Que será, será
Whatever will be will be
The future’s not ours to see
Que será, será
In our formative years, we sang this rhyme with gusto. We have been subconsciously taught to just move through the motions of life, riding the ebbs and flows as they come. However, life has also shown us that living without planning rarely ends up well in the long run.
Proper planning, they say, prevents poor performance, and cultivating good financial habits is a form of intentional, proper planning. To break free from that passive mindset, there are essential financial habits to cultivate.
Some of these habits discussed here may have been started by some people and abandoned, while others may have never been practiced at all. Let's delve into them.
1. Live Below your Means
A popular saying goes “Cut your coat according to your cloth”. In other words, this is a simple call to live within your means by making plans and spending according to your resources - not just your desires. This is one of the reasons why we see that, a person that was living in a luxurious apartment in the urban area when they were young tend to retire to a very modest apartment probably in a rural area not out of wanting to enjoy nature but due to the fact that they cannot afford the luxurious like they were living before. Living below your means naturally leads to the next habit; creating and sticking to a personal budget.
2. Create and Stick to a Personal Budget
You should not impulsively buy things especially when they are outside your budget. Do you even have a budget in the first place? A budget is very important as it is part of your finance tracking. It shows you what you can afford to spend on a particular item or group of items. For example, you could schedule to use only 50% of your income for food. This will make you employ more cooking at home options, rather than eating out depending on your income at the moment. One extra thing you could do is to have separate accounts or better still, use banks that have separable pockets in them, so that you could put the money for food/eating in one pocket, money for self-development in another, and money for retirement savings in another.
3. Avoid investing in things you don’t understand
Young people should not invest in things they don't know about especially with money that is of huge importance to them. They are many times where it has been heard of people that invested a small amount in a particular business venture or other form of ‘investment’ which ended up making them a huge amount of money giving them large gains in a short amount of time. However, this form of getting wealth is not sustainable as a person that does that type of investment is most likely not financially wise and end up splurging everything on another investment that promises to be in gold mine. A very subtle variation of this is investing in schemes that promise to give a lot of money like Ponzi schemes. These schemes pay early comers for referrals of new members which is not sustainable.
If you invest your money in what you don’t know, it can ‘carry you go where you no know.’ (put you into undesired situations)
4. Track your Expenses
One very good way to control your money is to keep track of your expenses. If you cannot account for ₦5000 out of your current income, you can easily lose ₦50,000 and ₦500,000 as your income increases - and you wouldn’t know where all that money went. It is good to know where all your money goes. The knowledge can help you adjust your spending habits, and make changes where necessary. It is important to develop this as a habit at a younger age when you are not under as much pressure. If you’re finding it difficult to, you should read our article where we share tips to help you track your spending and expenses
5. Save consistently
Let me ask? What was your saving goal for this year? How was your saving for this year? Hope it has not already been used for oblee (partying)? A structured way to help you save is to have a percentage you want to save which you send to your savings account immediately you receive your income. Some people call it ‘paying yourself first.’
6. Build an emergency fund
An emergency fund is important to help you sort some contingent bills as they come. Having an emergency fund helps you not intrude into your savings when emergencies come up.
7. Invest Early and Wisely
As a young person, while it is somewhat safe for you to take risks, you should invest with some wisdom. Remember ‘low risk, low reward; high risk, high reward’. The investments with ‘out-of-the-world rewards’ usually come with high risk that could even take all your money with it.
8. Get Basic Financial Knowledge
It is important that you get basic financial literacy to help you avoid costly money mistakes. Your financial literacy habit may be to familiarize yourself with basic financial terms, read a finance related book, article or finance trends and reports. You could also choose to watch a video and read a finance article or blog post like the excellent articles we churn out on our website here. Gaining financial knowledge will prevent you from being confused by complex jargon and help you avoid exploitation or making poor financial decisions. By now, you should have knowledge about the tax implementation coming up soon in Nigeria.
9. Diversify your Income Streams
There is a saying in Yoruba that goes ‘Ona kan o wo oja’ literally translated as ‘there are multiple entrances to the market.’ This implies that there are multiple ways to make money. It is good practice to diversify your income streams as soon as possible. For students in school, a very easy way to do this is starting a side hustle in school that could give you some extra income apart from the pocket money sent by parents/guardians.
10. Practice contentment and delay gratification
It is advisable not to do ‘If I perish, I perish’. Your finances are perishing. If you want your finances to be better, practice being content with solving your needs first before your wants. A rule of thumb for delaying gratification is to wait for 24 hours before making a purchase.
11. Build a circle that positively influences your finances
If you have an urgent need right now and you need ₦5 million, do you have people around you that can help you raise it. There was a similar question to that asked on social media. If your current friends can’t raise that amount but are financially growing and responsible, DON’T LEAVE THEM. The important thing is to have people around you who are constantly motivating you to do better financially, to have better financial habits. If all the friends around you have bad financial habits, and to cap it all, you don’t expose yourself to sound financial information, you are on the verge of going down the ‘hand-to-mouth’ path. Show me your friends and I will have an idea of who you are.
Conclusion
As written by James Clear in his book, “Atomic Habits”, the Changes that seem small and unimportant at first will compound and turn into remarkable results if you're willing to stick with them for years. So if you have read till this point, this is your cue to start these habits today, and stick with them to see the results of your compounded efforts. You can choose one or two from this list, and grow them properly, knowing that good financial habits don’t require perfection, just consistency.
This article was written by Damilola Abraham Olágúnjú, a personal finance enthusiast who helps individuals build healthier money mindsets and make smarter everyday financial decisions. You can read his full profile and check out his articles here.
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