Planning your money is not a choice. However, many of us – and especially those in employment – don’t take the time to plan their finances. You earn, you spend and the next pay day comes around.
However, it only takes a small jolt for all of this to change. Unemployment can happen. So can retirement. Divorce and separation can change your financial landscape too. For me, it was going into business blind and discovering what it meant to not have a consistent salary. Whatever the incident, getting out of a comfort zone gives us a push to get our act together.
Suddenly, that meal that lunch you had at a restaurant without a care in the world becomes a decision you have to think through very carefully. The things you used to take for granted, such as a brand of soap being Sh50 cheaper or more expensive than another, is now a point of serious reflection in the supermarket.
Staying ahead of your money means trying to limit how much catches you unaware. The value of experience and age is that you can anticipate certain situations e.g. possibility of no income.
But let’s say disaster hasn’t struck you yet: It’s still important to plan your money. Let’s say that all your household and upkeep bills come to a total of Sh100, 000 per month. Due to inflation, the prices of every rises by 10 per cent every year. In 10 years you will need just over Sh250, 000 per year for the same lifestyle. This does not take into account costs that will rise more than 10 per cent per year, like we have witnessed with fuel this year.
Let’s say you have a child who is 10 years old today. The college you want them to go to costs Sh500, 000 a year today. In 10 years it will cost Sh1.3 million for just one year. You can now do the math for the entire four years. These kind of numbers need a plan. It needs you to think ahead. A deal is not coming around that will suddenly cater for all these costs at the point of need.
So how do you make this all work? Start with what you have and build on it. Today, you may not look like you have anything under control in your bank account but if your mind is thinking forward, the money will catch up eventually. Just start and don’t procrastinate because you cannot figure it all out. Put some intentions (otherwise known as goals) in place. This could be as simple as saying that you will have a school fees fund of Sh500,000 by the end of next year. Many of us buy shares, plots, land, have money in SACCO’s and so forth without any intention in place. Because we have investments, we may think that all is well. But if we have not identified their purpose we may find we have underestimated what we need.
Many of us are aware of what we need today but have no idea of what we will need tomorrow. This causes a mismatch in our actions, planning, investments, habits etc. The financial plan for today should have happened yesterday.