Monday, May 23, 2016

Money Matters with Nimi: Is Inflation Eating Away Your Finances? 11 Ways to Soften the Blow

Nimi Akinkugbe - Press

How are you coping with the recent hike in the price of fuel? The best time to think about how to protect your savings from the ravages of inflation is long before it actually strikes. Here are some practical ways to soften the impact on your daily financial life. 

Create a Budget 

By creating a budget and sticking strictly to it, you can identify exactly where your money is going. Review and track your routine expenses so you can begin to rein them in. For example; do you have to order a takeaway lunch every single day? It takes no time to prepare a packed lunch and will save you thousands of naira each month. Monitor your utility bills and be more cost conscious of electricity, diesel, water and mobile phone bills.

Reduce your Debt 

Pay off or at least reduce your most expensive debt as soon as you can. Credit card debt, in particular, is vulnerable to increased interest rates and that would put more and more pressure on the family’s already stretched income, which is unlikely to increase for now. 

Don’t hold too much cash

If you are earning 4% interest on your savings, and the inflation rate is well over 10%, then you are in reality losing money and not earning anything at all. However, we all need some cash particularly for unexpected events, so certainly do maintain your emergency fund during periods of uncertainty; but remember your money is literally worth more today than it will be tomorrow. 

Stock up on staples

The price of food is one of the first things to be affected by inflation. Stock up on household staples such as Garri, rice and other non-perishables to provide a cushion for a few months whilst you adjust to the new prices. It is easy to over buy or panic buy; If you buy in bulk which is usually cheaper, share the produce and split the cost with friends and relatives, or it will end up being a waste. 

Buy what you need

Do you need to buy a cooker, a generator, inverter, or new tyres for your car? Sitting on cash will cost you in the long run. If there are durable items that you need and you have the funds, it is probably best to buy them now as prices tend upwards. 

Reduce transportation costs

With the drastic increase in the price of petrol, we all need to find ways to reduce our transportation costs. Do we all need to be on the road at the same time? Do you have colleagues or friends who live and work near you? Car-pooling makes good sense as fuel costs are split. You will reduce your costs as well as the stress of driving each day. How many cars do you have? How many cars do you need? If you are struggling with your fuel-guzzling jeep, perhaps it is time to buy a more fuel-efficient car for your daily use. Be strategic and purposeful in deciding whether to keep, sell, or purchase. 

Invest in the stock market

The stock market is a good option if you have funds that you can afford to put away for the long term. Indeed, inflation is a key reason why equities are better for long-term investments. Cash and bonds may sometimes seem likely to yield a higher income at less risk, but there is evidence to show that stocks have outperformed other asset classes over the long term and are a good hedge against inflation. The cheap, easy way to own stocks is through an equity mutual fund.

Invest in property 

Over long periods, property prices tend to outpace inflation. Property prices have softened so take advantage of this if you can by buying. It doesn’t need to be expensive property. A plot of land held for Real estate requires a capital outlay so has to be planned for. If you have cash to spare, now may well be a good time to invest. As with all investing, seek professional advice and ensure that you have all the essential documentation in place.

Shop smart 

It is time to shop smart and to get value for money. You don’t always have to buy everything brand new. There are very good resale online stores that offer nearly everything you will ever need including used vehicles, tools, household appliances and furniture in perfect condition. Don’t feel that you always have to “keep up;” be practical and get what you need at affordable prices. There is nothing wrong with buying second hand if it is in good working order. You can also place appliances and furniture that you don’t need, in the market place. Apart from getting rid of much clutter, you will also make some money.


We’ve all heard the phrase, “Don’t put all your eggs in one basket!” This old maxim perfectly describes the concept of asset allocation. If you put all your savings in one type of investment and the investment fails, you could jeopardize your savings. Asset allocation refers to how you spread your money among a number of different asset classes such as cash, bonds, stocks and real estate. With the naira under so much pressure it is a good idea to hold some foreign currency in your portfolio. 

Stay healthy 

Stay healthy by exercising regularly and eating a healthy balanced diet. We’ve all heard this before but it matters now more than ever. You don’t want poor health and expensive medical care to add to any financial woes; certainly not now.

In the final analysis, it is important to stay positive. Inflation is one of the most common financial facts of life. The short term may be somewhat challenging but such times are full of opportunities. Seize them.

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