The 2008 financial crisis was indeed a difficult time for the Nigerian economy as it was for most economies. However, then, unlike now, the economy did not fall into a recession as prior savings and swifter oil price recovery ensured the economy continued on a growth path. In August, the National Bureau of Statistics confirmed what most of us already felt, that the economy was in a recession as GDP contracted by 2.06% in Q2 2016, the second consecutive quarterly drop. As we await the 3rd quarter GDP numbers with trepidation, this is perhaps a good time to reflect on what we can do as individuals to survive and thrive in the downturn.
Reduce Discretionary Spending
With high inflation and reduced purchasing power, it is important to make your income even go further. Now is thus a good time to reduce discretionary spending and focus on the essentials. A simple budget will be a good way to identify what is essential, what can be deferred and what can be done without. Spend on only the essentials, cut off the rest and make budgeting a habit.
Pay down Debt
With interest rates on loans so high, debt is a huge burden. Any savings from eliminating non-essentials should be partially used to reduce debt with loans having the highest rates paid off first. If you are in real difficulties, then approach your bank to restructure the tenure of the loan and the interest rate. Do not be put off thinking it is not possible to get a better deal. It is. If you are lucky not to have any debt, go to the next point.
Yes, I know we are in a recession and you are barely managing to make ends meet. Still, you need to save. If you spend all your income, you are guaranteed to be in financial crisis anytime your income falls or disappears due to a job loss etc. Therefore, always set aside a percentage of your monthly income and use it to build up an emergency fund. An emergency fund to cover about 6 months of your expenses should be your minimum target.
Embrace Financial Planning
Having done the above three things that can get you quickly back on track, it is essential you take it further by embracing financial planning. It should actually be the starting point as it is vital for a better future; alas most of us ignore it. This is now your chance to plan so that you will not only survive this crisis but also thrive. A financial plan is your roadmap to financial security as it enables you to identify and prioritize your goals, appraise your resources and identify products and solutions to help you meet the goals. It also allows you to regularly review your progress and keeps you on track towards achieving those goals.
We are in difficult times but you can thrive if you can reduce discretionary spending, pay down debt, save and embrace financial planning.