Quitting my job to be a temporary stay at home mum to my daughter with my husband’s support has been one of the best decisions I have made in my life. It came with its ups and downs. It’s unusual and considered risky in this country, considering the current state of the economy for one to quit a good job to stay home and focus on raising a child. This will be a story for another day, including the journey and how this decision has helped me learn new things and develop myself both personally and professionally whilst at home.
My focus for today would be on how one can manage their finances irrespective of how much they earn. Quitting meant less additional income flows, as such we had to make extra effort in planning and budgeting our finances. We moved from having a double income source to relying on my husband’s income for our daily living. Journey has been full of temptation to overspend sometimes. Wanting to spend on things that we can live without and can always postpone to another time. We first had to critically review our monthly shopping list to ensure we were spending on what we actually needed such as food supplies, toiletries etc. As a lady I had to minimise my expenditure on shoes unless it was utterly necessary, it’s a very big sacrifice for a lady to make :). What is contained in this post is no new news and you would already be familiar with it. If you know this already and you are still struggling, it means you have not been committed to your personal finance plan.
Step 1: Assess your monthly total income
This requires you to be able to identify all your income sources and know how much you earn on a monthly basis in total. For those with unstable earnings, you can draw up an estimate based on your past earnings pattern. Apart from your monthly salary, it’s advisable you have an additional income stream. This doesn’t mean you should overwork yourself by working two full-time jobs. You can earn additional income through investment planning or making good use of your hobbies or skills to earn some money. Earning money from doing something you love is less stressful in my opinion, unless you decide to take on orders you cannot handle with the personal hours (don’t use office working hours for your personal business) available to you. This is a bit more flexible especially you are not in full-time employment. You don’t need to overburden yourself to the extent of not having time for yourself, friends and family. Thanks to social media (Social media and business), you don’t need to invest a fortune in marketing what you do.
There are also a lot of investment options available, before you settle on an option consider your risk tolerance level, investment goals and timing. I receive investment income every quarter from investments made, I chose the plan of rolling forward my principal till further notice and just make use of the interest income that I earn on it. I don’t have to put in much effort. I do not consider the principal as part of our income, we consider it as a fund available for the long-term and as such it’s OUT OF BOUNDS for current use. Additionally, there are a lot of freelance work opportunities available online especially for those who love to research and write. I do this sometimes in my spare time.
”It takes a lot of discipline to stick to your financial plans.”
Step 2: Identify all your key expenditure
Be sure to differentiate between your needs and wants. My husband and I took a critical look at our monthly shopping list and reviewed each item on a need and want basis. The question one may ask is, “How can I differentiate between my wants and needs?” It’s a simple process if you are true to yourself.
Before proceeding lets check out the Oxford dictionary definitions for both words:
Need: Require (something) because it is essential or very important rather than just desirable:
Want:Have a desire to possess or do (something); wish for:
”Before you spend on anything you should ask yourself these questions, “can I do without it?, “is there an affordable alternative available?”
Hope this brings out the clear distinction between the two. Before you spend on anything you should ask yourself these questions, “can I do without it?, “is there an affordable alternative available?” This task should result in some costs savings if it’s done diligently. For instance we used to drink only bottled water at home but currently we have reduced the number of boxes and we now supplement with sachet water. We have ended up saving few cedis from the reduction in boxes. Periodically you can take home-made meal to work. You will be surprised at the savings which would be an average of GHS50 per week. This could be put to better use.
Step 3: Plan your savings
If you know you lack self-control it’s advisable you set up standing orders on your account to limit your options and prevent you from side tracking from your set goals.
Your savings is the remaining funds available after sorting out your expenses. Remaining funds should be allocated and set aside for investment, miscellaneous or unplanned expenditure and for personal pleasures. How the remaining funds should be allocated is based on your discretion. One cap might not fit all. If you know you lack self-control it’s advisable you set up standing orders on your account to limit your options and prevent you from side tracking from your set goals.
Step 4: Repeat all the above steps every month
Stick to this routine and before you know it, it will become a habit. Be dedicated and committed to the financial goals you set. In all this financial planning don’t forget to invest in yourself.
”Don’t forget to invest in yourself.”
”A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way the desired result is attained. It requires some training, perhaps, to accomplish this economy, but when once used to it, you will find there is more satisfaction in rational saving than in irrational spending.” -P. T. Barnum