How To WIN In 2015 By Organizing Your Money

Solape: New Year, new me! 2015 is my year!

Chike: This year ‘I go hammer’ like Dangote’!  Forbes loading….

Nkiru: My year of transformation! This year my body will be on ’fleek!’ * think Draya from Basketball wives*

Welcome to the first week of January, the time for infinite New Year resolutions and declarations of change. However, come second week, life happens and we are back to our old ways. So how do we turn those resolutions from empty promises to bulletproof goals backed with an action plan?

I love the New Year because it represents a fresh start and New Year’s resolutions are a great way to state your intentions. I want to be rich, I want to lose weight, I want to be closer to God but the ‘koko’ of the matter is that we make these grand statements and expect that, we are just going to magically become these amazing new people that are skinny, have savings and are more spiritual, because the date has changed! But that’s all that has happened, the date has changed! We forget that we are entrenched in already existing habits that helped us gain weight, save less and not go to church in the first place.

In order to achieve the goals we set for ourselves, we need to build systems, made up of a series of tiny behavioural changes that make us more likely to take the actions required to follow through.

Let me explain, my battle with weight is a constant struggle, I love food too much so I need to exercise regularly to keep my weight in check. Don’t laugh! But I’m more likely to go to the gym in the morning if I wear my gym clothes to sleep and play really loud rap music at 4.50am when my alarm goes off. So how can we replicate this system for our finances?

3 easy steps to help you organize your money

1.Create specific goals

Most New Years resolutions don’t work out because they are merely vague aspirations with no action plan. For example Osamede’s New Year’s resolution for the past 3 years has been to buy Land. This never happens because each year by the time the bills start to pile on, he decides he is not yet earning enough to afford this goal.

A better way to approach this would be for him to say, I currently earn N3m a year.  What area in Lagos is realistic to buy land, given my salary?  Because ‘Water get level’, land in Banana Island and land in Ikorodu are not the same price, so it might be reasonable to settle for land in a growth area like Sangotedo, which has the potential to appreciate substantially in value over time.

Lets assume a plot of land costs N2m. If he sets aside 20% of his income every month (N50k a month/N600k a year) and puts it in an investment account that earns a 7% return p.a.  He has a better chance of reaching his goal in 3 years.

We are more likely to smash our goals when they are as specific as possible, realistic in comparison to our present income (not future income) and have a goal date with a Naira amount attached to it.

2.Establish separate accounts for each goal

So confession time! My name is Arese and I am an impulsive spender! But they say the best way to deal with a problem is, acknowledge that you have one right? Then find a way to deal with it. So I guess I’m on the right track.

I have found that if I ‘mistakenly’ leave my disposable income in my ‘everyday’ account. I will find ways to spend it mindlessly, from drinks with the girls to new toys for Zikora or furniture for the house because that’s just how my brain is programmed.

To deal with this I found a system that would remove me from the equation, help me avoid temptation and force me to achieve my goals without procrastinating because a habit I’ve spent years subconsciously cultivating, is not automatically going to change on its own.

This is how it works. Create multiple accounts, one for each goal. Then ensure that what you decide to allocate from your income to each goal is automatically debited from your salary. That way you don’t have a say in the matter. (Make arrangements with your bank to debit your account on particular dates).

However, the only way this will be effective, is if you limit your access to all but one account. The account you require to pay bills for the month and you should only have an atm card or chequebook for this account.

All other accounts should be set up so you, either have to go into a bank, write a letter to request your funds or bear some type of monetary penalty to gain access to the money in all other accounts. This way your mind is programmed to ‘think broke’. For example, if you only have N75k in your ‘bills’ account every month and you are used to living on a N100k, it’ll be hard at first but you will eventually adjust to thinking that’s all you have.

