Times are tough, and it’s time for you to get tough on your spending.
It’s a good time as any to revisit the topic of budgeting given the recent increase in fuel prices. This will not just affect our transport costs but will translate to other areas like electricity, food etc. Here are a couple of things we can do to stretch that shilling.
1. Have a budget in the first place. When you don’t plan your spending in advance you are really groping in the dark. We avoid looking at numbers hoping something somewhere will fall into place. A budget just makes you aware.
If you have no idea how much you spend, track your expenses for a month and you will come out with a pretty good idea. You may be complaining about the increase but find you waste money on other areas that are not that important, then you find yourself borrowing to make ends meet.
The cycle will never stop. Even if you will not end up living beyond your means, you are probably being extremely wasteful in how you spend money simply because you don’t know.
2. Be proactive and cut your costs. Rising expenses means something has to change. If fuel for your car is going to cost Sh2,000 more, that money still has to come from somewhere. Identify that ‘somewhere’. For one, reduce needless trips as much as possible. Maybe you go shopping or to the supermarket often. That’s fuel in addition to whatever it is that you are buying. Can three or four trips be condensed into one bigger shopping trip? This will just mean that you plan better, which also helps in reducing food expenses. Mechanics have told me that cars are very inefficient when running on quarter tank. It pinches in the beginning but filling your tank is better for your wallet.
3. Do not skimp on your savings. It is very tempting to cut down on your savings at this point. In fact, that is what most people do. But think about it this way: The more expensive life is, the more you need to save and invest. Say the goal of your saving was an emergency fund that can sustain you for three months without an income. Well, what you now need is more. You will need more for retirement, school fees etc.
As we like to say in Centonomy, try and protect your factory i.e. your assets, savings etc. that work for you. Cut down on what you give other factories. To ensure you don’t cut down on your savings, save first when money comes into your account. What is left, you can spend. In the greater scheme of things, it doesn’t matter how much went to electricity vs airtime vs fuel vs food. It matters a lot more what was saved or invested. If you need to cut airtime to buy fuel so be it.
4. Earn more. You can’t keep cutting costs in the longer term without an increase in income. In our classes we help people plan to increase their income because it’s probably the most important part of the financial plan. Keep your expenses in check but be just as concerned with what you need to do to earn more. What value are you delivering at work to get that increase? What do you need to do in your business? Do you have some free time you can put to good use over the weekends? What hobbies can make you some extra money? Can your side hustle become an actual business?
5. Last but not least, ditch the poverty support group. These are the people who will waste way too much time complaining about the economy, sending negative messages etc. For most people this will not help them keep food on the table, businesses alive etc. Focus on what you have to do.
Waceke runs programmes on personal finance. Get in touch with her on firstname.lastname@example.org|Facebook/WacekeNduati| Twitter@cekenduati