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Personal finance tips that don't require stinginess

By Jacqueline Mahugu | January 16th 2020

You have heard it all: Save. Invest. Budget. However, those common approaches to money can be done in more uncommon ways that might just be what you need for a financial makeover. We spoke to a financial expert on some of these ways.

1. Preserve your money through utilities

If you are employed and with a monthly income, whatever you earn, you have to preserve some of it. The percentage you preserve depends on the dynamics you are going through, but irrespective of the problems and obligations, you still have to preserve something regardless of the amount you get. Ignoring that rule always brings consequences.

The rule of preservation is a different concept from saving, in that it opens up the mind to numerous possibilities of preserving money, such as through purchasing utilities you can sell later. You can buy an item that you will be using but when push comes to shove you can offload it. Instead of having maybe a mobile phone of Sh2,000, you can sacrifice and say you’ll buy one for Sh5,000, then if push comes to shove, offload it for Sh3,000, pawn it or give it to a shylock to give you the money for it.

It is not the ostentation of having the mobile phone. It is only you who knows that you bought it because you want to preserve the Sh2,000 extra in it. There are many unique ways to preserve money without necessarily ‘saving’.

In fact, you will not offload a mobile phone unless it is an emergency, unlike money that you can just take out of an account.

2. Use unorthodox means of investing

When people think of investing, they only think of the definition that comes with a return. However, you can actually invest in yourself through education. You can buy a good book that costs Sh1,000. To others it will be just something you are reading, but to you it is an investment. The truth is that you want to learn more so that you can use it to make more money. That is an investment. It is not the orthodox ways people think of investment, such as buying plots, stocks etc.

You can also invest socially. When people have functions and you appear and contributing, you are investing social capital investment. In that way, when you get stuck or you want to do something and you pass a hat around to the people you invest through, it becomes easy because they will support you. That will be a return on your investment, even if it is not the orthodox ways most people think of.

It has to be very deliberate and calculated, for instance, “I am going to buy a book on money management because I want to understand money.” That is an investment, because if you manage your money better, meaning you are not spending so much, anything that you preserve resulting on the knowledge that you got is a return on your investment.

3. Ask powerful questions

The main reason people get themselves into debt is because of associating consumption with pleasure. There is a story they tell themselves: “I have worked hard, so I deserve to eat chicken on Friday.” Indeed, if that is what you want you will give it to yourself. However, the reality is that the income you have is very finite.

The many needs you have are also clamouring for your attention, and some of them are absolutely necessary. For people who are indebted, the indiscipline comes from what they tell themselves, so they should change the narrative to themselves. Changing the narrative to yourself will also change the way you see yourself. It changes from “Friday I have to go out”, to “Do I have to go out?” and the answer will be no.

That way, the Sh500 you wanted to spend, you can send to someone who is disciplined to preserve it for you. When you are able to do that on the spot, you have started associating the preservation of money with pleasure, as opposed to associating the spending of money with pleasure. So even when the borrowing apps are shouting that they can give you money, you will ask yourself, “Must I have the money?”

The moment you ask yourself a powerful question, a powerful answer will always come. But when you ask yourself a weak question like, “I am bored. Should I go and socialise?” The answer will be “Yes”. What question do you want to ask yourself? People who are in debt don’t need to be educated about it first, they need to learn through the pain.

They need to be harassed by those loan officers. That pain is what will make them change. If you cannot teach yourself deliberately by asking powerful questions so that you can get a powerful answer, then the outside world will teach you through the pain.

People usually get carried away because of indiscipline, and usually there is no cure for indiscipline other than making a deliberate decision to make a change.

4. Guilt yourself by writing things down

Budgeting is a good tool of money management, but it is not the beginning. It is preceded by a certain discipline of making note of your expenditure. That means that you do not just spend. You have to write it down. If you have that habit of writing, when you buy things and record them down you will ask, “Was this necessary?

I bought a bar of chocolate for Sh175, that would have been enough for fruits for two days.” By recording you are able to allow things you have bought to scream back to you and ask you if it was necessary. That is where financial discipline starts.

When you write down and see all the things that were not necessary and feel guilty about it, you will not repeat it.

Your next shopping will be better, and you will find yourself buying what is necessary and you feel good. When you feel good, you are associating cutting down expenses with pleasure, as opposed to the opposite.

5. Preserve through insurance

Investment-based insurance and education policies are good. Talk to an insurance company and say, “I am able to preserve at least Sh1,000 every month. What package can I get?” Don’t worry about the returns because it is not about that.

Your game plan is not the income that you are going to get from it, but what you have preserved. It also comes with other benefits. Health insurance is mandatory because it protects you, but there are other types of insurance that have an investment angle.

Insurance companies are now so dynamic that if you call an insurance company and ask them which insurance packages they have that have an investment angle, they will introduce you to many of them.

6. If you encounter trouble, graduate with honours

The best learning is practical. When you experience money mismanagement consequences and pressure, you are lucky to encounter the most effective learning tool. Most people who manage money well attribute it to personal or family-based discipline on respect for money.

Financial literacy fails because of a belief that you know about money. Most only realise they don’t know about money when they get into a financial mess and by then, financial literacy teachers play the role of financial mess undertakers. 

At that time, pain needs to be allowed to do its training, which is more effective than financial literacy classes. When you are in financial challenges, you are in pain class and can only graduate with honours.

7. Avoid booby traps

These are like unnecessary spending in the guise of entertainment which takes a lot of money. There is a lot of pleasure you can sell yourself, but it comes with indiscipline. Try to change in a way you can get entertainment which will not be as expensive.

You can get a book which will give you knowledge, while you get entertained by it. You can buy one which you will read a couple of times but when you go out you can send that Sh2,000 in the blink of an eye. The other trap is the illusion of quick money making.

People are led by illusions and shortcuts. People think making money is easy, so they get money they have preserved and put them in what they think are quick money making schemes, yet they are actually loss-making schemes and traps.  

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