With the current economy, budgeting is not an option, it is mandatory. Unfortunately, most people get it wrong by assuming that having a list of bills to clear and the money is budgeting.
Budgeting involves allocating money to different baskets and keeping expenditure records.
Financial baskets you should have as an individual include;
This is where you allocate your bills that are fixed. You can allocate bills such as rent money, water bills, and bus fare if you use electricity.
Having investments that will make you money is very crucial because you need to have income from various sources. To make this happen, you have to allocate a percentage of your income even if this may take time before you get the money you need to invest.
You have to allocate at least 10% of your income to your savings which will of course be relative to what you are earning. Someone earning sh.30,000 will save sh.3,000 while the one earning sh.100,000 can save sh.10,000.
4. Debt repayment.
Having debt is somehow bound to happen to everyone. With this, you have to allocate some money to avoid the consequences that come with failure to pay a debt.
Sometimes life just happens, the emergency in hand mostly requires money. Since such things just happen, it’s good to have allocated some money to cater to such needs.
This usually gives you access to your money when you need it. With insurance such as National Health Insurance Fund (NHIF) for health, it is mandatory to have one and it deducts your salary directly.
7. The Sinking Fund.
This is where you allocate money that is bound to be spent at any time of the month or regularly. For example, if you do nails, go to the salon or even you have a car that you need to service, you may opt to have a sinking fund that is going to cater for that.
8. Retirement Fund.
In Kenya, everyone has to have a retirement fund where if you are salaried it gets deducted directly. Even with the government retirement programme, you can opt to also have your own.
9. Miscellaneous requirements.
Having to spend money on funds such as church contributions, weddings and funerals is bound to happen.
This is the least required but if you can afford, its also good to do it on a budget. Luxurious expenses such as taking a trip also require to be done with the money.
BY MARGARET MUGO