Before diving into the strategies for beating inflation and thriving during economic hardship in Nigeria, take a moment to pause and breathe.
Allow yourself to be open to learning, and keep in mind that the information shared in this article will be valuable.

The strategies discussed are currently being used by many people, and now is the perfect time to implement them, as the year is just beginning.
Please note that this article will be lengthy.

Conversely, salary earners are experiencing the worst impact of the current economic hardship.

Salary earners need to be intentional and strategic to mitigate these effects by prioritizing these critical areas: transportation, health, household items, feeding, and rent.

These areas typically will stress one’s finances.
The strategies discussed in this article will help you address the financial challenges that may arise from them by adopting the creative approaches explained in this article.


In Nigeria, some strategies have been successful, but it is important to note that not all financial advice that works in developed countries may be effective in Nigeria.
To get started, your fundamental goals should be:

Achieving financial stability
Establishing a level of financial security
Achieving financial growth
Unlocking consistent daily cash flow

Clearly defining and identifying the right objectives is crucial as it will provide a better understanding of which strategies are most suitable for achieving your goals.
With a well-designed system in place to reach these objectives, you will probably experience less financial stress and have the potential to beat inflation.
The next step is to explore different strategies, which you can implement systematically' to accomplish the objectives, with the key phrase: "being systematic.”

Deploring the strategies systematically means addressing them in an organized and logical fashion, using a specific creative approach.

Often it involves dissecting the problem into smaller components, evaluating each component and then using that information to create a resolution.
Then, channelling a creative approach towards that resolution.
This process is step by step, where each step relies on the previous one, and the final solution results from a systematic and logical progression.


The 9 strategies are

Identify areas of concern and create a personal financial plan and budget to address them.
Reduce expenses and save the residue
Income investing
Income smoothing
Establish emergency funds
Adopt Frugality as a lifestyle and avoid loan apps
Create micro-manageable extra streams of income
Upskill
Strategic networking and intentionally increasing your visibility and influence


Identify areas of concern and create a personal financial plan and budget to address them.

Personal financial plans and budgets are necessary for achieving financial stability and security.
By implementing the right strategies, individuals can take control of their finances and achieve these crucial objectives:
“Achieving financial stability and establishing a level of financial security.”
The initial step in personal financial planning is to have clear and specific financial goals, such as paying off debt, saving for a down payment on a home, or planning retirement.
Within the context of this article, the intended result is to beat inflation.

Budgeting is a vital aspect of personal financial planning.

It involves creating a financial plan that outlines income and expenses each month.
By monitoring income and expenses, individuals can identify where their money is going and, could make adjustments as needed.

A creative and practical approach to budgeting during inflation is the 60/10/30 rule, which allocates 60% of income towards necessities, 10% towards discretionary spending and 30% towards savings or income investing.

Under necessities, it should cover areas such as transportation, food, household items, health, bills and rent.
During inflation, to achieve financial stability and establish a level of financial security, it’s recommended to reduce discretionary spending from the typical 30% to 10% by allocating more money towards savings and income investing.
Also, increase the amount allocated for necessities.

By discretionary spending, I am referring to the money available for non-essential items and services after paying for necessities like housing, food, and transportation.

This type of spending is discretionary, meaning that it is up to the individual to decide how to use the money, and it can vary depending on an individual’s priorities and preferences.

Discretionary spending differs from mandatory spending, which is the money spent on necessities, such as rent or mortgage payments, utility bills, and health care expenses.

Discretionary spending can be a great way to enjoy life and reward yourself for your hard work.
However, it’s necessary to have a budget for discretionary spending to prevent overspending and maintain financial stability during inflation.

To do this, you can use a Personal Financial Planning Matrix.
Click here to download the free tool and start drafting a better budget to manage your finances efficiently during this high inflation period.
To effectively plan for your finances, it’s necessary to understand your financial history.

