Take a fresh look at your lifestyle.

Setting up effective financial plan

Babajide Okeowo


It is important to set and reach financial goals. A long-term financial plan will help you to reach your long-term goals and give you a focus for your short-term goals. It can help you stop making financial decisions based on fear and help you determine the order of your major life steps. This plan will vary from individual to individual, and a financial adviser can help you solidify the plan, especially when you are ready to start investing. Your financial plan will help you to make the best financial choices, so you can set yourself up to win financially by really managing your money.


 Budget successfully

To truly manage your money, you should have a working budget for each month. A budget allows you to give each naira you make a purpose. It puts you in control of your money. It lets you track your spending and helps to measure whether or not you are meeting your financial goals. Although a budget may seem like a lot of work or too basic when you think about creating a long-term financial plan, it is the key to real, lasting financial success. A good budget will prepare to make each financial step as it comes. You should have a monthly and an annual budget to make this work effectively. It does not matter how much money you make, you can always spend more than you earn. A budget is your best tool for taking control of your finances. It is the key to helping you change your financial future.


Eliminate your debt

The second step is to get out of debt. This is important because it does not make sense to save or invest money when you are paying a higher interest rate on the money that you owe to others.

Getting out of debt takes discipline, but it is possible. If you have a lot of debt you will need to drastically cut your spending and increase your earnings in order to pay the debt off more quickly. You should include all of your debt in this except for your first mortgage on your home.

Related Posts

READ ALSO: The problem with Buhari’s ministerial list: Nigerians kick

Once you are out of debt, you need to set up systems that will help prevent you from going into debt again. This means setting aside money for big purchases like your car and carrying the right amount of insurance so you do not take on unexpected medical debt.


Build an emergency fund

Once you are out of debt you should build an emergency fund of six months’ worth of expenses that you leave in the bank. This cushion will allow you to leave your investments alone in case you fall on hard times. It should only be used for real emergencies such as a job loss, and it is set up to protect your investments and retirement savings. If you dip into your emergency fund you should focus on bringing it back up to the full amount as quickly as possible. If you have an unstable job, you may want to consider saving up a year’s worth of expenses.

If you are creating your financial plan before you get out of debt, you can set up a smaller emergency fund of N100,000 or one month’s income that should help you cover most unexpected expenses. This will help you to move forward with getting out of debt and prevent you from adding more debt.


Invest and diversify

You can use tools such as mutual funds, annuities, or real estate to increase your investment portfolio. It is important to diversify your types of investments. If you are consistent and careful with your investments, you will reach a point when your investments generate more income than you do. This is a good thing and you should have this in place by the time you retire. As you draw closer to retiring, you will want to change the way you invest. It is important to have safer investments that will not be as affected by the market going up and down. This way you will still have the money you need if the economy crashes, whereas when you are younger, you will have time for the market to recover. If you need help with this, a financial adviser can help you.