Akoth keeps a budget. Many of us do not like this term though logically we know we should be keeping one. In our Centonomy classes we ask people what they feel when they hear the word budget and many times it is not pleasant. They use words like restricted, too much sacrifice, failure, hard work to define their experiences of budgeting. Maybe you can relate to most of these feelings, no wonder we don’t keep budgets. We detest them even before we start. Let’s look at Akoth’s life and see if that negative association we have can change. Akoth is married and has two children. She works. She drives a car. She has a social life and good group of friends. Like most people she has dreams and aspirations for her life. She goes on holiday with her family once a year. Fairly standard life of a woman with social engagements, work pressure, family obligations and keeping her household running. How has budgeting practically helped Akoth.
- It helps her turn her dreams into reality. As we said she wants to do things beyond just surviving. Some of her goals are to be able to retire well and still live a comfortable lifestyle. She would like her children to go to a certain university. She would like to buy a house and many other things. All these will require money. From the time she did her initial budget she was able to make a decision on what to put aside every month into her savings and investments. She simply made a decision that her dreams were more important than feeling restricted. In fact, she doesn’t see this as sacrifice but rather a step in the right direction because the budget is ensuring that she will get to do what she wants. As her income increases she adjusts this budget to ensure that her “dream account” also benefits from the increment.
- It brings awareness into her everyday financial life. Before this she would spend money without thinking. She would go to the supermarket and just buy things. At the till she would be shocked to find that it was five thousand shillings more than she generally thought but she would still buy it. She would order and buy books, magazines etc. without a plan. She was prone to impulse spending. She would go out and about over the weekend only to find that she was short when it came to paying essential bills e.g. domestic help, electricity etc. Now she knows what to spend at the supermarket, entertainment etc. Surprises are rare and even when they do happen she can quickly adjust. She has realised that she will not die because she has to leave a few things out of the trolley, buy one less book or spend Friday evenings at home.
- It helps her spend money without feeling bad about it. At times when she would spend, she would feel guilty for doing it. Because it was not thought through most of the time so it would leave her wondering what may go unpaid, was it too much and all those thoughts we are all familiar with when we think we have overspent money. She does allocate a miscellaneous amount in her budget because you cannot plan for every eventuality. Her friend recently had a baby and she contributed money for a gift. Sometimes things in the house have broken down and need to get replaced or fixed. Sometimes prices of things go up or she buys a clothing item. Or it could even be she wants to go for a movie/show/concert that she had not really itemised in the budget. She is also able to cut elsewhere if need be. When she contributed for the gift she decided to carry lunch the week after to save money. The budget helps her make these choices so she doesn’t have to beat herself down for spending money.
- It enables her to to see long term ways of saving money. When you look at your budget, adjust it, evaluate it (Click to Tweet this thought) say on a monthly basis you will start seeing opportunities to be clever with money. After three months of looking at the money she spent at the salon, she was able to figure out that it would be cheaper for her to purchase the hair products and then just use the salon for styling. She was also able to cut down on supermarket expenses by taking an afternoon every three months to go to a wholesaler for certain items.
- It stopped the fighting in her home. It is well known couples fight a lot because of money. Very often it is about how they spend. Akoth and her husband are now at least on the same page when it comes to spending money and the insecurity with each other around this has gone. What did they do different? They sat down. Looked at both their incomes and decided who will pay for what. Before they did this Akoth’s husband felt that the burden for many of the expenses fell on his shoulders and this resulted in some level of strain. In addition, they also jointly save money towards their common family goals. It is not a perfect science but just by dealing with the spending they opened the channels of communication.
- It ensures she goes on holiday. Yes, she has long term aspirations but that doesn’t mean she shouldn’t enjoy something now. She treats her holiday the same way you would treat rent. Money goes into a specific account to pay for this every month and she can go on holiday. Again without feeling guilty or borrowing to go on holiday. She has peace of mind as she enjoys her breaks.
Your budget is Not cast in stone and it should evolve. (Click to Tweet this thought) There are many times it doesn’t work as you would like and you have to change something. However, as you can see from Akoth if you keep at it, it will not be a negative experience but one that actually empowers you and enhances your financial life.
Waceke runs a program on Personal Financial Management & Wealth Creation. To sign up, email her at email@example.com| Facebook/centonomy |Twitter/ @Centonomy & @cekenduati or go to www.centonomy.com