Prioritising your Expenditure

Sam has been behind on school fee payments ever since he could remember. For years he has been close to a heart attack whenever holidays come to an end. Especially in the New Year when apart from fees, there will be all sorts of expenses. Recovery from the festivities, various forms of insurance, uniforms, books etc. However if you did not know Sam or know that he has kids to take to school, you would not think anything is wrong. Over the weekends he is in the bar two or three times. He generally seems to live a good life. However in between all this he makes quiet phone calls to the school every so often to negotiate on payment terms. He just can’t afford to pay school fees on time. Nyokabi has been interested in doing a business course for the last two years. Whenever there is a new intake, she doesn’t seem to have the money. I can’t afford it yet again she tells herself. Meet Nyokabi when she is going for a function e.g. a wedding. Of course she never has anything to wear and proceeds to go purchase a new outfit most of the time. Rita sits back and envies a friend of hers who seems to be able to travel out of the country on holiday at least once a year.

She always wonders where she gets the money to do this. To Rita, her friend seems to live in this fantasy world that she will never have access to. She says her income from her job will just not sustain her to be able to do this. Rita believes you really have to be earning a lot of money to be able to travel like. That’s the reason she thinks she can’t afford it. However, Rita is always spending money somewhere. Everyday at work she will buy lunch. She will also buy snacks like Mandazi’s in the morning. She is frequently topping up airtime on her phone. The list of the various things in our life that we normally say we can’t afford can go on and on. Some of them we genuinely can’t. I can’t wake up and buy a brand new vehicle tomorrow. But with a lot of them is it because of the alternative ways we use our money? In many cases our priorities are just wrong. We have chosen not to afford it and we hope that the schools, banks, SACCOs, employers, parents, business clients will rescue us by loaning, giving or paying us more money.

Sam has chosen not to afford school fees. Booze is more important than children’s education. Rather than paying school fees and negotiating what he can spend on entertainment it is the other way round. Entertainment first and then negotiate the fees. We have worked with many schools in educating parents about this. Their frustration is in seeing the types of lifestyles that parents have yet when it comes to an essential like fees, it becomes a problem. Unfortunately the children bear the brunt of this misalignment in priorities. Studies get interrupted, children are sent home etc. As much as Nyokabi wants to develop herself (or so she claims) and take a business course, showing up at functions with a brand new outfit and shoes is more important to her. However Nyokabi will keep lamenting about how she does not now how to grow her business. If you make a cheap or no investment in yourself, please expect a cheap result. She has prioritized looking good at functions over and above growth of her business. Rita will never go on holiday with that thinking. Snacks are her priority. She is eating her holiday on a daily basis. If she calculated the amount she spends on those snacks, lunch and unplanned airtime top ups she will probably find that it will fund a large portion of this holiday. Rita just needs to carry food from home to make this happen. Does she really value that holiday? By the way all these expenses we are talking about are not bad to have. It’s fine to go for lunch, have some entertainment and drink a decent glass of wine. Everybody needs a nice looking outfit every so often. The question is are we doing it to the extent that we are sacrificing what should be really important?

Examine your personal expenses. What do you spend in a month and on what? What does your spending reveal about what you value? What does it say about you? Many people often ask me what percentage of their income they should be spending on what? There is no rulebook to this. The question should be what percentage are you comfortable spending on what? When we do these exercises with our clients many people realise that they are not happy spending forty percent of their income on things like entertainment and that becomes the impetus to change something. Are you happy with fifty percent of income going to rent yet struggling with fees? Are you happy with twenty percent going to the bar yet you never get to go on holiday and enjoy the beautiful destinations your country has to offer? Are you happy with ten percent on lunch money yet you never seem to be able to take up courses to improve yourself, your business, or career? CEO’s are in charge of managing and allocating resources in an organization to achieve best results. Take up position as CEO of your money and start doing the same. The answer is not more money. More money with the same management technique will lead you to a bigger problem. There is always a more expensive drink to aspire to. Managing what you have well is what creates that room for more.

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Waceke Nduati-Omanga runs programs on Personal Finance Management and Entrepreneurship. 

Find her at waceken@centonomy.com| twitter @CekeNduati| Facebook.com/CekeNduati