How To Create A Financial Plan: Determine your Strategy

Welcome to part 3 of the ‘How to create a financial plan’ series. In this series of articles, we take you through 4 simple steps to put together your own financial plan. These steps are:



After you’ve developed your SMART financial goals, it’s crucial that you create strategies (i.e. using the appropriate tools and approaches) to help you reach these goals. It’s also important to note that the strategy you apply depends on each set goal such as the length (Is it short-term i.e. 1 year or less or is it long-term 5 years or more).

There are three strategies that have and still are currently helping me to achieve my financial goals, these are:


1. Increasing earning potential

Investopedia defines Earning Potential as the largest possible profit that a corporation can make. Applying this definition to your personal finance means your earning potential refers to the maximum money you can make in your lifetime. A new report  from the Federal Reserve Bank of New York found that your first 10 years in employment will likely determine your lifetime earning potential, meaning we have to get to work now! Here are some ways to increase your earning potential;

  • Become a lifelong learner: The top performers in most fields are ones that are constantly reading books about their field (or books related to it), enrolling in courses and taking certifications, if possible, and attending/speaking at conferences/seminars in their field. With the wealth of information we have at our fingertips on the internet, there is no excuse to not keep constantly learning. If however, you wish to switch to a new career path, Massive Open Online Courses (MOOCs) have also given us the ability to learn new skills whenever we want. Some good MOOC sites are: Udemy, Coursera, edX, CreativeLive and even YouTube!
  • Negotiate your Salary: In my first two years as a professional, for some reason I thought it was taboo to ask for a raise and negotiate my salary. I was so grateful to have a job that I thought it was selfish of me to ask for more money! Apparently I’m not the only one who felt this way, a new survey by NerdWallet found that only 38% of millennials negotiated their first salary. Similar figures have been found for negotiating the initial salary for new job offers and for asking for a pay rise. After this realisation, I used some tactics I learnt online and have since had a pay rise every year.
  • Start a Side Hustle: A Side Hustle refers to any role you work at, outside your full-time job, that provides an avenue to make money (now or in the future). Side Hustles are very beneficial because they can help you improve your skill set, you start to diversify your income streams (the more, the merrier!) and you could potentially find a new fulfilling career or found a company. We wrote an article about how to find your side hustle and you could also use this article by Nairametrics for more inspiration.


2. Cutting expenses

Earlier in this series we developed some SMART financial goals that we think will help us live our dream life, but now ask yourself this: “Am I willing to give up certain things to reach these goals?”. If your answer is no (insert side-eye emoji) then maybe we need to redevelop your goals, however for those who answered yes, we may have to cut out some of our spending on our ‘wants’, which are non-essential items.

One of the biggest savings I made was to take a packed lunch to work, after calculated how much I spent eating out, I was shocked! I was spending almost 10% of my disposable income (this is your income minus your essential expenses like rent, fuel, etc). Sometimes you have to remember, there’s rice at home!

Another concept that helped me was beginning to practice ‘Mindful Spending’, this simply refers to buying items beyond the purpose of instant gratification. To implement this, whenever I see a ‘want’ I’d like to buy,  I simply note it down along with its price in a notebook. A month later, I review my ‘wants’ list and ask myself if I’d still like to buy it and if the answer is yes I wait another 2 weeks. If it’s still on the list after 6 weeks then it’s going to be purchased.


Finally, I want to put a challenge to you all, for the next 7 days, every time you spend money note it down in a notebook (or on your phone), you’ll likely be surprised about the little things that you spend money on. If you continuously track your expenses, you’ll find that you subsciously start spending less on things that don’t matter to you, Steve Jobs once described this phenomena when he said ‘What gets measured gets managed’. Some good expense tracking apps are: Spendee, Fudget or you could use a simple excel spreadsheet.


3. Saving & Investing


For your short-term (1 year or less) or medium-term (1 - 5 years) financial goals, keeping your money in a savings accounts is probably your best bet. There are broadly two categories of savings accounts which serve different purposes;

  • Fixed Deposit Accounts: If you’re a ‘bad’ saver, meaning you always eat into your savings then this is the account for you. When you open this type of account, your money is ‘locked up’ for a fixed period of time, usually 30, 90 or 180 days. If however you withdraw your money before the fixed period is up, you may face certain penalties like losing all the interest you’ve earned. This type of savings account often offers the best interest rates.
  • Individual Savings Accounts: This savings account is more accessible than the fixed deposit account mentioned above, however it usually doesn’t offer interest rates as high as the fixed deposit. If you’re building your emergency fund (and you should be if you don’t have one!) then this is the account you want to use due to its accessibility.



Before I start this, I need to point out that this is not financial advice.

For long-term (5+ years) goals, I tend to turn to investing to help me achieve them. Why Investing? One word: Inflation. Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. As of February 2018, the National Bureau of Statistics calculated the year-on-year inflation rate to be 14.33%, this means that in February 2017 an item that cost N1,000 now costs N1,143.30. This means your money is worth less! Investing has proven to be the only way for your money to grow at a rate significantly higher than the inflation rate (this is not to say it doesn’t have its risks).

What you need to know about investing

  • Individual Stocks vs Funds: You can choose to either invest by choosing and buying the stock of one or more companies or by investing in a fund. A fund is a pooled investment, where you and lots of other investors bring your money together and invest together. When you invest in a fund, there is usually a fund manager who will make the final decision on what to invest the fund in.

For beginners, it’s usually recommended that you invest in funds because you leverage the expertise of fund managers. If you would rather decide to choose what you want to invest in however, then the job of picking the stocks to invest in depends on you.


Risk Profile: Understanding your risk profile is important when it comes to investing. This is because inherently investing comes with risk, there will be times when your investment portfolio loses money. If the idea of losing anything scares you then you’re probably a ‘Cautious’ investor and you should look to invest in a fund which reflects this (e.g. a Money Market fund). However it’s important to realise that there is a correlation with risk and returns i.e. the more risk, the more potential for higher returns.


Asset Class: This is just a fancy way of talking about stuff you can invest in. Assets classes include:

  • Equity: This simply means a share of a company, meaning you own part of the company.
  • Bonds: These are just IOUs issued by the government or companies. If the Nigerian government want to raise money, they can do this by issuing bonds which you as an investor can buy, meaning the government owes you money.  
  • Property: This can be retail property like a house or commercial like Palms shopping mall.
  • Commodities: These are physical things humans use like oil, gas, metals, sugar, etc.
  • Private Equity: This refers to investing in small startup companies like


Management Fees: This is the amount you pay to the fund manager for investing your money for you, although cheaper isn’t always the way to go, you should aim to keep your management fees as low as possible without sacrificing quality.


How do you invest? All you need to do is open an Investment account with an Investment firm and pick the fund based on your risk level that you want to invest in. We have put together an Investment Products Log which contains all the mutual funds offered by four top investment firms in Nigeria to help you get started.


When it comes to saving and investing, the key to being successful is to always PAY YOURSELF FIRST! This simply means that when you get paid, the first payment that comes out of your account is to your savings and investment accounts. You’re taking care of your future self first before you take care of your present self.

The simplest way to do this is to automate the process. You can do this by setting up a standing order between your current account (or where you get paid) and your savings and investments accounts.


In the next article, we will wrap up the financial planning series by talking about the importance of regularly reviewing your plan and how to do so effectively. 

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