Do you know how to spend money? We have talked about expenses in this column several times. Many times it has been about managing expenses, being efficient with costs and even preparing to cut back when we have to. Perhaps it is time we look at the other side. How do we get to spend well? To spend in a way that works for us? Besides if you think about it, the only way to manage expenses properly is to actually know how to spend it well. Here are three things you can do to spend money better.
1. Have a Spending Plan
Now, this is not necessarily some huge spreadsheet that you have to over analyse. This is not simply about setting restrictions on what you spend. It’s about being intentional about the way you are spending money as you go about your day (Click to Tweet this thought). For example, do you go to the supermarket with a list of things you need and what they you expect them to cost? Or do you simply have a rough estimate in your head, pick things and then get surprised at the till or pay whatever figure shows up there. You may even have a budget where you had estimated Kshs 20,000 per month for grocery shopping, but on one of the days you actually went shopping, did you purposefully know that you would spend Kshs 10,000 or were you just hoping the figures would work themselves out. When you go out for lunch or even take someone out for lunch, do you intentionally know how much you are prepared to spend? When you go on holiday, have you prepared yourself for your expenditure or do you just get mentally prepared to swipe your credit card when the bill comes?
We have got to plan to spend. This way, we become conscious of what we are doing and are therefore empowered to make certain deliberate decisions. These decisions may lead us to say no to certain things. Maybe that particular brand of jam is no longer so important, or it may result in a swap within your expenditure. If the shopping costs you two thousand shillings more than you anticipated, you can make an immediate decision on what you will spend two thousand shillings less on. You also start becoming very conscious of fitting in more with less when you can. For example, you may find bulk shopping more effective. I dare you to test this spending plan. It will bother you when the limit has been breached, and that’s actually a good thing.
2. Pay into your everyday account or current account only what you are prepared to spend
You can do this in two ways. Let’s assume you earn a salary. Your salary can come in and you can leave only the amount that you intend to spend on bills, maintaining yourself, entertainment etc. This is what a lot of people do. They are definitely a step ahead of the people who don’t do anything – those who spend and expect to see money at the end of the month. Or you can do the reverse. Again this is the part I dare you to try. If you don’t have a savings account, open one. Let your salary or any personal income for that matter; first go into your savings account. Yes, all of it. Then transfer only what you intend to spend on your current account. I have been doing this for about six months now and if my example is anything to go by, you will save more. The reason is this: when money first goes into a spending account, we think about spending first and hence we usually underestimate what we can actually save. Then, unless we have a standing order, we usually delay sending money into the savings. Right? Then progressively we spend more. After all electricity bills go up, you find things more expensive, there was always something to spend money on so the first victim is usually the savings. Apart from an account, you can carry this into everyday life. You can keep in your wallet or mobile money account only what you are prepared to spend. (Click to Tweet this thought)
3. Make room for the expenses that have value to you
Imagine that you are ninety years old and you look back on what you did with the money you earned. Will you be happy with this reflection? Many of us, unless we change something, will find that all we did was survive. We paid bills, and then the bills became bigger and bigger. Though our earnings will have increased, we may find that we used it to pay bills. We may have entertained ourselves a bit (or for some a lot) and even saved/invested some. But is that it? We do need to do the practical things – e.g. pay the bills, rent, school fees, invest etc. But will you be happy with just that? Are there some things you would like to do that make all these things worth it? Things that, apart from the bills, help you give meaning to your hard work. They don’t have to mean anything to anyone other than you.
I meet too many people who are working hard, even earning decent incomes but do not do anything other than pay bills, as well as what they are expected to do – like show up in the bar every so often. This could be a sport you like to play, it could be treating yourself to a good meal at a fantastic restaurant every month, it could be a holiday every year, it could be certain books you like to indulge in. The choice is yours. There is no right or wrong. However, having this “treat” in your life goes a long way in keeping you motivated. Nobody just wants to pay bills. There’s no inspiration in that. Everybody needs that pat in the back even when things look bleak. It may mean re-alignment of certain things but most of the time we are spending that same amount of money on things that are not really important.
It is very empowering to remove something that was not all that important and replace it with something meaningful. Pay somebody else less so that you can treat yourself. Intentionally spend less on airtime this month and go for that dinner. See what happens when you stop hiding behind the all-too-famous excuse of ‘I can’t afford it’. Maybe you just didn’t make room for it.
To learn more about wise spending, wise saving, fruitful investment and much more, click here to learn more about the Centonomy 101 (Personal Finance Training) program.
Waceke Nduati-Omanga runs programs on Personal Finance Management, Entrepreneurship and Career Success.
Find her at waceken@centonomy.com| twitter @CekeNduati| Facebook /CekeNduati
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