purchases if you find ingredients spoiling before you can eat them. Or eating at home more, instead of at restaurants.

Keep a budget journal: Once you’ve gone through these steps, monitor your progress for a few months. You can do this on paper by keeping a budget journal where you can write all your expenses and your projected income, or via budgeting apps.

Seek New income: Consider ways to increase your earning, either by working overtime, getting a second job or making money off your talents.

samuel

Name: Samuel Omole

Contact: 07040603344, 08055340368  samomole03@gmail.com

Professional Qualifications and interests: Sam is a Chartered Accountant with good knowledge in organizational development. With over ten years’ experience, Samuel Omole brings an in depth understanding of Human Resource Strategies, Financial Services, Business Advisory Services and Training Facilitation.

Business Address: 1B Omorinre Johnson Close, Lekki Phase 1, Lagos.