Management of personal finances is a skill that needs to be developed with both knowledge and consistency.
Photo credit: wayhomestudio
You feel depressed and you’re wondering why your mood is low. Then you remember it’s your personal finances that are troubling you. For some reason every month you get it wrong in the money area.
At the beginning of the month, you start well with your salary intact. But somewhere around the middle, you just can’t explain why you have to really cut down on your expenses if you’re going to make it to the end of the month.
Management of personal finances is an art that needs to be developed with both knowledge and consistency. Unfortunately, in many education systems, there is no curriculum that teaches students from a young age how to save and manage their personal finances from a young age.
Hopefully, with this information, you can start your journey towards taking control of your money and living a more fulfilled life. Here are sure-fire signs that reveal that you’re not in control of your finances:
You can’t explain where your money goes
Most of us are guilty of this one. If not all, many of us. Have you ever found yourself broke and wondering, “Where did all the money I had go?” I personally have asked that question more than a hundred thousand times.
You can remember the time you had enough and you were good for the month but two or three weeks in, you’re in distress. It gets so bad that you have to borrow from online apps, family and friends just to survive before the next payout.
The truth is, you don’t track your spending. Personal finances are so sensitive and money is so elusive that you need to keep a close eye on how and where it goes. A famous finance expert was quoted saying that if you don’t treat your money right, it will run away from you.
Luckily, in this day and age, we have technology that helps us ease these processes. There are different apps on the Google Playstore and the Apple Appstore. These are examples of expense tracker apps that you can use:
Every Dollar App
You Need A Budget (YNAB)
With this strategy, you’ll start bringing some semblance of order to your finances. These days thanks to technology, online buying has been made fast, quick and easy. Consequently, people are spending too much without their knowledge. Not knowing that even online payments attract transaction fees.
Track every single coin you spend. Study your bank statements and M-Pesa statements meticulously at the end of the month and account for all the monies that you spent. This way you’ll know what to cut back on and the financial loopholes that you need to seal.
You have little control over your personal finances if you live from paycheck to paycheck
If your salary/income lasts you only to the next payout and can’t sustain you for at least another month or two, you’re not in control of your personal finances. I’ve been a victim of what I call money fever.
This is when you just get paid and you feel “rich and generous”. Money fever is that false sense of security that you have enough money in your wallet or on your phone therefore you don’t mind buying things that appeal to your eyes.
For example, if you pass by a pizza restaurant and the tantalizing aroma hits your nostrils you immediately enter. You order a large pizza which is quite pricey but you’re not conscious of the financial implications. Later when you leave the restaurant and you’re strolling through the streets you see a nice shoe on display in an expensive shoe shop. Without thinking, you walk into that store and you leave with the shoe. All this is inspired by the security that you have a good balance in the account.
In essence, money fever gives birth to impulse buying. That is how you find yourself living from paycheck to paycheck with no savings or an emergency fund.
Diahann Lassus, a chief investment officer, told CNBC, “The best way to increase your savings is to decrease your spending,” Lassus says.
Decrease your spending and implement the 24-hour pause rule.
“This “24-hour pause rule” is one psychological way that financial therapist Amanda Clayman suggests to slow down the buying process and, ultimately, spend less,” according to CNBC.
In other words, you should start practicing delayed gratification. If you honestly know that you don’t need it, leave it.
If an emergency were to happen you’d be in real trouble
What if thieves broke into your house and wiped your house clean of all its contents? What if you or a family member falls sick suddenly and you’re not insured? There are dozens of other emergency scenarios that I can cite.
If you know that an emergency would send you into debt and sink you into deeper financial distress, start paying attention. Many financial experts around the world concur that you need to set up an emergency fund that you don’t touch.
An ideal emergency fund should total the amount of 4-6 months’ worth of monthly expenses. If your monthly spending is Ksh 20,000, your emergency fund should be Ksh 80,000-120,000. Lock and secure your emergency fund and only use it when you have an actual emergency. That way you won’t have to go back to your pocket, spending money you hadn’t planned for.
You have a hard time saying no
We all have friends and family who make us spend money. There are always contributions to someone’s wedding committee, friends that want you to go out every weekend, and sometimes you have to pay for the whole pack, etc.
You’re not in control of your money if you always agree albeit halfheartedly. Look for material and books that will help you develop assertiveness such as “The power of saying No” by Simon Wright. You will disappoint your friends and probably lose some. Ultimately, you want people in your circle that will add value to your life and not just take.
Remember, when facing bills, creditors, and landlords, you’ll do so on your own.
There are individuals who are always in debt and they start becoming dodgy because the majority of the calls they’re getting are from creditors. If you’re constantly in debt because you borrow money regularly to fill up a deficit, you need to regain control. There is a crisis that has been fueled by online money lenders. Many people are borrowing from these fast cash apps. However, repaying the debts has been a challenge.
The first thing you need to do is to cut down on borrowing. Tame your debt thirst. Secondly, when you get paid, dedicate a significant amount of your income to settling debts. Thirdly, if you have to borrow, it must be absolutely necessary. Moreover, you must have an intricate plan for paying it back. Lastly, don’t borrow for personal use. Borrow to start a business, to pay for a certain course, etc. Let the debt bring long-term economic value to your life.
You don’t budget for your personal finances
At the beginning of the month or when you receive your income, you need to have a budget and a plan. According to radio show host and famous financial advisor Dave Ramsey, budgeting is telling your money what to do.
If you don’t have a plan of how you will settle your financial obligations, your financial life will just be marred in chaos. Get on a financial plan, write your monthly expenses, and save at least 30-40% of your income. Then you can designate an affordable amount for entertainment and things you’d want.
For example, if you want to buy a car or furnish your house, you can budget for it by setting aside x amount every month until you get the full amount you need.
That way you’ll avoid financial distress and depression.
Conclusion about personal finances
In developed nations, there are career paths such as financial therapists who help people regain control of their personal finances through psychological diagnosis and treatment. The way you spend money to a large extent has a lot of psychology that goes into it.
However, regaining control of your finances is a mindset and a paradigm shift that you need to adopt. You need to retrain your brain to think like a saver and not a spender. The more you acquire knowledge about the management of personal finances you’ll be conscious when buying things as a reflex because your brain is getting tuned into this new lifestyle.
It takes time, but with determination and consistency, none will stop you. There are months you’ll do well and be on track. There are times that you’ll stumble and go beyond your budget. Don’t give up. Strive to achieve your financial goals. Regain control of your personal finances today.