Money Management

Money Management

Ochola has just began working and he is struggling to make his entry level salary last until the end of the month. Having just started working, he believes that he should invest his money in a number of different ventures. At the same time, he also wants to enjoy life. Ochola therefore spends much of his money on parties and buying gifts for himself, his family, and friends. Unfortunately, the consequence of his current lifestyle is that Ochola is struggling to make ends meet. At the end of every month he barely has enough money to cater to transport or any other basics despite having earned more than many of his contemporaries. Moreover, Ochola is now looking to secure debt solutions as he is no longer able to manage the end of the month.
While he has been setting aside money for saving and investments, Ochola finds himself taking money out of this fund when he is broke. He argues that the problem is that he does not earn enough money at the moment and the investments are too small for his dreams. Ochola believes that if he was able to secure a promotion he would be able to manage his money better. The challenges that he faces are the reason that he is unable to secure greater income and returns over the years. Ochola looks at his current situation and is convinced that with a larger income his monthly challenges would be a thing of the past. He is therefore working to secure a pay rise and has already approached his boss with a request for the same.

The truth is the average campus student wants to finish school, get a job, make good money, buy a car, live in a nice side of town, and have the respect of their family and friends.
We all feel the pressure to “make it.” From flashy posts on social media with celebrities and business personalities driving the most expensive cars, eating at the best restaurants. And even with the reality of COVID-19, we still see lots of celebrities that we follow on social media living their best lives, clearly, the reduced incomes or job losses have not been experienced by all.

If you are struggling to pay rent, find food to eat, or can see that your family is just getting by, you might feel that you or your parents are not doing the right thing. What we do not realize is that the people who get rich quickly when young are a really low percentage of society. In 2015, the Business Insider noted that it takes 32 years for the average self-made millionaire to get rich. It took 38 years for 52% and 42 years for 21%. Only a handful, 4%, became wealthy in less than 27 years. Let me break it down:

•  1% became wealthy before the age of 40
•  3% became wealthy between age 40 and 45
•  16% became wealthy between age 46 and 50
•  28% became wealthy between age 51 and 55
•  31% became wealthy between age 56 and 60
•  21% became wealthy after the age of 60

The “get rich quick gospel” is a myth. It takes many years of hard work, sacrifice, failure, and recovery to become wealthy. So, let us talk about a few principles that will help you become wealthy over time. The best time to start learning these lessons is now during this hard season.

Spending Less

Spending less flamboyantly is a major way to ensure greater growth. The Millionaire Next Door is a great book and below is an excerpt from there:
“They are in types of that would be classified as dull-normal – welding contractors, auctioneers, rice farmers, pest controllers, coin and stamp dealers, and paving contractors. However, they live on less than 7% of their wealth and are homeowners, living in the same home for more than twenty years. They stay in areas below their status of wealth and have more than six and one-half times the level of wealth of non-millionaire neighbours.”
These are people who live well below their means. If you were presented a group of people and asked to pick who you think is an average millionaire you would be wrong because the clothes, cars, houses and locations lived in would be different from what you think. The millionaires in The Millionaire Next Door decided to trade acquiring high-status material possessions for wealth.
Saving

Saving is keeping money aside from what you earn today to use in the future. There are three kinds of people:

• Those of us who spend more than we earn
• Those who spend exactly what we earn.
• Those who spend less than they earn.

The good book tells us that the ant, despite not having a commander, overseer, or ruler, stores its provisions in summer and gathers its food at harvest (Proverbs 6:6-8). It also tells us that the house of the wise stores choice food and oil but that they foolish man devours all he has (Proverbs 21:20). The case of Raymond Yator shows how without this type of planning great wealth can go to waste.

Keeping Track

If you can see where your money is going, it can help you manage your expenses more effectively. You can track excessive spending and keep track of items that you need to reduce spending on. Even for those with great wealth, lavish spending without proper planning will burn through a huge fortune, as several billionaires discovered. To help you with this, there are several mobile applications that you can use to keep track of your spending.

Budget

A good budget will help get the most out of your money. It will also help one avoid debts by spending it wrongly or wastefully. Budgeting can help you achieve your financial goals whether those goals are buying a phone, laptop, going to a concert, or saving for a holiday. It can also prevent you stressing over money because it helps you know whether you are managing your money, or your money is managing you.

Income Plan

If you have a plan on what to do with your money, when you get it then you are ready to start working on creating an income plan. We created a COVID-19 Toolkit and have lots of great content to help you. It has three main components:

• Figure out what your talents and skills are
• Learn how to develop them and finally
• Generate income

Working on generating income now would set you apart in a few years, whether you decide to get a job or start a business. Leveraging your skills during this time as Elsa Majimbo has can reap great benefits. The skills you will develop will serve you all your life. Innovation will not only create great opportunities from crisis, it will save you much trouble later in life. You do not have to start saving when you are earning KES 250,000 (2,500 USD) a month, start with KES 1,500 (15 USD). Only then will you be able to start managing your resources effectively.