This archive report was first published on 21 August 2021.
Published on August 21, 2021, a famous quote by PT Barnum, the late American businessman, serves as a sound piece of advice about personal finance: 'Money is good for nothing unless you know the value of it by experience.'
However, for many people, the lesson comes too late when all their money is gone. A Twitter user recently posted, 'I feel like someone stole my salary this month. Like, where did it go already?' This sentiment echoes the feelings of many Kenyans who, after settling their monthly bills, are left wondering where the rest of their pay went.
Financial literacy trainer Elizabeth Nkukuu attributes the problem to a lack of budgeting. 'Being Africans, most of the money will go to contributions, which is not in your budget. What someone needs to do is at the beginning of the month, or before one gets paid, you have to document everything and even provide for miscellaneous because I feel that is where most of the cash goes,' she says.
Nkukuu also points out that impulse buying explains the 'mystical hole.' 'Especially for us ladies, when you pass somewhere and you see a nice shoe, you will buy and you later ask yourself 'what did I just do?'' she says.
She advises having a pot of, say five per cent, which will cater for such miscellaneous expenses, and sticking to it. Nkukuu explains that miscellaneous expenses are unforeseen and a part of one's life, such as contributing to a friend's wedding or funeral, or chipping in for a comrade's entertainment.
ICEA Lion Manager Patricia Kihara suggests recording every single cent spent, including small tokens and tips, to know where the money goes. She also advises accounting for coins lying around in the house. 'Documenting every single expense will help you know where your money goes,' Kihara says.
Kihara lists mobile transactions as one of the expenses that could be creating a hole in finances. While mobile transactions are convenient, she says, in some instances, they can be avoided. 'An example is sending money to your sister who lives with you through M-Pesa,' she explains.
She advises withdrawing money as per the budget to transact with cash, avoiding unnecessary transaction costs that come with ATM charges and mobile money. 'Convenience is good, but do you know how much you pay for it?' Kihara poses.
She calculates that Sh50 by 30 days is Sh1,500, and when multiplied by 12 months, it comes to Sh18,000. 'That is money you could put in a Sacco and possibly end up borrowing three times the savings, which is Sh54,000. Can't this be a down payment for a piece of land?' Kihara asks.
She also calculates that Sh150 for lunch by the end of the week is Sh1,050, and when multiplied by 52 weeks for the whole year, it comes to Sh54,600. 'But if someone told you that you spend almost Sh50,000 for lunch a year, would you believe them?' Kihara poses.
She concludes that being disciplined is not being a miser. 'If you send someone to buy you something and they don't give you the balance, you should raise the issue because you are teaching them to be honest,' she says.
