So you fasted and prayed combining the knowledge on online forums like nairaland and Jarushub.com and finally got a job. Hurray!!! I congratulate you.
This news lands in the ears of your friends and the next thing they tell you is “We go wash am oh”. You also tell your pastor and you are aptly informed of a first fruit offering or maybe you have even decided to give your first salary to your parents as a sign of gratitude.
Before the salary is earned, it is already spent.
The following tips should help every new entrant in the job market concerning managing finances. Some regrettably, I wish I knew earlier.
1. You really do not have to “wash” your new job. While it is okay to be grateful and want to celebrate, going over the top is never a wise decision.
2. Look at your offer letter well and find out how much you are actually taking home. Nowadays, Nigerian employees state salaries at “cost to employer” this means that they lump all benefits you are to receive to form your total emolument. So that 3.5m you see on your offer letter might not really amount to 290,000 monthly. This is because of the following reasons:
• Taxes: The government gets a share of your earnings through what is known as PAYE (Pay As You Earn). The average tax rate for earnings between 1.5 -4m is about 6-11%
• Pension: You are required to contribute 7.5% of your Basic, Housing and Transport allowance as pension. Now your employer is also to contribute 7.5% but as earlier stated, most Nigerian companies have already included this contribution in the total emolument stated on the offer letter.
• Health Insurance: If your employer provides health insurance, there is a high probability that that money goes out from your total emolument stated in your offer letter.
• NHF: NHF means National Housing Fund even though few companies in Nigeria comply, you are to contribute to this fund.
• Training: Some employers also add this to the total emolument stated in your offer letter.
• One-off payments: Some items like leave allowance, passage allowance and maybe 13th month are paid at specific times and so take note.
3. The cost of working: In order to earn your pay, you would have to spend on transportation, feeding etc.
4. Overtime allowances are taxable: This one has had a lot of people disappointed. Yes, even if you toil all night working overtime, your allowances are not tax free!
5. Keep your expenses low: you are finally in Victoria Island with that dream job but if your expenses jump with your income, after a while the job would become annoying because its proceeds would just go into bill payments. Avoid taxis as much as possible (usually 4 times more expensive than regular bus rides), regular eating at fast food restaurants like KFC etc, Friday night outs can gulp half of your monthly pay if you are not careful. A bottle of Hennessey anywhere in VI doesn’t go for less than 25k. You also really do not need to buy all the items hawked in traffic. Fund raising in churches and mosques can also leave you broke if you do not apply wisdom.
6. Join a staff cooperative: If your company has a staff cooperative, join it. It will help you become disciplined with savings and you might be able to take loans at considerate interest rates when you need it.
7. Have an emergency fund: Have at least 3 months of your monthly expenses saved in an account just in case you happen to be out of work at any time.
8. Avoid loans early in your career: Try as much as possible to avoid taking loans very early into your career unless it is really really necessary. This can really take out the joy of earning money for the period the loan repayment lasts. Avoid buying things like mobile phones on credit, save money and buy it.
9. Plan your free cash: Free cash is what you have after you have deducted all the taxes, pension, etc. This is what you can use to achieve those great ambitions you have. Money would not fall from the sky for you to have that wedding you dream of neither would your Range Rover Sport fall from the sky. If you do not manage your free cash, you CANNOT have those things! Knowing how sentimental Nigerians can be, this isn’t a curse it is simple reasoning.
10. Track your daily expenses: This may sound absurd but write down every naira you spend. This helps you know where your money is going.
Now that you have a job, the onus is on you to manage your finances in a way that you can achieve your goals.
If you get an offer and would like expert advice on all the aforementioned, feel free to enlist my services at a fee obviously *wink*.