A few months into the new year you may find yourself reviewing your current financial situation based on your expectations for 2017. For most young people, a new year is a time to reflect on the highs and lows of the previous years, and set goals and objectives for the future. Usually, most plans will revolve around the popular topic of money.
Taking control of your finances is the first step to reducing your dependence on a salary or student allowance. Having learned from the spending mistakes of the previous year you may be looking for a measured and structured approach towards managing your finances. With corporate downsizing and rising inflation being a key issue for many Kenyans, having a budget is necessary for boosting your savings and investing in your future.
The question then comes to mind,” what type of budget am I looking for?”. There is already plenty of information on how to create a budget and manage your finances. The drawback is most of the information may be technical or overly complicated for people with limited financial knowledge.
That being said, here are smart budgeting tips that do not impose harsh and unrealistic targets on you, but allow you to manage your money without having to make drastic changes to your lifestyle.
What are your priorities?
For most Kenyans, their budgets revolve around three expenses: housing, food, and transportation. After factoring in those costs which probably account for around 60% of your income, and include any debt payments, decide on how to prioritize your financial needs and obligations. Find the proper balance between managing household expenses, savings, professional expenses and entertainment.
Evaluate your low and high points
One way you can pinpoint your weaknesses is to review your financial position over the previous months. Take stock of your successes and failures when it comes to managing your finances. Did you end up spending twice as much because you waited too long to purchase certain items? Or did you get costly gifts for your loved one? Whatever the case don’t be too harsh with yourself, consider some of the good choices you made. This can include preparing more homemade meals and comparing prices whenever you shop for items.
Keep records of your spending
Take the spending diary challenge where you write down all things you spend money on every fortnight. Remember to include side notes on how you felt after each transaction. You may be surprised to discover the leaks in your budget are not what you expected. For instance, buying coffee in the morning and takeouts for lunch may be more expensive than you care to admit. After 2 weeks are up, review your notes and make the necessary adjustments.
Utilize the power of online tools
You can take advantage of web-based budgeting tools to help you in managing your finances. Most of these apps allow you to upload your information and get immediate insight on your income and expenses. With the right information, you can begin planning for the coming back-to-back university semester. Some popular online options you can try include:
- Mint: Mint is a free app that brings together all your financial accounts online, automatically groups your transactions, allows you to create budgets and assists you in achieving your budget goals. You will be able to view your balances and transactions together, using your phone or by going online. The app also suggests products you should buy based on your spending patterns.
- Moneytrackin’: Moneytrackin’is a free web app that enables you to track your income and expenses easily without too much of a hassle. One key feature of the app is sharing and collaboration. If you are working with a roommate or family member to keep your finances in check, you can do that easily by working from the same account to reach your financial goals.
- Zoho: Apps from Zoho have beautiful interfaces. The apps are easy to use and suited for non-financial minded people. Developed for SME’s and freelancers, the apps cover time tracking, invoicing, expenses and much more. Zoho Books recognizes each user has his own unique needs and therefore offers great flexibility.
Try Budgeting for the year, instead of a month
Consider setting up an annual budget which you can review after every 3 months or so. The reason being generally people are not so confident about meeting their monthly financial targets due to unexpected costs. By having a yearly budget in place you give yourself flexibility in terms of implementing the budget you have set without having to make drastic changes to your lifestyle.
Put money aside for leisure
Recent studies have revealed that people derive the most pleasure from spending money on leisure activities. These includes vacations, hobbies, or social events just to name a few. A common mistake most people make when budgeting is assuming they will stick to a normal work and study routine and therefore become stressed when they spend money on having a good time. Remember having some down time is important for your physical and mental well-being and it would be prudent to set money aside to cover your social needs.
Share your budgeting goals with others
By sharing your aims for budgeting with friends and family your plans become a reality and not just another wild idea. You will be surprised to find like-minded people who are trying to keep a lid on their finances and can share their experiences and ideas on how to achieve your goals. You can also check out online networking platforms such as 43things and My Life List where users can set and share goals. However, be careful of what financial details you divulge to strangers as not everyone may have the best of intentions.
While budgeting your finances may require you to be self-disciplined, do not forget to reward yourself every once in a while. Denying yourself every material pleasure takes the fun out of budgeting and makes money a sad subject, instead of an empowering one. After all, a major aspect of managing your finances is to have money to spend on what brings you happiness and fulfillment. Take control of your future by figuring out your financial goals and creating your own budget to help you achieve them.