Financial plan to help you jump shocks of high cost of living

No matter how hard the economy becomes, or if one bumps into some anticipated or unanticipated financial challenge, the needs and wants that support human life or your previous lifestyle will always be there.

Such has been witnessed with the Covid-19 pandemic where tens of thousands of Kenyans lost their jobs or had their income slashed by large margins, but they were and are still expected to put food on the table and make ends meet.

During such times, it becomes quite a challenge for individuals to balance their income or none of it against the increase cost of goods and services.

How does one navigate through such a time? Or rather how does one plan themselves to ensure tough economic times like the Covid-19 pandemic and high cost of living due to inflation do not deny them the lifestyle they are used to?

Samuel Njuguna, leader of Smart Spender, an application that tracks ones expenditures, says it is important for one to keep tabs how money flows in and out of their pocket or bank accounts.

This will ensure that one gains the consciousness on how much they spend and a result save more in order to invest more as well.

Track your expenses

Njuguna says when one tracks their expenses, it builds in them a sense of responsibility as they become aware of how much they spend in every day and on what.

Most people, he notes, will be aware of what they spend in a month or a year but as you start closing that gap to six months, three months, a month and even a day, or two hours; it dawns on them.

“As you come closer it triggers a financial kind of consciousness and responsibility. At Smart Spender that is what we want to trigger in people,” he says.

Once you know where your money is; where each and every shilling is going (which is what zero budgeting system is), it will prompt you to make a decision.

“If you can control what you are spending, this reflects on what you are generating because you save more for you to invest more. It is more of a means to an end,” he explains.

While Njuguna acknowledges the importance of financial planning, he notes that during the development of the app, he was not aware of many aspects of the same.

He saw a gap in the market of an app that can track one's expenses but as he continued to structure the app, he got to understand more about financial planning.

“I came to realise that financial planning is a systemic approach to managing one’s finances. That is where we saw the gap, that we needed a system where we could track expenses,” he says.

Steps of financial planning

From his experience, he found out that financial planning entails assessing what you have in your pocket or bank so that you can prioritise and do goal setting.

“We build the app based on those two facets of financial planning,” he says.

 Edith Siddondo, founder and Chief Executive Officer Profit Acumen, a money coaching firm notes that it is from this kind of tracking that one can know if they have been spending money on the wrong things.

Siddondo notes that many people spend money on consumables that are not of any financial value.

She says for the last two years, people have faced real pains with money. She, however, brushes off the argument that the Covid-19 pandemic was and is the problem.

The problem, she says, lies in how we relate to money.

Need for a budget

“Money is not something you transact with. Money is something you relate with,” she says.

“So Covid-19 just revealed that outside of salary, a consistent income, people feel lost on what to do.”

This challenge, she says, has affected a majority of the middle-class population whose mode of relation with money is that of spending.

Siddondo, a certified money coach and author says by the fact that people lost their jobs, as a society, we need to not only be focused on resources – ‘the money I have, the job I have, the things that I have.’

“We need to focus on resourcefulness. What do I have within me which I can use to give value to the world so that the world pays me for it?” she poses.

“Money is an appreciation the world gives you for the value you have given.”

Siddondo says beyond jobs, there are other things we have within us - God-given talents.

She says people should think outside the box – away from the eight to five norm they are accustomed to – and ask themselves: what more can I do to generate more money?

By you generating more it means you are equally giving value, she says.

“Irrespective of whether you are disabled, or abled. We are all enabled differently and we can use those abilities to give value to the world. We are in a technological advanced era right now and it allows us to do more beyond Kenya,” she says.

“Even when the inflation rate is high in Kenya, using the internet and the technological tools we can think outside the box and do more.”

Gain new skills

One mistake the middle class makes, she says, is spending their money on consumables. Instead of doing this, one should sit back and ask: how can I use what I have to create value?

This can be done in several ways: personal growth being one of them where one goes back to school and gains skills that are later used to create value.

Or you can also buy some goods, adds value on them and sell them with a margin.

Self-care is also another way to add value, she says.

“We only look at things that according to the world gives me a better image than the self-care of our health; because to make more money you need to be healthy and have a good state of mind,” she says adding that one should ensure they are the best version of themselves.

You can also grow your money by simply investing in a Sacco.

“You just put money in your sacco and continue growing it as opposed to looking at money as something that once it comes to my hands you ask what can I buy that is consumable in nature,” she says.

“Move away from just spending to value addition on self and others. That is how you keep multiplying your income.”