Early last year I worked Nyambura* with one of the attendees of the Centonomy program on budgeting. Her expenses were out of control. Despite her keeping a monthly budget nothing was changing. Not everything she was spending money on was an absolute necessity but at the same time, Nyambura did not have an extremely irresponsible lifestyle. So for her as much as she wanted to, she was actually not able to identify what was going wrong and where she could cut expenses. She wanted to understand why there was still so much month at the end of the money. She wanted to get to the bottom of why the nice monthly budgeting template I had given her never seemed to work. Have you ever watched a video clip on your phone and then you go watch the same video clip on a big screen TV? Any difference? Most likely the picture is clearer. You will even notice details you did not quite see when you were watching it on your phone. This is the same thing we had to do with Nyambura’s budget. Sometimes to see something in a different light we actually have to put in on the big screen TV. We started by creating a monthly budget and then went month by month until we had a forecast budget for the whole year. This was based on her past spending trend so was as realistic as possible. Of course just like anything else the figures are not expected to be accurate to the cent but they do provide a guideline. After that we did totals for the full 12 months so that we could look at the annual position i.e. annual income and expenditure. We had our annual budget.
The first thing that hit Nyambura was her income. Her net salary at the time was Shs 125, 000 per month. However this translated to Shs 1, 500, 000 per year! She actually had not realised she earned that much money. At Shs 125, 000 per month it had never seemed like a lot of money to her. Her exact statement to me was “If I earn that much money, what have I been doing with it?” I think this is a question we all need to ask ourselves. This annual budget exposed Mary to who she had been paying with her million shilling income. If nothing changed just like she had done in the past, she would end up paying the supermarket, the restaurants, power companies, salon, book shops, schools, clothes retailers etc. I’m not saying some of these expenses are not necessary, they absolutely are. However when you look at your annual income and where it goes, it becomes obvious if you are paying everyone else apart from yourself. If you work only on a monthly budget, it is easy to say you will save next month because you have smaller figures in your head. Haven’t you noticed how this magical “next month” that you will actually save never comes? When Nyambura came face to face with the amount of money she earned, she really started challenging herself on why she had not been saving or investing. She started asking herself questions like this – “If deposit on some properties is Shs 500, 000 and I earn three times that amount of money, why have I always thought I cannot afford it?” For you it may be a different investment that you thought you could not afford. It may be debt that you could eliminate. It could be a particular school that you would like your children to go to. Putting up your budget on the big screen as we did with Nyambura exposes and even magnifies the choices you are making.
The choices we make are seen through our expenditure. A huge chunk of Nyambura’s income was actually going to household expenses i.e. food, household items and electricity. When she saw that these expenses were costing her Shs 600, 000 a year (or Shs 50, 000 per month) she knew something had to change. Even with three children, she knew this was high for her income level. She started buying some items from wholesalers. When you buy items in bulk even at supermarkets that have that option, you save money. For example you may find buying 10 Kgs of detergent is cheaper (per kilogramme) than buying 1 Kg. Same thing goes for a lot of items. Since she could not buy all the items in bulk at the same time she purposed to stock up on different items at different times. For example in one month she would do the bulk detergent shopping and diapers, the next month she would do cooking oil and tissue etc. She started buying fruits, vegetables, meat at the market and generally became more aware of offers and venues she could use to shop smart. To cut down electricity consumption she replaced water heaters with instant showers and moderated the use of the kettle and iron in her house. She then kept track of these expenses and by the end of last year, estimated she had spent Shs 150, 000 less than she would if she had continued business as usual. As her monthly shopping burden lessened in the year due to buying in bulk coupled with decreased electricity bills, she started putting these funds in saving. From March she has been saving at least Kes 10, 000 per month and sometimes even more.
Sometimes it is important to get away from the rut of looking at things in the same way. Put up your budget on the big screen and see if it will give you some determination to make different choices.
Waceke runs a program on personal financial management. Find her at firstname.lastname@example.org|