I felt a strain in my back and realized it was because I was hunched over trying to read from my notebook in the fading light. I stood up to go switch on the light and that’s when I noticed I wasn’t alone. At a corner in the back, I saw the top of someone’s head peeping over the desk dividers of our open-plan office.
Eric was meticulously inspecting every company transaction from the previous month. He dotted every “i” and crossed every “t” in our accounts and expected nothing less from his colleagues.
Like Eric, most of us are careful to include every detail when dealing with our employer’s money. I guess we do so because of the fear of losing a job or being arrested for fraud. In contrast, most people cannot account for 20% to 40% of their personal spending.
The only amounts that are clear in our budgets are the ones imposed on us by others such as rent and loan repayments. We completely lack accountability when it comes to our personal finance and it shows at the end of the month. Many of us don’t save and invest, or, we save and invest very little towards our goals.
There is hope though. Start by simply knowing where your money goes. Try this for a month and send me an email on the results: Write down every shilling you spend for 30 days; like it was your boss’s money. Don’t judge yourself, simply write down where your money is going.
If you are married, do this as a couple because you often spend on the household, not just yourself. Be thorough and account for everything; Mobile money transfer charges, bank charges, Boda-boda rides, sweets and treats, etc.; write everything down.
My wife and I did this soon after we got married and we found that we were spending more on take-out food than our rent. This may sound like a middle-class problem but we have seen this same issue across all income levels.
Centonomy worked with a mechanic who discovered he was spending 20% of his income on buying lunch at work, unnecessary mobile money transfers cost and taking an extra Boda-boda ride each week. A top executive in our class didn’t know that he was spending over KES 80,000 on drinks in a month and yet he is not an alcoholic. As his income grew he moved to more expensive clubs and became an ATM for his friends.
We still eat out with my family, only now with a plan. A plan that allows us to save and invest while we enjoy the life we work so hard to earn. If you don’t know exactly what is happening with your money then you feel powerless to change your situation. Eckhart Tolle said, “Awareness is the greatest agent for change”. Act like you care about your money by tracking your spending and it will empower you to make better decisions.