10 Rules of personal finance to guide you

Web Editor | ConsumerConnect

  1. Pay yourself first. Whether it is through your employer-sponsored retirement plan, an individual retirement account, or savings account, sock away at least 10 per cent of your income for you. After all, you do not work just to pay bills; it just feels that way most times.
  2. Save three to six months of worth of income for emergencies. And do not touch it unless it’s really an emergency. Saving for a vacation or new wardrobe does not constitute emergencies. You never know when you could lose your job, become disabled or sick, or have a major medical or family emergency.
  3. If available, take advantage of your employer-sponsored investment plan. Contribute at least as much as your employer will match, which is typically between 3 and 10 percent in some economies, and 7.5 per cent by both parties (contributory pension scheme) in the Nigerian economy. Consult your human resources department at your work for details on how that particular retirement plan works.
  4. Pay off credit cards (if any) with the highest interest rate first. Obviously, there’s no sense in paying off a 12 per cent card before a 15 per cent card. Make minimum payments on the 12 per cent card until the one with the 15 per cent rate is paid off.
  5. Come up with a budget and stick to it. You can use a computer programme, or just pen and paper. But do it. Figure out your income and expenses and what you have left over to spend as you wish.
  6. If you have trouble determining where your money goes, particularly cash, then keep a spending journal. Document every expenditure for at least a two-week period. This will help you in coming up with a budget as well.
  7. Don’t borrow from your retirement plans. After all, this is money for your retirement. Plus, the tax implications and early withdrawal penalties are so hefty that you really are giving up a lot for a short-term cash infusion. You should have a separate savings account for your current needs.
  8. Pay in cash when and as often as you can. It’s amazing how good that feels.
  9. Shop around for the best credit card deals and banking offers or programmes. By shaving off a few percentage points on your credit card or avoiding bank fees, you can save a substantial sum of money a year.
  10. Avoid peer pressure. Your friend might be able to afford five new pairs of leather shoes or boots, but that does not mean you can. Who even knows if your friend can and who cares. Take care of yourself first and do not try to ‘keep up with the Joneses.’ There will always be people better off and worse off than you are.

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