To do this, you can examine your assets, liabilities, and net worth as if you are about to apply for a bank loan.
Create a list of all your assets and their respective values.
Create a list of all your liabilities and subtract them from your assets to calculate your net worth.
This exercise can be essential in understanding your financial situation and identifying non-essential expenditures.
To determine what non-essential expenditures are, write your monthly expenses and ask yourself, “Amongst these expenses, what do I need to survive and maintain my physical and emotional well-being for the next six months without a salary?
“Any expenses that do not fall under the critical category can be non-essential, especially during trying times.
And you should reallocate the money for that expenses towards either savings, income investing or necessities.

Personal financial planning and budgeting are ongoing processes that require discipline and commitment.
By implementing the right strategies, individuals can achieve financial stability and security and work towards reaching their financial goals.


Reduce expenses and save the residue

Once you have identified the area of concern, the next step is to create a detailed financial plan by reallocating your income towards these areas.
Then try reducing the expenses.
The budget you created will pinpoint areas where you can cut back on spending.
A personal budget is a crucial tool needed to beat inflation for a person who wants to take his finances seriously.
You can’t do without having a personal budget.
Using your budget, you can track the rate at which inflation affects your income.
Also, you can get a head start on areas to start from to reduce the impact of inflation because the areas you need to cut down expenses include not only discretionary expenses but also areas such as transportation, rent, health, household items, and food.
To keep a tab on the rising cost of these areas, you need to consider adopting creative approaches to reduce expenses.


Rent

To manage rising rent costs, calculate the percentage of your budget allocated to rent or your monthly rent.
There is no set percentage for how much your income should go towards rent as it varies based on factors like; income, location and personal financial situation.
However, a commonly used guideline is the “30% rule”, which suggests that you should not spend over 30% of your gross income on housing costs, including rent, utilities and other associated costs.
For example, if a person earns NGN 300,000 a month, they should not spend more than NGN 90,000 on rent.

It’s important to note that this is a general guideline and may not be suitable for everyone.
Some experts recommend allocating even less, around 25% of your income.

The cost of living and individual’s income and expenses also play a role in high-cost cities like Lagos.
It may be harder to stick to the 30% rule or below it and may require additional cost-saving strategies and extra streams of income.
One creative approach for managing rent costs as a salary earner is to calculate the daily cost of your rent.
For example, if your annual rent for a house is NGN 650,000, the daily cost would be NGN 1,806.
To create residual savings from this expense, you need to find a savings account; which offers an interest rate between 9% to 15% (Opay Owealth gives a better savings interest) and deposit daily into that account.

Here is the math using Owealth as a case study:
To calculate the compound interest on a savings account that offers 15% interest, we can use the formula:
A = P (1 + r/n) ^ (nt)
Where:
A = the total amount in the account after t years
P = the initial principal or deposit
r = the annual interest rate (expressed as a decimal)
n = the number of times that it compounds interest per year
t = the number of years the money is on deposit
Here, we are saving 1806 daily for 12 months, so:
P = 1806 * 365 = 659,190
r = 15% = 0.15
n = 365 (daily compounding)
t = 1 (12 months)
Therefore, the total amount in the account after 12 months (1 year) will be:
A = 659,190(1 + 0.15/365)^(3651)
A = 659,190(1 + 0.000104)^365
A = 659,190(1.000104)^365
A = 659,1901.05848
A = 699,967.964
So you will have NGN 699,967.964 in the account after 12 months.
NGN699,967.96 - NGN 650,000
= NGN 49,967 (Residual Savings)
(To download the Opay wallet, you use my referral link: )
This method can help to ease the financial stress of paying rent when it is due.
You will even earn extra income from the interest on your house rent.
Then you can use the residual income from the interest to build your income-investing portfolio.
In situations where co-sharing house space or using your home for Airbnb is not viable such as in Lagos, because of security and privacy concerns, paying rent daily; may be the best approach.

And also, as a salary earner, breaking down your expenses into daily expenses can help improve your financial situation.
For example, if you find a deficit of NGN 5000 in your budget, you can generate a business idea to create additional streams of income to balance the deficit.

Click the link to continue reading: https://blog.mrchino.club/2023/01/31/9-strategies-for-overcoming-inflation-and-financial-difficulties-as-a-salary-earner-in-nigeria/