How to make money work for you

By Abel Kabiru

If you calculated all the income you have had since the year began, you’ll be shocked. The immediate question you are likely to ask is, ‘Where has all that money gone?’ You would find it difficult to account for the earnings or justifiably. To most people, when they make more money, their expenditure rises in tandem.

It is possible to work very hard and make lots of money by the end of the year but still have nothing to show for your efforts. Your financial growth needs to be visible on an annual basis — your loved ones must also feel it.

So how do you ensure that money does not just pass through your hands?

First, stop operating in arrears. If your bills, loan payments, mortgage, school fees and other financial obligations are always behind schedule, you’ll never see tangible benefits of your money. You could make a Sh10,000 today but at the end of the day, you will have nothing left in your wallet.

Get off late payment treadmill

How do you get off the late payments treadmill? Tackle one late payment conclusively. Do that to all late bills until you have regularised your account and are up to date.

Since you are already late, don’t try to please everybody with piecemeal payments. Take the crucial bill, say, rent, ignore all other late payments and work on this until it is current. Then, go to the next important one. Granted, you will annoy some creditors, but it’s the only thing to do it if you have limited income.

Plan your expenditure. If it happens that you are always left with little or no money after paying bills, you are living beyond your means. Ideally, your recurrent and other financial obligations should not exceed 50 per cent of your income.

Set aside compulsory savings. These will include pension, medical and education insurance, family savings and an emergency fund account.

The amounts will be determined by how much you earn. You may not be left with a lot of disposable income, but you will be financially secure.

Free up some money

Free up some money for investment. If all your bills are up to date, you can take the total income of one month and pay the bills in advance. Probably you can pay your rent and fees three months ahead. This will in effect free up the income of the following three months. You can use that money to do something substantial.

Alternatively, you could increase your income. Most people don’t like moving down the social ladder so they’d rather strive to make more money. You can moonlight, engage in freelance consultancy or open a side business to shore up your income.

Prioritise your loans. Paying for a car, mortgage, education, and other loans you may have simultaneously will inevitably drain you. You should be left with reasonable disposal amount after paying bills, enough to see you through to your next income.

Write down a budget and adhere to it. If you don’t, you could have lots of money but blow it all away unwittingly.

You could even use one spouse’s money for recurrent expenditure while the other spouse’s is channelled to development.

Ideally, you should never have to ask ‘where did all the money go’. Careful planning, prioritisation and discipline should pre-empt that question.

—abelkabiru@yahoo.com