The United Nations Federal Credit Union (UNFCU) advises a 50:30:20 rule of thumb for managing finances, where 50% of income goes to needs, 30% to wants, and 20% to savings and investment.
However, concerns have arisen that the current economic situation in Nigeria might have increased the cost of meeting needs alone to over 50% of people’s income.
As a result, failing to provide for necessities can result in poorer welfare and more poverty, unmet wants can result in a worse standard of living, and not having any savings can result in less investment and unavailability of emergency funds.
The actual worth of an N30,000 ($20) minimum wage in 2019 has decreased to N11,708 as of April 2024 due to annual inflation.
This means that the 100% (N11,708) real wage that workers earn now is not even up to N15,000 or 50% of N30,000 they would have used to cater for their needs in 2019.
With the real minimum wage falling drastically, the ability of Nigerians to adhere to the 50:30:20 rule is weakened.
For Nigerians, the proportion of household income allocated to meet needs is 69%, while the UNFCU recommendation is just 50%. This implies that a greater percentage of household incomes is allocated to necessities like shelter, food, transportation, and medical care.
Nigeria’s allocated wants are also 15% less than the UNFCU recommendation of 30%. This implies that spending discretionary income on luxury goods, entertainment, and dining out is more constrained than it should be.
According to the UNFCU, the Needs that must be met no matter what are Utility bills, Rent or mortgage payments, Health care, and Groceries/food.
Adijat Kareem is a research and data analyst at Dataphyte with a background in Economics. She is passionate about data and storytelling in driving social change and innovation.
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