Cancerous cells can develop unnoticed for years and spread across different organs in the human body. Most often, they aren’t properly diagnosed and when the disease is discovered it’s already probably too late.
Just like cancer, many have ailing finances but do not realise how dire their situation is until a catastrophe strikes. More sadly, just like cancer when these are noticed it is probably too late.
Ayo is in his late forties, working with an engineering construction firm. Everything seemed rosy, till the company faced regulatory problems, lost most of their clients and had to downsize.
Unfortunately, Ayo was retrenched without any substantial severance package. He definitely didn’t see this coming.
Apparently, even though Ayo worked for close to a decade with this company and gave them most of his youthful years, he barely had anything in savings.
His unexpected retrenchment set the ball rolling for several years of financial difficulty. He had to sell almost all of his properties just to feed his family of four. In 2020 following the COVID-19 pandemic, many industries and companies downsized and unfortunately, this has been the trend
Just like Ayo, many people have varying degrees of financial problems that are masked by their current income stream. Just like a bandage solution to an open wound, once the bandage comes off the wound becomes bare. For some, the catalyst for financial ruin may be big unexpected expenses like medical bills or property loss.
The risk of financial ruin is of great concern because in some cases it is a matter of life or death. A 2019 stat from the Nigerian Deposit Insurance Corporation NDIC revealed that 99.4% of Nigerians have less than N500,000 in their bank accounts.
The question that begs for an answer now is what these Nigerians would do if they find themselves in a life-threatening situation that requires more than N500,000; say a million naira? Quickly, the issue of financial stability becomes one of necessity and not a choice.
Five signs your finances are ailing:
1. Little or nothing left after recurring expenses: Experts recommend that recurring expenses should not take up more than 50% of your annual income. This means that If you live in Lagos for example and you earn N100,000, your expenses like feeding, utility bills, and transportation should not eat up more than 50% of your income.
If you find yourself spending more than that then you probably need a reality check. Audit the numbers and remove expenses that aren’t necessary.
2. Little or no emergency savings: What happens when life throws these unexpected problems at you? Do you cave in and begin to run helter-skelter? Forbes experts recommend sinking at least 20% of your annual income into savings to cater for the rainy days if and when they come.
No one sits and prays for these bad situations but if there is something we know about life, it could throw these kinds of tantrums.
3. Frequently needing bailouts from family and friends: You don’t want to be that family member who owes almost everyone in the family. If you frequently find yourself needing to lend money from friends or family then your finances are probably ailing. Even if you manage to pay back on time, the frequency tells a very strong story about the state of your finances.
4. Living above your means: Houses in Lekki for example cost about N3m per annum for rent and Chase experts recommend that your rent shouldn’t take up more than 30% of your annual salary. If Ayo rents such an apartment while his take home per year is just N6m, he is definitely living above his means.
Understandably in this part of the world, you may need to impress some people to remain relevant but you must ask yourself at what cost?
5. Having just one income stream: It may sound really cliche but you don’t want all your eggs in one basket. What happens when you lose your trusted nest egg? Even if you work a regular nine to five leaving you with no spare time, you may put your money into good use by looking into investments.
It is important to mention though that investing comes with its own risks and you want to do your research before diving in. If you have time on your hands you can look for side hustles like freelancing, blogging or content creation. Just something to bring more money into your pockets.