Many Africans in their 20s and 30s are doing better than their parents when they were the same age. Yet, we can't always see (consistently) the difference in wealth manifest or last as expected or hoped. A few factors deplete the hard earnings, such as increased financial responsibilities through imposed expectations, guilt, shaming, and a self-imposed savior mentality in the African culture and home. Of course, not all Africans fall prey to this or find themselves in these categories; however, many can identify with a few of these challenges after coming to money.
Managing personal finances is a universal concern that a significant lack of knowledge enshrouds. Achieving financial well-being regardless of age, ethnicity, culture, upbringing, job title, or income level is vital to success and happiness. However, for young African millennials and Gen Z there are unique opportunities and challenges to consider. This article aims to provide a personal finance guide tailored to this demographic's financial realities and aspirations and offers solutions to consider.
As an African high-income earner, you might be the first or second in your family to earn more than your parents or extended family members did, do, and might ever earn. As such, you are part of the group of people I call First-Anythings. As a First-Anything, in this case, the first high-income earner, you will perhaps be the first to buy or build a house or the first to be debt-free, etc. As a First-Anything, the generational cycles will start to break with you! It can't be the same as past generations; it should be better, and below are a few personal finance strategies for African African millennials and Gen Z.
1. Establish Clear Financial Goals
Many Africans are brought up to pray. It is baked into our minds to pray first and consistently about our problems. Yet, more is needed to be taught about planning, putting things to paper, and executing our plans. This is not to blame the culture but to point out that the action part of the equation receives less attention compared to seeped in religious praying and fasting. Thus, we tend to be deficient and struggle to establish clear financial goals tailored to our circumstances due to a lack of knowledge and practice.
As a young African in your 20s and 30s, your journey to financial success begins with establishing clear, achievable goals. Identify what you want to accomplish in the short, medium, and long term. Your goals may include purchasing land back home, building or buying a home, paying off student loans or credit card debt, starting a business, or saving for retirement; the list is endless, and your dreams are worth planning for. Guarantee success in achieving your goals by making your goals specific, measurable, attainable, relevant, and time-bound (SMART). This will help you manifest your dreams with a clear vision and realistic expectations.
2. Create A Budget, and In the Name of God, Stick to it!
Creating a budget is not scary, and having one is not restrictive. In fact, having a budget will make you feel like you got a raise. Budgeting is the cornerstone of personal finance, regardless of your income level. Creating a budget is irrespective of how much money you earn. If you create a budget with your current salary and live within or below your means, when your salary increases, the habit of living below your means will not be a foreign concept but a familiar and reinforced one - even when you overspend, the old budgeting habit will resurface and help you recalibrate.
Start by tracking your monthly income and expenses using the old-school method: paper and pencil. If that is too tasking for you, there are budgeting apps or spreadsheets you can create or pay a small amount for. The next step will be allocating a portion of your income to cover essential expenses such as housing, transportation, food, utilities, savings, and investing. The last part, the telling part, is the disposable income or the discretionary fund; this is how much money is left over after all your expenses and savings buckets are filled. If you are in the negative at the end of each paycheck, you can reduce your expenses or bring in more income. Most people find that reducing their expenses, although more difficult, is the better solution.
3. Tackle Debt Strategically
"The only man who sticks closer to you in adversity than a friend is a creditor." - Evan Esar.
Outstanding debts are like shackles and accessories you don't need. Nothing is more disheartening than seeing your debt accrue interest faster than you can pay the principal. It is a quicksand trap many cannot escape from for years, and for some, it becomes generational. If you have outstanding debts, aggressively prioritize paying them down. High-interest debts, like credit card balances, can be particularly burdensome. Having a plan with a strict timeline to pay it off is crucial to better financial health. Develop a debt repayment plan and stick to it.
4. Build an Emergency Fund
These two words, emergency fund, can bring anxiety and shame to those who don't have enough or don't have enough in the fund. But the fear, shame, and anxiety can be conquered by understanding what this fund is meant for.
Let's start by calling it something different. Although I know my emergency fund is my financial safety net, when my brain hears the word "emergency," it starts to panic. It tells me I don't and will never have enough. To rewire these false and negative emotions, I changed the name to "I Ain't Worried Fund." This name change gave it a more empowering meaning and calmed my mind when I needed to use it, save toward it. Because the name tells me not to worry, I feel more confident that I have enough to cover my needs comfortably when using it or when I need to use it.
After choosing a name for your emergency fund, plan and save at least three to six months' living expenses in a high-yield, readily accessible savings account. This fund will safeguard you from unexpected expenses like medical bills, home or car repairs, or job loss. Need more help? Watch How To Save $5,000 Effortlessly to get you started. Â
5. Invest for the future
In addition to saving, another equally important thing to do is invest your money. Investing is a powerful way to generate wealth over time. Buying target date index funds from Charles Schwab, Fidelity, or Vanguard is a great way to grow your money and allow the power of compounding to work for you while you sleep. You can also invest through home and land ownership. The point here is to own assets, and there are many safe ways to do that. Saving cash in an account or under your bed is not investing and will never grow your money.
Financial literacy is an ongoing process. Stay informed about financial news and trends and seek advice from reliable sources. Being well-informed is a significant advantage in building wealth and making prudent financial decisions. While self-education is valuable, consider consulting a financial coach or advisor to help you get started and put suitable systems in place. These professionals can provide personalized guidance to help you achieve your financial goals. And remember, paying for such services is an investment, and your future will thank you for it. Read how and be of help, and book a free consultation with me here. Â
When it coms to personal finance Strategies for Africans in their 20s and 30s earning over $100K a year, effective finance management is necessary for achieving financial stability and building wealth. As a young African in your 20s and 30s, you have unique opportunities and responsibilities to be a generational cycle breaker. By setting clear goals, budgeting, saving, investing, and seeking professional help and advice, you can work towards a secure financial future while positively impacting your community.
Be gentle with yourself,
Celestina
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