If you earn a regular monthly income, coming up with a savings plan may not seem too difficult. For most it is just a matter of deciding how much per month you will put aside, and every pay day ensuring that those funds are directed to wherever you have decided to accumulate the funds be it a savings account, money market fund etc. However for many people who do not earn a regular monthly income, saving may seem hard and sometimes downright impossible. This often happens for people who are in business. Suppose Kamau and Wanjiru based on their needs need to put aside Kes 10,000 per month. Kamau is employed so he has decided to set up a standing order of that amount per month. Because he earns a regular income, this works for him. Wanjiru runs her own consultancy business and between irregular cash flows and business expenses she has found it very difficult to put aside money. She cannot establish the same system as Kamau because her income does not come on a regular basis. What should Wanjiru do so that she can still end up saving?
What Wanjiru needs to do is set her sight on the end objective. Both of them have the same objective of saving Kes 120,000 per year (Kes 10,000 X 12). Kamau can do it via steady monthly payments, Wanjiru can’t. However she can set her mind on making an extra Kes 120,000 in that year to put towards this. Remember the first time you decided which car you wanted to buy. What did you start seeing on the road? Many of the same model and car correct? Well that’s the same thing that happens when you set your sights on an end goal. You will start seeing opportunity that can enable you to meet that objective. Wanjiru can plan to get the kind of jobs that can enable her to put aside Kes 120,000 every year. This may be two consultancy jobs that pay her enough to put aside Kes 60,000 each or four jobs that enable her to put Kes 30,000 aside etc.
There may be people who do earn a regular income but cannot save from that. They can also use this. Even if you can save monthly, challenge yourself in a year to do an extra amount in the course of that period. From experience there is an advantage to be gained when working with lump sums. It makes you think big! If Wanjiru can manage to come up with Kes 120,000 in the first year she will believe in herself more and be willing to stretch that to Kes 150,000 the next year. Your thinking also starts to change to – “How can I do this?” (rather than all the reasons why you can’t) and begin aligning your everyday actions to the end goal that you want to achieve. You also start to rely on your own ability to create income as opposed to someone else being willing to pay you a specific regular amount.
Very often irregular income is used as an excuse not to plan, but just remember it only means you have to plan differently!
Waceke Nduati- Omanga
The author teaches personal financial management. Find her at www.centonomy.com