Ideas for Reorganizing Personal Finances

By Joyce Kangogo

Six months ago who would have thought that the country would be shut down and we’d all be afraid to go to the markets and all public places, have schools closed, learn new habits of using face masks, sanitizing and maintaining social distance, seems like a bad dream but this is the new normal. The minute your income stops you have a problem, and with the current situation organizations are closed or downsizing and unemployment skyrocketing, now is the time to have a cash cushion. Indeed, unprecedented times call for extraordinary actions. Now is not the time to bury your head in the sand but to wake up and learn financial survival strategies around COVID-19

Know your weaknesses – identifying money problems

• You’re borrowing to buy a want or a luxury
• You’re not able to pay all your bills on time
• Your expenses exceed your income
• You’re receiving reminders on unpaid obligations through letters or phone calls, messages
• You’re not saving for the future
• You borrow from one lender to pay another lender
• You’re using your savings to pay for your expenses/overspending

Above problems can be traced two common issues: Ignorance and wrong attitude. Ignorance is when we have no financial knowledge e.g. based on your income how much can you afford to spend on housing, food, clothes, transport, entertainment or even put together, organize and control a family budget.

Attitude-Is as a result of what we think, indeed proverbs 23:7 tells us our actions are a result of our thinking. Some attitude problems include – Pride, Greed, covetousness, indiscipline and lack of contentment.

Finding Solutions – Be Strategic

• Set goals and make plans.
• Have a personal vision, mission and strategies to execute them
• Why do you exist?
• Where do you see yourself in short, medium and long term?

Use a budget to set goals and make plans. Budget is a written plan to determine how money comes in your hands ensures also that your expenses does not exceed your income, and also allocated the money coming in to proper balance, if and when circumstances change we may have to modify our budget plan like the current COVID-19 situation, or may receive a gift, inheritance, all modifications should support our goals e.g. saving for future, spending less so that we can have more to save.

Tips to reduce your expenses

1. Sell of any asset that you do not needed and pay off that debt remaining on the asset
2. Shop for the best bank services, look for a bank that has low or no service charges to the accounts
3. Reorganize your debts to extend repayments time and lower average interest rate and monthly repayment e.g. consolidation by Kanisa SACCO (once you take this approach live within your means/income otherwise you will end up right where you were with high monthly payment).
4. Be a better manager of your money and fix your level of spending below your income level
5. Shop with a need list, and when shopping compare prices and quality. You can opt to buy from wholesalers instead of supermarkets
6. Combine errands into a maximum of once per week, stay out of shops unless you have an item on your need list
7. Pack lunch for your children and yourself, this results in daily savings and well a lot healthier meals.
8. Avoid giving children money necessarily, only out of the unexpected chores e.g. special projects and extra work performed, this gives them an opportunity to work and earn
9. Eliminate junk food-they are unhealthy and very costly, could lead to medical issues that will eat up your future savings
10. Review your budget regularly and cut back a little in all budget categories
11. Reduce the times you turn on electrical lights and appliances – they consume a lot of power, which translates to high costs
12. Reduce wastage s of resources, this comes in form of food, water, assets
13. Get estimated costs of major expenses e.g. houses, medical and also if possible, get second or third opinions
14. Do your personal and hair care at home whenever possible
15. Buy clothes that don’t always need to be cleaned,
16. Eliminate or reduce subscriptions e.g. magazines
17. Set a specific amount weekly for your pocket money based on the budget
18. Learn to prepare your own income taxes
19. Keep the required minimum balance in your account to take care of emergency situations.

Homework – Creating a Budget

Create and maintain a budget or a system of tracking your income and expenditure. Author and Certified Financial Planner Robert Pagliarini recommends a system called PERK (Postpone, Eliminate, Reduce, Keep) to make sure that your budget is still in good shape. This method, which starts with making a list of all of your current and upcoming expenses. From there, you’re going to organize each expense into one four categories: postpone, eliminate, reduce, or keep (hence, PERK).

List all of your expenses individually and then add them together, those that recur frequently and those that are less frequent. Next to each expense, write either P for Postpone, E for Eliminate, R for Reduce, or K for Keep:

• Postpone – These are expenses that you can put off for a period of time. For example, a house remodel project, vacation, or new car purchase. 
• Eliminate – These are expenses you can completely eliminate such as a gym membership you never use, the video streaming service you never watch, or subscriptions you’ve forgotten about.
• Reduce – Any expense that you are willing to cut back on qualifies for Reduce. For example, if you order dinner every night but are open to cooking a few times a week, mark the expense Reduce. In this case, you are reducing the frequency of the expense.
• Keep – Many fixed expenses such as rent, insurance, and food are necessary and should be marked Keep.

Now recalculate your revised expenses. It should be less than when you started. We are all creatures of habits and habits are easily formed but hard to break, make that deliberate extra effort to change poor habits into better habits, most of our spending is because of our habits of buying clothes, food, household items, gifts and CSR activities.