Episode 9: How You Are Paying Double Interest On Your Bank Loans
In the absence of an emergency fund, you would have to go for loans no matter the terms and conditions, because emergencies do not wait for a person’s situation to improve financially.
Everyone needs between one (1) months of their salary/income and three (3) months’ salary to keep in an account or investment that can not be accessed easily as an emergency fund for that purpose.
This fund is not to be used to balance monthly expenditure. Without this fund, financial institutions would collect your five (5) years’ gross salary as their interest on loans they would be giving you throughout your working life. Five (5) years’ gross salary can not be overemphasized.
See also: Episode 3 & 4: How You Are Paying Double Interest On Your Bank Loans
Episode 10: How You Are Paying Double Interest On Bank Loans
No doubt about this, if you do not have an annual budget ready in November of the preceding year around the time the national budget is prepared, you will definitely take a bank loan and pay interest or you will regularly ask for loans from family and friends that can affect your image.
The expenditure lines that consume all your salary or income are fixed and basic. They can therefore be foreseen in which month financial disaster will loom for you to prepare for it before that month arrives.
See also: 4 Institutions To Take Loans From Or Never
Everyone must know how much they spend monthly on food, electricity, fire fuel, transport, stipends to relations, average funeral/social contributions, rent etc. After the sum of these estimated expenses are subtracted from your salary for each of the 12 months, you will know which month you will need a top up and which month you can have a surplus to repay loans from colleagues without disappointment.
If you can not perform the monthly budget, the annual budget could be an alternative. That will lead us to new episodes, BENEFITS OF PERSONAL BUDGET.
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