Personal Financial Planning: Income & Expenditure Management

A Summary of lessons learnt in one of our fellowship meetings

In managing your income and expenditure start by doing the following:

1.       Determine your Cash Flow:

This is your salary and other steady income. The first key to managing your finances is to set up a budget; which simply states your proposed expenditure and expected income. This is not actually a hindering tool but something that keeps you in check. Determine your monthly income; write out how much you spend

2.       Paying off your Debts (Living Debt Free):

If you really intend to be financially free and prosperous, you have to make out plans to be debt free. Start out by paying your debts. Discuss with your Creditors on how you intend to pay off. Have an active and feasible plan on how to go about it.

3.       Pay God First:

As a Christian, all that you have is given to you, thus do not default in your tithes, offerings and welfare to the needy.

4.       Outline your expenses into:

Fixed Expenses: expenses on things that do not change from month to month, sometimes annual payments such as Tithes, house rent/month, Insurance/month (i.e. divide by 12 months) etc.

Committed Expenses: dues, Prepaid Electricity, BB subscription, utilities, food, transport, allowances for parents etc.

Discretionary Expenses: expenses on clothes, entertainment, TGIF, welfare, eating out etc.

5.       Spend Less than you earn:

Once you take a good look at your expenses, and observe you spend more than what comes in, it is time to reduce your spending. The basic principle of financial discipline is Spend Less Than You Earn. Start by cutting back on your discretionary expenses e.g. eat out once in a month instead of every week. Then look at your committed expenses, are there cheaper and efficient ways of doing things? If your fixed expenses are more than your monthly income, then you may need to cut down on big lifestyles. Change apartment, change cars etc. Learn to delay gratification. Be moderate in your lifestyle.

6.       Plan for an increase in income:

Whenever you experience an increase in your income, note that it is not an avenue to spend everything. If you could survive on your previous income, then you can survive without the increase, therefore save or invest at least 85 -100% of the increase.

7.       Savings:

Emergency Funds: Rev. Sam Adeyemi said “have at least 6 months to 1 year emergency savings kept away for rainy days. The minimum you should be saving is at least 10 – 15 percent of your income after tax. The more, the better. Join reliable cooperative schemes. Issue a standing bank debit mandate. Open an escrow account where you would not touch the money. Grow your savings, and then invest in projects, businesses and investments. Money kept idle would soon fly away.