Thread by @Centonomy

1/ Staying Ahead Of Your Money

Planning your money is not a choice. I have worked in a money related industry all my life but planning for a large part of it was never a priority. The pressure to think ahead was just not there.

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2/ You earn, you spend and the next pay day comes around. There is this illusion of continuity and then something happens. This is what wakes up many of us. For me, I went into business blind and discovered what it meant to not have that consistent salary.

3/ The meals in the restaurant I ate without a care in the world, was now something I could not do. When I did, it had to be really thought through.
Other people lose their jobs and they suddenly have to itemize their financial resources until plan B comes along.

4/ It could be retirement which pushes them into consultancy or a business. They could get a child and start weighing the cost of diapers. It could also be a big career shift that makes you realize that the car you wanted to buy might not be important.

5/ You now have to think about your life very differently. Whatever the incident, getting out of your comfort zone gives you a push to get your act together.
Staying ahead of your money is trying to limit how much catches you unaware.

6/ The value of experience helps you learn from it and you can anticipate certain situations e.g. possibility of no income. Here are other simple argument for being ahead even without change.
Let’s use sustaining yourself.

7/ It could be rent or mortgage, food, transport, school fess, entertainment, house bills etc. Let’s say all this currently costs you Kshs 100, 000 per month. Assume everything goes up by ten percent every year.

8/ In ten years you will need just over Kshs 250, 000 per year for the exact same lifestyle.

9/ This does not take into account costs that will rise more than ten percent per year like we have witnessed with fuel this year or other lifestyle changes e.g. another child, more expensive habits etc. If we were to take that into account this could easily double.

10/ This is why many people are not ready for retirement.
Let’s say you have a child who is ten years old today. The college you want them to go to costs Kshs 500, 000 a year today. In ten years it will cost Kshs 1.3 million for just one year.

11/ You can now do the math for the entire 4 years.  Plug in your own numbers. You may want your child to go to Harvard. Your lifestyle may be at Kshs 300, 000. You can estimate with the same multiples. These kind of numbers need a plan.  It needs you to think ahead.

12/ There is no deal coming around that will suddenly cater for all your costs.
So how do you make this all work? Start with what you have and build on it.

13/ Today, you may not look like you have anything under control in your bank account but if your mind is thinking forward the money will catch up eventually. Just start and don’t procrastinate because you cannot figure it all out. Put some goals in place.

14/ This could be as simple as saying that you will have a school fees fund of Ksh 500, 000 by the end of next year. Many of us buy shares, plots, land, have money in SACCO’s etc. Without any intention in place. Because we have investments we may think that all is well.

15/ But if you have not identified the actual purpose you may have underestimated what you need.  In our Centonomy classes we get people to break down this particular part so that they truly come to terms with what they need and how to start.

16/ Many of us are aware of what we need today but have no idea of what we will need tomorrow. This causes a mismatch in our actions, planning, investments, habits etc. The financial plan for today should have happened yesterday.

Article by Waceke Nduati