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Friday, January 8, 2016

5 Money Management Tips to Implement In 2016

Proper management of finances is one of the most import things for a Kenyan today. It is getting extremely easy to get buried in debt, and it seems almost impossible getting out of it.

These 5 tips, are very useful if your resolution this year was to get to and stay on track to financial freedom.

 Money Management Tips to Implement in 2016

1. Create a budget, and stick to it!
You probably guessed the first tip right. Yeah, it is the same old cliche, "budgeting". I wish I could say something else but there is no financial management without a budget. That is why you will see this tip in almost every blog you read. Write down your budget, and prioritize everything. Top of your list should be what is extremely necessary. And when I talk of the first item, then savings should top your list. Make sure you have figured out each and every expected expenditure and if possible try to over budget. This way, if something unexpected happens , you won't have to go over your budget, but if there are no unforeseen expenditure, then you have extra money left over. 

2. Open a savings account
If you still don't have a savings account, I would advice you to put all those resolutions aside and start this year by opening one. Savings accounts are very important as they help in times of emergencies and also acts a money reserve for future expenditure and investments. I was taught to try and save at least 3 times your monthly income, just in case you lose your job. (3 months is ample time to get back on your feet). I understand it is hard to just stash that much money away all at once, but bit by bit you will make it.
One easy way to build your savings is to have an automatic direct transfer set up from your checking account to your savings.

3. Live within your means
Always ensure your cost of living is below the amount of money you actually make. It will require good budgeting techniques and persistent monitoring to achieve this. Once you have reached the threshold (that is Income = Expenditure), try to reduce your expenditure by a further 10%. This will ensure that you end up with some extra money at the end of the month after footing all the bills. This also means that if you get a raise at your job or get a better paying job, you should try to continue to live the way you have been before.
This means your savings will increase at the end of the month. Increasing your cost of living unnecessarily, will always hurt your finances and in case of a setback you will find it hard maintaining such standards . So its best to just play it safe.

4. Beware of Credit!
Credit is a double edged sword. Carefully planned, Credit is very useful in the financial world especially when you want to buy capital intensive stuff like a vehicle or a home. However, credit can also be fatal to your finances. Even though, technology has made it easier for a Kenyan today, to get a credit card or some kind of “buy now, pay later” deal, it is extremely important to avoid unnecessary credit at all cost. Talk of M-Shwari, M-Advance, M-Kopa, AFB credit card, Okoa stima, Okoa jahazi etc, all these credit products are easy to get and with minimal or no collateral required. While it may sound like a good idea at this time, it is what really hurts people years down the road.
People go on swiping that credit card as if they will never pay it back, when, in reality, you will need to pay all back, plus interest. If you are a credit user, make sure you have the cash to back it up.

5. Stay Healthy
Health is wealth. And for you to keep healthy, you must invest in your health. Eat healthy food, do exercise, and be sure you have a health insurance. If your employer doesn't provide a health insurance, then you should try and get the cover privately. The cheapest insurance cover in Kenya today is NHIF. For those employed, you should already be a member of the scheme. However, if you are self employed, you can get full insurance cover at only Kshs. 500 per month. The benefits of a health insurance is immense.  With an insurance coverage, you will drastically reduce the cost of medical bills and keep yourself out of debt in the unfortunate event that you need to seek medical care.

If you can practice these 5 money management tips this year, you will be better off. It is always good to take control of financial destiny now, rather than being at the mercy of debt collectors! 

Happy New Year 2016.
May you succeed.