[dropcap]I[/dropcap]n these desperate times of recession in the economy (some might disagree and say it’s a stagflation), it can be awfully difficult to get by for the average person. Unemployment is rising, inflation is accelerating and the Naira is losing value.
Tackling a stagflation isn’t as easy as dealing with a recession or fighting off inflation but that’s not for you to worry about but for the managers of the economy to keep working at solving.
In the meantime, everyone needs to take certain steps to cushion the harsh effects in the short and long term. I’ve tried to list some of the ways we can do this below:
The very first and obvious thing to do is to save even more now. If you weren’t a prolific saver before this period, this is the time to begin. It’s never too late. Saving a part of one’s income is something that people have always done over the years. Your savings help tide you over in times of great turbulence and you can also make long term strategic decisions with your savings.
You might be wondering how you’re expected to save more with prices continually going up and your income is either stagnating or reducing (some workers have been suffering wage cuts).
The first thing you should do is resolve to cut down on your spending and then make a plan. Breakdown your income into a hundred parts and then allocate parts to various things (say 10 percent goes into your savings, 20 percent to feeding for example).
After breaking down your income, make a budget of what you intend on spending monthly. Making budgets is something that helps you a lot and should be done all the time. Remove spending on things that are not essential and that you might consider frivolous. You know all of the things you spend on that you can easily do without. Having a budget will help you in curtailing excess spending, saving a little here and there goes a long way to help.
Another way of reducing what you spend monthly involves doing simple things like making your own food instead of eating out, walk or ride a bicycle instead of driving or paying for transport for short distances.
Sometimes the cheaper alternative is the healthier alternative. Spending more time at home helps to save you some money and allows you to spend more time with family and friends which makes your personal relationships stronger. We cannot exhaust the simple ways we can each make savings that can add up.
One word we hear a lot in times of downturn in our country is diversification. Government officials and business people talk about it, almost everyone knows that diversification is very good. It’s one word we need to think about when it comes to our personal finances also. Diversify your income stream, diversify your investment portfolio, etc.
After exhausting ways to make little savings on your existing income, the next step is to look for ways to increase your income. Some of the things you like to do during your spare time – your hobbies, your interests – should be turned into an income stream.
No matter how little you might feel it is, it’s still adding something to your income pool. You know those cartoons your draw on your spare time? Try and monetise them. Monetise your skills. If you’re a good public speaker, you can become a compere on weekends while working your regular job on weekdays. We all have some kind of skill, make use of yours. Getting in more money never hurts.
Trying to optimise your expenditure and savings and also diversifying your income streams are both very helpful in the short and long term (you don’t necessarily have to stop good practices when the economy starts to perform better). With the inflation rate so high and continuously rising, just saving your money and keeping it might not be the best idea. The best time to invest in things is generally thought to be during periods of economic downturn because most people are going short (selling off their positions) which causes a downward pull on the prices of those securities that are being sold off.
There are numerous securities in which you can invest your savings to maintain and build value. You can convert some of your savings into certain foreign currencies as a way to maintain the value of your savings long term. You can build your own investment portfolio and manage it yourself.
You can build a diverse investment portfolio made up of stocks, bonds, etc with some of your savings by cost averaging over a period of time. This is a good way to build up the value of your savings over the long term. Periodically rebalancing your portfolio is also a very good idea.
You can lean on the expertise of a financial planner to help you with ideas on how to work with some of the funds in your savings, but stay away from pyramid companies, multilevel marketing companies and Ponzi schemes (MMM is a popular one currently making the rounds). You don’t want to go through the stress of building up your savings and then handing it over to some fraudster leaving you in the lurch.
Owen Omorogbe is a medical practitioner. He tweets from @Claspie.
The opinions expressed in this article are solely those of the author.
