HOW TO MANAGE YOUR FINANCES IN A RECESSION

The Nigerian economy is currently battling with economic recession which started in the 2nd quarter of this year and continues up until this moment. The most common among the effects of a recession are high rate of unemployment due to loss of jobs, a sharp drop in consumer spending due to lower income, depletion in the capital markets and increase in prices of commodities due to scarcity. 

Meanwhile, according to a recent forecast by both the Central Bank of Nigeria (CBN) and International Monetary fund (IMF), our economy will recover from the current recession by 1st quarter of 2017 (hopefully).

While the government is finding ways to chat a path to recovery there are several measures you can adopt to help reduce the negative effects of the recession on your personal finances. Below are a few tips

·        Determining necessities: At a time like this, you must try to separate your needs from wants. The things you need are your running expenses like cost of foods, clothing, house rents, cost of fueling your car, transports fares etc. while your wants are things you think you need to make you comfortable, for example, you need clothing but you may not necessarily need a designer clothe. So to stay afloat during a recession you may need to focus only on the things you need and ignore those you want or desire.

·        Pay up your debts: Because of huge interest expense attached to loans and credit cards, you should try as much as possible to pay down your debts to avoid monthly expenses and also free up money for you in the future.

·        Create additional income stream: Having an alternative income is essential during a recession even if it is N10,000 a month because there is a high chance that you might lose your job. You can start some online business or bulk sms business. You can also start exporting agricultural products to Europe or the US to make extra cash.

·        Cook your own food: instead of going out to eat at eateries and restaurants you can decide to visit the markets regularly to buy your food stuffs and cook for your family. This will give you the opportunity to eat more vegetables needed to maintain a healthy lifestyle, and thereby saving money in the long run.

·        Reduce expenses: This is more or less the most important step you need to take to survive a recession. You need to come to terms with the reality of the economic situation in the country. The exchange rate of the naira to the dollar is an evidence of how bad our economy is. So this is the time to reduce your overall expenses and avoid unnecessary expenses.

·        Plan a budget and save: Now is the time to have a strict saving and budgeting routine. Although there is the universal 50/20/30 rule, which means you should allocate 50 percent of your income for essentials (like housing and food), 20 percent as savings and the remaining 30 percent goes into your life style choices like the cable TV or nights out. However, during a recession, one has to be frugal. Therefore, a more appropriate approach to surviving an economic downturn would be to divide your monthly income using the 50/30/20 rule, where you save 30 percent of your income. That way you can have enough to fall back on in the case of an emergency.