Recent reports suggest that Nigeria may be heading towards a recession. On Friday, the Nigerian Bureau of Statistics revealed that in its first quarter, the country’s economy shrank by 0.4 percent. Due to the drop in the manufacturing sector and other economic indicators, experts have warned that “the country is headed towards a full blown crisis.”
While things may seem rather gloomy, there is always an alternative to panic. If the Nigerian economy eventually falls into a recession, here are some tips to get you prepared:
Pay your debts now
Trying to pay off a debt could be a burden but it’s even worse if one waits till the recession hits. Debt repayment becomes extra stressful and can bring a lot of financial strain. During a recession, there is an increase in interest rate and banks will have constricted credit limits.
So, in order to avoid the stress, make an outline of your payment obligations and make a plan to pay up your debts as quickly as possible.
Identify your monthly expenses
In a recession, there’s usually tight cash flow. People tend to watch their spending and avoid taking risks with money. Categorise and track your monthly expenditures by outlining the amount of money you spend on eating out, recharge cards, extra-curricular activities and luxury items. If you spend a large chunk of money on eating out, maybe consider making your meals at home. Prepare to stick to basic and essential items only during this period.
Plan a budget and save
Now is the time to have a strict saving and budgeting routine. Although there is the universal 50/20/30 rule, which means you should allocate 50 percent of your income for essentials (like housing and food), 20 percent as savings and the remaining 30 percent goes into your life style choices like the cable TV or nights out.
However, when preparing for a recession, one has to be frugal. Therefore, a more appropriate approach to surviving an economic downturn would be to divide your monthly income using the 50/30/20 rule, where you save 30 percent of your income. That way you can have enough to fall back on in the case of an emergency.
Boost your income
Aside from your regular 8-to-5, it is time to take on a part-time jobs in order to boost your income. You can decide to monetise your hobby (some of which may be tax-free) by working harder on it during your down time or on weekends, that way, you can earn some extra cash.
Live within your means
It is time to cut out wastage and extras. Avoid purchasing what you don’t need. Scour shops and supermarket for sales, save on electricity usage. Try to cut costs in every possible way.
These should help you help you during the rainy days.