Financial management in uncertain times

These certainly are uncertain times. Inflation is on the upward swing. VAT increase is now effective. There are rumours of removal of petrol subsidy. The price of electricity is scheduled to increase in April. The Central Bank is having difficulty defending the value of the Naira due to the dwindling revenue from Crude Oil, our major source of foreign exchange – any increase in the exchange rate would affect our purchasing power. Yet we must remain calm and optimistic because it is in these very times that those with insight and foresight can see what others do not see and manage their finances optimally.

Many people seem to overlook the small ways of saving money and forget the adage, “little drops of water make a mighty ocean.” However, every personal finance book insists that we need to manage the seemingly “small” outflows. Even if incomes are growing, we need to pay attention to the outflows if we want to build our wealth. Remember – it is not what you earn the matters, but what you keep.

Who remembered that we pay VAT on electricity until we were reminded last week? So, the cost of electricity has gone up since February 1st, even before the announced increase of April. People with pre-paid meters can push the effective date of the April increase forward a bit for themselves by stock-piling electricity units in their pre-paid meters at the old price. This way they would enjoy the old rate even after April.

Take a look at your Telecoms service – call and data package. Is this the best value you can get? You may be able to save thousands of Naira monthly if you change the package or even change the service provider. Remember that with the portability of phone numbers, you do not have to change your phone number; you keep your number but get a better deal. Savings on mobile telecoms services are real and are especially crucial for small businesses.

Now is the time to review our relationships with the banker, insurer, school, dry cleaner, beauty salon, restaurant, tailor etc. There could always be a better service provider delivering greater value for your money and helping you reduce your outflows.

We all should know that many of the charges placed on bank current accounts do not apply to savings accounts. In the “olden” days, we all used currents accounts so we could pay third parties using our cheques, since cheques were only issued to current accounts. But who uses cheques these days? So why then do we continue to bear the burden of paying account maintenance fee, stamp duty and other fees that are not applicable to savings accounts? Certainly, a business account may need to operate a current account, but there may no longer be any financially prudent justification for individuals to operate them.

How about our insurance policies? Which perils do they cover? Can we get another reputable insurer to cover the same perils for a lower premium? If you insure more than one car with the same insurer, can you get a discount? We should search out ways to effectively reduce our premium outflows without reducing our insurance coverage.

Can we obtain discounts with our children’s school proprietors for having more than one child in the school? This discount is offered by most reputable schools.

Savings can also be obtained when we buy physical goods. Many of us shop around before making major purchases like electronics and mobile phones, but we overlook the smaller purchases. However, major purchases are few and far between. Smaller purchases are regular, and the extra (and unnecessary) outflows add up very fast; creating a mighty ocean. Is your local supermarket or even the giant megastore delivering on their pricing promises? A convenient way to find out is from online grocery retailers. We have a few reliable ones already operating across the country. Take your receipt from your favorite supermarket and compare the prices on it with the prices offered by different online stores. I am sure a lot of savings opportunities would be discovered to reduce your outflows on provisions. In addition to savings on prices, many of these online retailers deliver free (for a minimum sum of purchases) in the cities where they operate. So, when you factor in the time and energy saved, and the traffic jams and inconvenience avoided, now may be the time to switch to these cheaper and easier alternatives.

All these small savings add up to increase the amount of money we have for investment and wealth building. Let us maximize them. Happy investing.

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