How to boost your personal finances and income

Like it or not, we’re all CFO of our own personal economies. We have good quarters and bad ones, we have shortfalls and surpluses, and a file cabinet full of everything from tax documents to lawnmower receipts.

According to www.primermagazine.com, If you have been following what are generally regarded as “best practices” when it comes to getting your financial house in order now that you’ve started your career in earnest, you should already be well on your way to paying off any consumer debt (if not all the way there), have a three-six month liquid emergency fund at your disposal, and be contributing as much as you can to retirement account(s).

All of this advice assumes that you’re already doing these key things and that the only money that even makes it to your current account is after retirement and other savings have got its piece.

Once you’re in the rhythm of saving, it starts to get easier, just like how your motivation increases when you start going to the gym. Day-to-day success makes you not want to sacrifice the progress you’ve already made. But just like at the gym, in order to progress you have to step it up a notch from time to time. That’s where these simple tips come in.

Pay yourself first, and also second

“Pay yourself first” is an old piece of personal finance wisdom. What it essentially means is, before going out to eat or buying yourself the latest gadget, or even before paying bills, put aside money from every paycheque towards your retirement or another long-term savings vehicle. Automatically if possible.

Paying yourself second is an addendum to that old adage. With your personal current account now only used to keep spendable income, get in the habit of throwing an extra chunk of change into savings when you’re flush and unlikely to notice, like on payday. It’s truly amazing how fast an extra N10,000 or even N5,000 per pay period can add up when thrown in a savings account and forgotten. An extra N10,000 per paycheque over the course of the year (assuming bi-monthly paycheques) totals N120,000, and I guarantee you’ll never notice it’s “missing” at the time. That will certainly put a nice dent in your holiday shopping.

Round up, and watch it build up

Chances are your regular monthly bills aren’t nice round numbers like the above example. So when it comes to the time to transfer money from your personal current account to your bills account, get in the habit of rounding up to the nearest amount. Again, the trick is about separating you from your money in increments so small you won’t notice at the time, but will be thrilled down the line when you need it.

Attack the principal

If you’re financing a car, depending how the loan is structured, your monthly car payment is probably divided between your principal and your interest. Meaning every payment you make not only chops off a slice of the car loan itself, but a portion of the interest you’re being charged. You can work around this by paying an extra amount mid-cycle, which more often than not goes directly against the principal.

If your car payment is N100,000 a month, and you pay an extra N25,000 on top of that between monthly payments, you’ll not only pay off your loan quicker, but likely save a healthy amount on interest in the process. Find out from your lender before attempting this as some companies don’t allow you to make principal-only payments like that.