Tag Archives: budget

gift-2016-valentines-day-budget

Budget for Love

It is Valentine’s Day on Sunday!¬† ‘Tis the season of love ūüôā .¬† In 2015, US$18.9 billion (yes, with a “B”) was spent on Valentine’s Day related gifts and activities in the United States of America.¬† I do not have the stats for Nigeria or the rest of the world, but I can imagine the numbers are just as mind-boggling.¬† So, we can safely conclude that love can get very expensive!

I will not go into the technicalities of what makes an appropriate Valentine’s Day gesture and what is not, how much should be spent, or whether to celebrate at all.¬† What I WILL state is that: “Don’t let love break the bank!”¬† Wondering what I mean?¬† Let’s take a walk with Gbenga.

Gbenga is a 25-year-old man who is a junior analyst at a bank.¬† He has finally gotten Yemisi, a 23-year-old intern, to agree to be his girlfriend.¬† It is 5 days to Valentine’s Day, and he is thinking of what to do to wow her on that day.¬† He has come up with the following¬†plan to impress his girl:

  1. Buy her a really nice piece of jewellery (cost: N25,000)
  2. Take her out to dinner at a fancy restaurant (cost: N20,000)
  3. Take her to see a movie she’s been wanting to see and grab a snack while at it (N5,000)

Total bill: N50,000

N50,000 may be a drop in the ocean for some, but not so for Gbenga.  His monthly take-home salary is N100,000 per month and his regular monthly expenses are as follows:

Description                                                                     Amount (N)

Rent (he shares an apartment with friends)                  35,000
Feeding & Transportation                                                 25,000
Tithe                                                                                      10,000
School Loan Repayment                                                    20,000
Contribution to Mama*                                                       5,000

Total                                                                                      95,000

As we can see, Gbenga has only N5,000 of “free” money left after he takes care of his needs and obligations – and he has not yet¬†put anything aside for savings ūüėź . ¬†His Valentine’s Day plan would surely break the bank!

We would not want Gbenga to get into financial trouble over love now would we?  So let us give him some precious advice.  Gbenga has two options:

  • Cut his coat according to his cloth: Gbenga’s true discretionary income this month is N5,000, so he can stick to the item on the plan that fits within his budget, i.e. take Yemisi to see a movie she’s been wanting to see and grab a snack while at it. ¬†This way, he is spending within his means, having fun while at it, and not taking on useless debt.
  • Save his money: This is even better; who says one has to spend money to have fun? ¬†Gbenga has a television in his room with a basic cable subscription. ¬†He can invite Yemisi and another of their couple friends over to a potluck dinner and in-house movie viewing :-). ¬†The benefits of this option are: (1) Gbenga and Yemisi get some quality get-to-know-each-other-better time between themselves, as well as with the other couple; (2) Gbenga gets to add to his savings; and (3) Gbenga has enough food (food never finishes at a potluck, he he) for the next few days, meaning he can save some of the amount he has budgeted for food.

If you were Gbenga, or Gbenga’s big sister, which option would you pick?

Happy Valentine’s Day in advance dear readers! And remember that true love has no price.

 

* featured image courtesy valentinedate2016.com

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Money Basics: Don’t Spend It All in December

For those of us in Lagos, Nigeria, harmattan – and Christmas – is very much in the air :-). The retailers have put on the show to draw people in and dispense the contents of their wallets, with the “mind-blowing offers,” the “you must haves,” the “must-visit places,” and the “must-do things.” ¬†It is very easy to get caught in the commercial excitement of the moment, especially because the capacity to indulge for most is also increased during this period: bonuses, gifts, and most salaries get paid earlier this month. ¬†For those who think the Joneses are the gold standard, it is an even more financially hectic period.

Here is a reality check for us all though: after December comes January, and 10 other months before the next December. ¬†January is considered by many to be a long and gruelling month, primarily because the duration between the paydays in December and January is the longest in the entire year for most – an average of 37 days according to my guesstimate. It is also because December is filled with so many activities and holidays from school and work, while January is “empty” after the 1st day of the month / year.

Here is another major reason why January is so long: school fees are due at the beginning of that month! For some, rent is due as well; these two items are the largest monetary expenses for a lot of people.  In fact, for some, the financial behavior in December ruins the whole year ahead.

So, now that we have identified some of the ways financial problems are created, here are some of my proposed solutions:

  • Forget about keeping up with the Joneses! This will always be my number one advice because keeping up with the Joneses is not a sustainable basis for getting anything done in life because the truth is the Joneses are clueless and broke!

    free-your-mind

    Image courtesy freedomfromwithin.com

  • Create an income-expense plan (some people call this a budget :-)). It would interest you to know that income-expense plans have been saving lives and fortunes since the beginning of time! ¬†No entity – individual or organisation – can have the kind of lasting progress a lot of us desire without¬†one of these.create-a-working-budget
  • View your finances through an annual lens. ¬†It is rather easy to focus on the cash inflows and outflows of each month on a per month basis. ¬†The reality for most of us however is that both our cash inflows and outflows vary by the month, and this is the case regardless of whether we work for an employer (private or public) or we employ ourselves. ¬†An annual view will help acknowledge this reality and make your income-expense plan more representative of your situation. ¬†It will also make it a lot easier to appreciate why you cannot afford to spend it all in December.

    birds-eye-view

    Image courtesy thinkbeyondthedesktop.com

  • Save and invest. ¬†One of the outcomes of your annual income-expense plan would be the need to save and invest, as some of the current income will need to be put aside to offset an expense later next year.save-invest
  • Remember the reason for the season: giving and sharing our fortunes with those less fortunate than ourselves, i.e. philanthropy. He who gives shall receive even more. ¬†Let us not forget those around us who could really do with a little bit of what we take for granted. ¬†Instead of buying your child that latest electronic gadget that she does not need, you could buy the monetary equivalent in rice and give to your domestic employees, or even school bags for their kids.

    philanthropy-and-giving

    Image courtesy philanthropistlist.com

  • And lastly, self-discipline. None of the above can be achieved without a healthy dose of self-discipline. We each need to love ourselves enough to be willing to forfeit instant gratification for a greater longer-term purpose. ¬†Just as we need to apply this to weight loss and keeping our bodies healthy, so we also need to apply this to keeping our finances healthy.

    self-disciplines

    Image courtesy quotesgram.com

Do you need the assistance of a professional with (i) creating an income-expense plan (ii) creating a savings & investment plan?  Feel free to drop me a line at comments@finomics101.com.

It truly is the season to be merry; my family and I wish you and yours the best of the season. ¬†Wouldn’t it be better if the merriment lasted all-year-long though? ūüôā

seasons-greetings

Image courtesy motorweek.org