BusinessDay 16 Apr 2018

Monday 16 April 2018
This is M NEY
A daily guide to your Personal Finance
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BUSINESS DAY
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• Travel
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• Managing your Tax
29
Worried about bank charges,
here is how to reduce them
Kenneth Doghudge
Are bank charges
causing you
to have sleepless
nights?
Are you wondering
why you must pay
every time you perform a
transaction? Seeing your
bank charges add up to
substantial sums can be irritating
and annoying. The
bank might provide poor
service, or worse still refuse
to support you. “And I still
have to pay bank charges?”
might be the question on
your mind.
So can we totally eliminate
these charges? No.
Banks provide financial
services to the public. They
are expected to charge customers
and make a profit
in return. Bank charges
therefore represents compensation
for services rendered.
Alas without it no
bank would be able to survive,
let alone thrive.
Bank charges may differ
from country to country.
There are certain climes
where the government collects
stamp duty, a type of
tax on banking transactions
in addition. Bank
charges, like death and
taxes have now become a
fact of life. You can hardly
fight or refuse to pay them.
Banks take the money out
of your account monthly.
In fact, the more transactions
you undertake the
greater your bank charges.
While bank charges are
here to stay certain steps
can be taken to reduce
them to the barest minimum.
You need to do the
following:
Acquaint thyself with
your current exposure to
bank charges
Come to terms with
your bank charges by making
a detailed study of your
statement. Request your
statement from the bank
and check, on a line by line
basis transactions done
in the month. Also check
what your total charges
amount to. You could be
in for a rude awakening. I
recently did, and it wasn’t
a pleasant experience. I
didn’t have a clue that I
was spending so much
on charges. You can only
make changes when you
understand the magnitude
of the problem. Determine
to reduce them
Acquaint thyself with
the number of transactions
you initiate regularly
How many bank transactions
do you make in a
day? Did you know that
each time you use the
ATM, POS machines, mobile
and internet banking
is one banking transaction?
Each usage may have
fees attached. Electronic
deposits into your account
also attract charges.
Scan your bank statement
to identify why so many
transactions. Try to understand
the reason behind
each transaction to see if it
could be stopped in subsequent
periods.
Paying recurring bills
in cash
It’s advisable to keep
some loose cash to pay
smaller and regular bills.
At the beginning of the
week withdraw certain
amounts to cover all your
recurring expenses. Petrol,
Transport, Lunch,
Telephone etc should be
planned for. This will cause
you to avoid whipping out
your card to pay for these
items thus causing your
bank charges to skyrocket.
Leave plastic cards at
home whenever possible.
Carrying your plastic
cards everywhere you go is
not a good idea. You should
leave them at home from
time to time. Planning what
you want to spend on in advance
can help minimise
spending. You could then
carry only the money for
your planned spending on
you. Try to make it a little
bit harder to access your
money wherever you go.
Earmark several days
as “no spending days”
Plan and mark several
days in your calendar as
days where you won’t be
spending any money. Start
out with marking one day
a week which could grow
to several days a week.
No spending amounts to
no charges. So challenge
yourself not to spend.
You’re not going to die if
you don’t spend I can assure.
Having no spend
days will help you manage
your money better.
Seek and use accounts
with lower bank charges
Currently there is a
wide variety of bank account
products. In the
past it used to be only current
and savings accounts.
There are accounts for
small and big businesses,
children, students, retired
people, high net worth individuals
and so on. In addition
there are accounts
for investments, fixed deposits,
mutual funds etc.
Please research and weigh
the pros and cons before
you sign up for any account.
Be constantly on
the lookout for accounts
with lower fees that best
matches your requirements
such as lower bank
charges.
Use debt wisely
Be careful when you use
debt. Especially when it is
not for purposes that will
bring more money into
your pocket. For instance
when you use your credit
card to pay for items. If
you don’t pay back within
the time limit the bank will
charge interest on the debt
plus several fees for using
the card. The same occurs
when you have a loan facility.
Interest rates and bank
charges usually change
in favor of the lender, not
the lendee. Taking on debt
usually causes your bank
charges to increase significantly.
Trim down the number
of accounts you have
The more accounts you
operate/keep the more
bank charges you pay out,
pure and simple. Most
people keep plenty of accounts.
Some might have
even gone dormant. I’m
sure when you calculate
your total bank charges
in one year you might realise
the level of wastage
you have been exposed
to. It’s time to streamline
the number of accounts
you have. There are several
debates on how many accounts
someone should
have. I urge you to be
mindful and not duplicate
similar accounts unnecessarily.
Permit me to re-emphasize
that immediately
after reading this you
should get all your account
statements. Work out how
much you have been paying
as bank charges in the
last 1 year. Take time to
implement all 8 key points
listed above to reduce fees
paid going forward. This
is guaranteed to save you
thousands yearly. Now
who wouldn’t be happy
with that?
Kenneth promotes
Moneytalk, a knowledge
based organization committed
to dispensing financial
intelligence that leads
to financial freedom.
You can reach him with
your feedback on money@
moneytalkng.com or 070
6337 3391 if you would like
him to facilitate Money
talks and lessons at your
events, seminars or conferences
over the weekend
in the Lagos area.
You can also visit www.
moneytalkng.com for additional
resources on financial
intelligence.
Taking firm decision about your retirement planning
Pension and retirement
funds
are crucial to
everybody. But
unfortunately it
is one of the least financial
planning we think about.
Eventually everybody has
to stop working. After years
of hard work you should be
able to put your feet up and
enjoy some peace.
That is not the time to
be worrying about your
bills and other things that
you need money to accomplish.
So what happens to
your expenses? They don’t
go away. In fact, your essential
expenditures may
become more expensive if
you factor in inflation. It is
time to take action and if
you have just started working,
you can start early.
Early planning is best
for pension savings. A
regular amount put away
yields a lump sum amount
through the years. There
are many examples where
a disciplined investment
started early has proved
to be more beneficial than
chaotic lumps at irregular
intervals. So start early.
Subsequently is regarding
the amount to be saved
each month. How much is
sufficient? Well, that depends
on your ability to
pay. Try to put away a fixed
amount. As it is always said
pay yourself first when you
receive your salary or income
each month.
If you are employed try
to save in work linked pen-
sion plans in which your
employer contributes some
amount. This is beneficial
as these pension schemes
are invested in government
bonds and offer good returns
with stability.
Many things have to be
considered when picking
a pension plan. Find out
how much of your pension
is taxable and at what
percentage. It pays to take
the advice of your personal
financial planners or legal
adviser who has experience
and knowledge in
pension and retirement
program. They are not part
of any one organization
pushing those plans. They
will work individually with
you to provide the best plan
exclusively based on your
needs.
Find out if the pensions
or at least a part of it will go
to your spouse or dependents.
So not blindly trust
that it will automatically go
to them. Read the fine print!
Take charge and do not be
a passive participant.
Usually pension money
is retained with the employer
till a worker retires.
It is good to know whether
this money is safe and in
the event of employer declaring
bankruptcy or going
out of business what
happens to the money.
Always ask relevant questions
and never assume
things. The stakes are simply
too high.
You should also start
investing in bonds and
share market early on in
your career.