Why you earn 5 times more now but still have no savings
SEE ALSO :How to build an emergency fund1. Clarify your goals If you haven’t clearly defined your financial goals, lifestyle inflation will make it even harder to achieve and maintain financial freedom. Before spending additional income frivolously, write down your long -- term financial goals -- such as saving up for your children’s college education, buying a home, or going on a dream vacation. Even seemingly small extra expenses- five thousand shillings here and ten thousand shillings there-can add up pretty swiftly and keep you from reaching your goals as planned. 2. Avoid new debt
SEE ALSO :How to start a businessRacking up new debt because you have additional income will only take you a few steps backward. Whenever you get in debt, you’re mortgaging your future. Don’t be tempted to think that you can now afford to be in debt ... there’s no such thing as being able to afford debt. Factor in interest rates and the picture gets even bleaker. The prudent move is to use the additional income to pay off your existing debts, starting with the smallest. Make more than the minimum required payment for a real impact. When your debts are paid off, channel the extra income to your savings. 3. Track your expenses If you don’t have a budget, lifestyle inflation might catch you unawares. A budget enables you to track your income and expenses, hence you will be able to notice any drastic changes and adjust accordingly. When drawing up a budget, make sure to include emergency fund savings, annual or semi-annual expenses, and expenses for recreational activities. After taxes and expenses, the effect of a salary raise is probably not as significant as you’d think.
SEE ALSO :How to raise capital for your start-up5. Save 100 per cent from your side hustle Unlike in the past, more people are going for part-time jobs or hobbies for additional income. A lucrative side hustle can help you afford a better lifestyle, but you should be careful that the extra money doesn’t go to unnecessary expenses. Try this strategy: save all the money from your side hustle and continue living on your main income. 6. Make gradual changes With more cash to spend, there’s nothing wrong about improving your lifestyle. After living pay cheque to pay check, finally getting some extra money will understandably make you feel the need to splurge. You might notice that your need a new car, your furniture needs replacing, and a totally new wardrobe won’t hurt. Instead of making drastic and expensive lifestyle changes, focus on things which matter and will significantly improve your life without hurting your wallet. For instance, you can go for upholstery instead of new furniture, buy a few new wardrobe essentials, and have your car repaired and repainted. As your savings build up, make gradual changes over time and stay within your budget. 7. Reward yourself wisely Do you want to give yourself a treat for your hard work? You definitely should! But instead of going on a shopping spree where you purchase anything that pulls your eye, think about what you really want. A good idea is to wait for 30 days before buying the object of your desire. If you still want it after this period, go for it. This trick will help you curb impulse buying and spend more intentionally. 8. Make the right friends “Show me your friends and I’ll tell you who you are,” goes the adage. If you hang around people who spend money recklessly, you will also be more likely to emulate them. If your friends are always suggesting expensive leisure activities, don’t break your back- or the bank- trying to keep up with them. You can suggest less expensive options or even take a rain check. If they’re real friends, they’ll understand and support your goals.
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