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On Saving and Investing

On Saving and Investing

financial habits

As humans, our wants can never be satisfied. A fatter salary comes with bigger wants. Here’s a guide to help you control your financial habits for a more rewarding future.

– By Oluwatosin Olaseinde

Last December, I turned the big 30. Finally, I had crossed this mark that many see as “real adulthood,” the stage of awakening, resilience and dream chasing. I even searched online for lifestyle requirements of a 30-year-old woman. The requirements ranged from a little black dress, a good piece of furniture to having a defined career.

For the most part of the list, I ticked the boxes. However, something else jumped out at me:  it had to do with financial habit. I had to ask myself some hard and sincere questions such as – how my financial habits could have made or marred me and whether or not I made the right financial decisions. Was there a road map? Was I deliberate about it? Did I have a structured plan?

With some hindsight, one always seems to be in a better place to give advice. I won some battles and I also lost some.

What could I have done differently?

Few weeks after I turned 21, I started my first job at an audit firm in Johannesburg. Oh my goodness, I was living my dreams! From zero salary to the equivalent of over one hundred thousand Naira. Yessss! I beamed as I signed the dotted lines to my first job.

As we know, with new money comes new taste. Suddenly, the down town CBD I used to shop at was no longer good enough. I needed a new place to shop for my new “status.” How about my apartment? Shared accommodation wasn’t good anymore;I needed a bigger space and on and on, the list went.

Although my income went from zero to over a hundred thousand, so did my expenses. And consequently, so did my lack. After a point, I didn’t have enough to get me till the end of the month and I literally crawled till month end.

I crawled.

I crawled and crawled.

It gave me a lot of comfort to know that I wasn’t alone as even my colleagues suffered from the same symptoms. So, we all shared the same pain and the difficulty to pinpoint what we were doing wrong. Instead, we directed our frustration at our friends who got jobs in a more lucrative sector. Interestingly, after further enquiry, those friends in the more lucrative sector were experiencing a similar situation.

That was a light bulb moment for me. It was clear that it wasn’t simply about how much I earned, what was more critical was how I allocated my earnings. Ironically, I had qualified as a chartered accountant, spent the early years of my career life auditing profit of different companies and identifying if the companies can continue as a going concern or not. But I wasn’t doing that for myself as an individual. I came to the realization that I needed to treat my finances as such.

For a company, Profit = Income – Expenses

As an individual, Savings/Investment = Salary/Income – Expenses.

I needed to put in as much energy as I put into auditing other companies into fixing my own life.So, I drew up a financial road map.

Every month without fail, I saved 30% of my income. Considering that I was barely getting by previously, how on earth was I now able to find 30% to save?

It is simple; I cut out the unnecessary expenses and started planning better. Many times, some costs can be avoided by making better decisions. For example:

See Also

  • Instead of buying groceries daily, consider buying in bulk.
  • Instead of eating at work daily, pack your own lunch.
  • Instead of going for dinner with the girls every Friday, reduce the frequency and take turns hosting each other at home.
  • Instead of always paying at the hospital every time one falls ill, look for a medical aid plan within your budget.

Automate the savings deduction to coincide with when you get paid. If you get paid on the 30th, ensure the savings is deducted on the same day instead of 10 days after when the wind might have taken the money.

Habits are hard to build, you might want to start with saving 10% of all your income and gradually ease yourself into a 20% benchmark, and then you can increase the percentage marginally after every 6 months.

So if you earn NGN100,000, invest the savings, that is, 10% per month, which is NGN10,000. You are probably thinking that is small money. When will it become substantial?

Let’s do a quick math, NGN10,000 saved every month for 10 years at an interest rate of 10% is NGN2,000,000. See how quickly those seemingly “small” amounts accumulate, whether you’re spending or saving it?

You need not leave it in your savings account indefinitely, it can be routinely channeled into other investment outlets such as mutual funds, real estate, equities, government bonds, Treasury Bills, etc.

If you are in doubt, print out a statement of your savings or investments after a defined period and you will give yourself a pat on the back. Get started already, there is power in starting early.

Oluwatosin Olaseinde is a chartered accountant with over 9 years of experience spanning across accounting, audit, financial management and taxation. She is the Founder/CEO of Money Africa, a platform that enhances financial literacy and wealth management coaching. Prior to Money Africa, Oluwatosin was a commercial finance manager at British American Tobacco, providing commercial & financial advice on capital investment and managing marketing investment budget in the 14 different markets across West Africa.

Eitor’s note: This article was originally published in the Spark Magazine. Find the magazine here to read more articles.

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