Budget helps you beat January cash crunch

For James Omweri, a civil servant, taking a loan was the only way he thought wise to celebrate the holidays. He took a Sacco loan of Sh50,000, which he is obliged to start repaying this month.

He told Money he opted for a loan because he did not save enough last year because he had other financial obligations to meet.

“For the better part of last year, I spent a lot of money on rent, bills and family upkeep. Due to the increase in the price of basic commodities, I had very little to save. In December, I shopped around and decided to take a loan because I had nothing to spend. I settled for the Sacco loan since I find it easier to repay,” says the father-of-two.

Surprisingly, he is now finding it difficult to meet his daily family financial needs because he has to plan on repaying the Sacco loan and meet its deadline without default.

“I hope things will be better in February or at least in March since for now its tough. Sometimes I regret why I borrowed it. I don’t think I will repeat again, if I will not have accumulated some savings for the holiday, I will try not to borrow.”

Welcome, it’s the new year and a good number of us are trying to recover from party hangovers.

At the same time, a number are deftly scheming on how to ease the pain caused by some costly financial decisions which they made during the festivities.

Benjamin Maruate, a businessman in Eldoret, is not spared either. He says he spent over Sh60,000 in a period of one week between Christmas and New Year’s eve.

“On Christmas eve, I had spent more than Sh10,000 on drinks alone, and earlier I gave out in excess of Sh10,000 to cater for my family’s shopping, but I think spending money for festive celebration is not a very bad idea because I worked for it the whole year.”

What with the looming bills, school fees and debts incurred through loans borrowed during the Christmas and New Year celebrations? The sobering reality is fast taking the better of him.

Mr Maruate says although the money he spent over the holidays was part of his savings, he has been forced to borrow some extra cash to survive the seemingly long month of January.

In case you are grappling with this financial quagmire, you are not alone. January has always been an unwelcoming month of the new year for many people.

It’s in this month that reality kicks in, that the loans you borrowed to foot your holiday presents’ bill need to be paid back — at an interest!

“Money is never enough. And saving part of it is a good idea. But what is the use of saving all the money and you cannot enjoy it at the end of the day? I think it’s good to be happy once in a while as you continue to make more money,” he consoles himself.

Even though he could not divulge the amount he borrowed from the bank to settle his January bills and finance his daily upkeep, he says that the amount is enough to see him and his family through until his next pay cheque.

On her part, Ms Mercy Wangeci, a Nairobi-based IT employee, says she is going through tough times financially at the moment.

She told Money she is even regretting why she spent all her cash in the festive period.

“The problem with money is that it’s very hard to earn but far too easy to spend. I borrowed some cash for celebration and used all of it, now I have paid back the money I borrowed but then I had to borrow more cash for my daily upkeep,” she notes.

The above experiences are just the tip of the iceberg. Many a people are grappling with complex financial mess. They have fallen behind in honouring bills and they inch closer to bankruptcy.

Which begs the question, What is the cure for the perpetual post-holiday cash crunch?

How can one deal with these nasty debts yet still meet daily financial requirements especially every year in January?

How can one manage the sense of powerlessness that often comes with debt and steer clear of a repeat experience?

Financial experts say that acknowledging the current trouble you are entangled in and taking a tough stance on it could go a long way to get one out of the debt trap — for good.

Look at your budget

“Although it’s always easier said than done, there are a number of methods one can use to handle his /her debt. First, you need to look at your budget. This is a necessary starting point so that you know how much you have and where your money goes,” notes Mr Clement Maina, a Nairobi-based personal finance coach.

He says that although making a budget may be very difficult for some, its advisable that you make a list of your income streams, whether salary or otherwise, and what goes out, that is, the expenses.

“Getting out of debt cannot be that difficult since it’s all about being responsible.”

The next step, he explains, is to look at who you owe money and the amount of loan that is supposed to be paid back at the end of the day.

“If you are struggling, you could contact a credit provider and explain to them what you are going through. A good lender will most likely suggest a repayment plan, but make sure it’s affordable and in harmony with your current financial situation.”

If after examining your income and expenditures it appears there is no way you can manage on your own, then exploring a loan is an option in order to help keep your finances afloat and there are several other options available even to those with bad credit rating.

“Spending less, and learning to live within your means is a solid advice our parents and grandparents lived by, and it’s never too late to follow that advice,” he says.