Assess Your Current Financial Situation
To build an emergency fund, you first need to determine your current financial situation. Analyze your income and expenses to find areas you can cut costs or earn additional income.
Look for expenses you can reduce or eliminate, such as eating out, entertainment, or hobbies. Even small changes can make a big difference over time. See if you can lower or eliminate any recurring bills by negotiating with service providers or switching to less expensive alternatives.
Examine your income sources to look for ways to generate more money. You might ask for a raise at your job, develop skills to qualify for a higher- paying position, or take on a side gig to earn extra cash in your spare time. An additional NGN 5,000 to NGN 10,000 per month can go a long way toward building your emergency fund.
Once you have tightened your budget and increased your income, determine how much you can set aside for your emergency fund each month. A good rule of thumb is to save enough to cover 3 to 6 months of essential expenses as a starter emergency fund. Automate transfers to move money into your emergency fund each month so you pay yourself first before other discretionary spending.
Building an emergency fund requires discipline and patience, but having a financial cushion can give you peace of mind and help ensure you're prepared for unexpected costs. With time and consistency, you can achieve your goal of having a robust emergency fund. Stay committed to your financial priorities and keep working to improve your situation over the long run.
Ways To Increase Your Income and Earnings
Find a Side Hustle
A side hustle is a second job or freelance work you do in addition to your primary source of income. Some options include driving for a ridesharing service, selling items online, completing market research studies, or doing freelance work like writing, programming, or tutoring. Any extra money you earn can go straight into your emergency fund.
Ask for a Raise
If you've been in your role for at least a year and have exceeded expectations, you are likely due for a salary increase. Schedule a meeting with your manager to discuss your performance and request a raise. Come prepared with specific examples of your contributions and accomplishments. Even a modest increase can help you save more each month.
Develop a Skill
Take a course to learn a new skill that could qualify you for a higher-paying position. Some skills that are in demand in Nigeria include software engineering, nursing, and digital marketing. As you gain more experience, you'll have the opportunity to take on more responsibility and earn a higher salary. Put any extra money from your increased pay into your emergency fund.
Sell Unused Items
Go through your home and look for valuable items you no longer need, such as electronics, instruments, tools, collectibles, or vehicles. Sell them through websites like Jumia or open marketplaces on Facebook and WhatsApp to earn extra cash for your emergency fund. Price items competitively and be willing to negotiate to get the best deals.
With determination and consistency, you can find ways to increase your income and build up an emergency fund to protect yourself financially in Nigeria. Keep working at it each month, and your fund will grow over time through your increased earnings and reduced spending.
Cutting Expenses and Reducing Spending
Identify discretionary spending to cut back on;
•Dining out/takeaway: Cook more
meals at home using budget-friendly ingredients. Limit dining
out to once a week or less.
•Entertainment: Reduce spending on movies, events, and hobbies. Look for free or low-cost entertainment options in your area.
•Subscriptions: Cancel unused subscriptions and streaming services. See if you can negotiate lower rates for the ones you keep.
•Impulse purchases: Make a list before shopping and stick to it. Wait 24hrs before buying anything over a certain amount to avoid impulse buys.
Reduce essential costs where possible
•Housing: Consider downsizing to a smaller home or apartment, renegotiating your rent, or taking on a roommate to split costs.
•Utilities: Turn off lights and electronics when not in use. Use fans instead of air conditioning when possible. Look for ways to improve the energy efficiency of your home.
• Groceries: Buy generic or store brand items, buy in-season produce, and avoid pre-cut or packaged fruits and vegetables which can cost more.
•Phone/internet: Shop around at different providers to get the best deal. Consider bundling services or reducing extras like unlimited data plans.
Building an emergency fund requires diligent saving and careful spending. By cutting out excess expenses and reducing costs on both essentials and discretionary items in your budget, you can free up more money each month to put into your emergency fund. Making incremental changes and sacrifices over time will help you achieve your saving goals faster without feeling deprived. With consistency, your emergency fund will grow steadily each month.
Conclusion
In the end, building an emergency fund in a tough economy like Nigeria's requires discipline and perseverance. It may not happen overnight, but by making saving a priority, spending less on wants, and looking for ways to earn additional income, you can steadily build up a fund to cover life's unexpected costs. Start with whatever amount you can set aside each month and increase it over time as your income increases. An emergency fund provides peace of mind that financial surprises won't devastate your budget or force you into debt. With steady progress, you can achieve the financial security and stability to confidently handle whatever comes your way. Stay committed to your goal and keep putting one foot in front of the other - your future self will thank you.