If Osamede was to do this…

Financial Institution Account Name % Of Income Contribution per annum Contribution per month
Partnership Investment Investment 20% 600,000.00 50,000.00
Access Bank Emergency 10% 300,000.00 25,000.00
Heritage Bank Turn up 10% 300,000.00 25,000.00
Gtbank Bills bills bills 30% 900,000.00 75,000.00
FCMB Rent 30% 900,000.00 75,000.00
Total   3,000,000.00 250,000.00
  1. An account for emergencies because you never know when your car is going to break down or when you have to send money to the village.
  2. A ‘turn up’ account because we work hard so we can play hard. Otherwise you’ll be setting yourself up for over spending, which will jeopardize your financial freedom in the long run. (This could be for shopping, traveling, anything that makes you happy). Planning for it means you spend mindfully and within a budget instead of impulsively.
  3. An account for rent because it’s easy to procrastinate and wait 3 or 4 months before the ‘gbese’ is due then start panicking and borrowing. It’s always better to have an account dedicated to this that you put aside systematically each month. (This works for school fees as well)
  4. An investment account because there’s no point working hard, year after year earning N3m a year spending it all and then your net worth is N150k. its best to systematically put aside a proportion of your salary towards building assets that will earn you an income.
  5. An account for, bills because Lagos is expensive, food, salaries, transport costs etc.

3.Create a money calendar

Ok lets be honest by the time the year ends most people don’t even remember what their New Year’s resolutions or goals were at the beginning of the year. So it’s important to write them down somewhere that’s accessible to you everyday. i.e. your phone.

Create a to-do list for each goal. For example, checking your balance in all accounts each week, each month or each quarter to see where you are in comparison to your goals. Then set reminders in your calendar all through the year that hold you accountable and help you develop a systematic review process.

Apps’ like Trello, Google calendar and Ever note, help you keep your goals visible through out the year and remind you to stay on track.

Poor organization usually leads to bad spending decisions. When you figure out how to organize your money and create a system that makes you more productive. You are already 10 steps ahead on your journey to financial freedom.

Happy New Year. I wish you all a productive year but remember that vision without action is a dream and action without vision is a nightmare…so be clear about what you want to achieve in 2015 and be willing to do what it takes to get there…legally ooooo.

signa1

17 thoughts on “How To WIN In 2015 By Organizing Your Money

  1. Being telling myself that I need to organise my income and make some tangible investments but I honestly couldn’t come up with how to do this. This write up has given me a sense of direction and I intend to follow through with my plans so help me God. Thank you for sharing feels like this was God sent.

  2. Another amazing post. Tell me Arese, how does it feel to be so smart about money like you are hmm? Thank you so much!

  3. In Nigeria, it’s hard to know and have access to information on (high) Interest bearing investment accounts. Like the first point and example you gave of setting money aside monthly and getting 7% interest p.a.
    Any suggestions please?
    My family lost so much money in the Nigerian Stock Market, so much that coupled with other financial mishaps, we haven’t even recovered. So shares/stocks are out of it for me.

  4. I’m 25yrs, and I’ve learnt to keep money in a separate account (save), but my money is just sitting pretty. I have no idea how to make money work for me/invest it so I don’t just have 20k in January, and meet the same 20k by December.

  5. @ Fre– Some Nigerian banks have hybrid savings accounts with high interest rates. Won’t be appropriate to go mentioning names here, but you could ask around.

  6. Thanks Arese, I have been checking your site since Nov, 4th. You disappeared!!!
    Nice steps you have written. I do have separate accounts but somehow I still go to the savings account especially when I have issues (ATM dispense error, Online payment error) with the other accounts and you know how it goes, the money is never returned after the error is corrected.
    Keep up the good work. You always make savings look easy.

  7. Thank you for this Arese! Thank God say u don come back…I don wait tire. I totally love the idea of having a money calendar, I have adopted it and I know I will see results soon.
    @Fre, the best banks for good rates are usually the smaller banks. The smaller banks are hungry for deposits so they rates are more attractive. My favorite are Keystone and Heritage. They are usually at least 2 basis points higher than the big 4.

  8. I love this article am an impulsive spender too and I have a problem saving. I will definitely try out this saving plan of yours . thanks

  9. God bless you for these life changing tips. Every time I read any of your posts I get lost in thought planning and replanning. I am steps ahead already having access to this site. Thank you!

  10. Even though its March already, I still feel this is doable… As a Corps Member, I think this is really hard to do… Arese, What do you advise??

  11. Thank you Arese. I had the idea of splitting accounts but I thought it would be too stressful to manage. Thanks for inspiration. God bless.

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