Money Management
November 11, 2024
Some of the common financial goals we set for ourselves include the ability to effortlessly pay bills, have money to invest, cater to housing, health, other necessities, and plan for the future.
However, every so often we're guilty of spending on out-of-the-blue pleasures which can come in the way of our achieving these goals.
There are things we buy from time to time that we may not really need but we justify spending on them with no-so-rational arguments such as ‘I am treating myself’ or ‘I think I can afford to’.
Other financially derailing purchases may actually not be pleasures but plain poor decisions. For example buying something new that you will only use once when you have the option of spending a fraction if you were to hire it.
Everyone is trying to get ahead financially. And there are generally two broad ways of achieving this; make more money, or spend less money and invest.
Today, we focus on spending less money by avoiding unnecessary purchases. To start you off, we have identified 10 purchases that can save you tons of money if you were to stop making them.
Let’s begin.
Eating out has its advantages plus it's exciting. However, the time and money spent shouldn't exceed how often you eat-in. In fact, the frequency of eat-outs should not even come close to the number of times you eat-in.
Instead, create and stick to your grocery list and liven up your dining experiences at home. You are basically throwing away a significant chunk of your income on a completely avoidable expense. Think of how ridiculously overpriced food is if you eat anywhere outside of the kibanda.
At work, consider carrying home-made, cost-saving packed meals to cut costs as opposed to purchasing meals that are conveniently advertised by a plethora of food vendors that keeps growing by the day.
For instance, if you spend Ksh300 for lunch, three days a week and work four weeks a month, you'll have spent Ksh3,600 in a month. That is an incredible Ksh43,200 in a year.
Do you know what Ksh43,200 can buy you? How about a 5 gas 60x90 stainless steel cooker + electric oven to liven up your home cooking experience?
It’s definitely a tidy sum to put aside towards a big expense of your choice, bolstering your retirement savings, feeding your emergency fund stashed in a Money Market Fund or to fund that much-deserved vacation with your partner.
Read Also: Where Do I Keep My Savings? Money Market Fund
Whether you read novels, short stories or creative nonfiction works for entertainment, business books to boost your entrepreneurship skills such as our recommended 6-month MBA book list, getting your school going children an assortment of books or you are in college and must read books, you will know that books can cost a small fortune.
That is when you are buying them in hard copy. You will be amazed by just how money you can save if you were to opt for alternative book formats.
If you switch to e-downloads over printed copies, you enjoy perks such as easy storage, convenience to carry around and ability to share with your loved ones as well as a lower cost of at least 10%.
If you prefer the more tangible and authentic option of a hard copy, you can bypass the often prohibitive cost of purchasing books by becoming a Kenya National Library Services member where you get free access to thousands of books - all for a small membership fee.
CAUTION: While e-books are an excellent way of saving money on books, you should be careful not to purchase pirated books that deny their authors revenue.
You should also consider the initial costs of accessing e-books if you choose this option including the acquisition cost of enabling devices such as the Amazon Kindle which couldn be as much as Ksh23,000.
Retail therapy as a coping mechanism and keeping up with trends is a costly habit.
If you do need to update your closet, say shopping for a formal event, upgrade your work wardrobe and so on - budget first.
However, before you make a purchase, go through your closet and note what you already have.
If you are keen on saving when buying an outfit for a specific reason e.g. to attend a 90s-themed-event, you are better off browsing thrift stores, online second-hand clothing stores and apps first.
Do you remember that Ksh20k suit you bought ahead of a big interview, graduation or when you got that job you really yearned for, that you barely wear? That’s money lying in your closet that you can’t realistically recover!
And that is exactly what unnecessary new clothing does to your money. It robs you of the opportunity to make the most of the money that you have.
The best formula to use when deciding where it is worth spending money on a piece of clothing is the cost-per-use formula. By simply dividing the cost of the item with the number of days it will be used in a year, you get the cost per use. You want to purchase something that will have the lowest possible cost per use.
Learn More>> How Not To Waste Money: Use The Cost Per Use Formula
From razors to deodorants to detergents, you will notice that the plainly branded “gender-neutral” items are significantly cheaper than the same products with dramatic “female-oriented” branding (a.k.a. pink tax).
For example, branded "women's" razors are pricier than "men's" razors, even though they both serve the same function.
Learn More About ‘Pink Tax’ in detail here>> Pink Tax: The Additional Cost of Being a Woman
Owing to affordable internet data packages, wide use of mobile phones and mobile money payments: gambling is now widely popular.
It is easier than ever before to gamble on literally everything from sports to simulated games etc. often, on very low odds - as they say, ‘the house always wins’.
If you compare the number of people who do win to those who don't, you will easily see why this kind of purchase can easily drain your account.
Instead, bet on yourself.
Plan to budget for investments that never lose, like consider setting up a money market fund which is a low-risk investment that always earns interest.
If you must bet, the most responsible way is to have a budget for this and strictly never bet beyond the set amount. And, importantly, do not think of betting as a serious part of your financial growth journey - consider thinking of it as a hobby.
Name-brand items are those that are made by well-known companies such that people consider them to be of superior quality as compared to other less-known brands.
The truth is that this may not necessarily be the case and you would still be okay purchasing a similar product from a less-recognised brand. This is especially true for fast moving consumer goods such as detergents, cooking oils, toiletries, stationeries etc.
The difference between the well-known brand and the lesser-known one could be as simple as the bigger brand having a significantly high marketing budget when the quality of the products is exactly the same.
"Spending money to show people how much money you have is the fastest way to have less money - Morgan Housel"
Buying expensive items to determine your self-worth or to be accepted is a quick trip to being broke.
Budget to spend within your means. Don't spend because you want the "luxury" option for vanity's sake.
You should make a purchase decision based on the value you are getting for your money and not just because a certain brand is ‘considered better’. This is especially when there is potential to save a lot of money.
Any unplanned spending will mess with your finances - whether it be buying pizza on your way home, chips mwitu, a soda, an outfit on sale, or a "large money move" like an impromptu change of residence.
So, make every shilling count.
Before spending, make sure you have a list of the items you need to shop for beforehand. This way, you can ensure that you do not spend extra money on unnecessary items.
On the other hand, avoid spending money on items considered low cost, such as coffees, street food, candy, and canned or bottled beverages. You may not notice it, but in the long run, these end up eating into much of your budget.
In today's digital world, gadgets are part of your home, social and work life. The device you own, the model and the accessories you have or don’t have now define you and your worth.
And therein lies the problem of trying to keep up with the latest gadgets which can become very costly for no rational reason.
While you may need or want the latest phone, laptop, smart watch and so on - your desires don't qualify as a reason to go ahead with an unplanned purchase.
In reality, the smart money move is to research what you need, prioritise according to need and save accordingly.
Chances are by the time you achieve your savings target, you'll have enough available to buy a better version that fits your budget.
The biggest question to ask yourself is ‘Do I really need it?”
For more on this, read>> How To Figure If Something is Worth Spending On
Did you know that the high cost of any bottled or packaged drink (including your cup of coffee), has less to do with the beverage itself and everything to do with the associated manufacturing, transportation, and promotional costs?
So, the next time you want or need a drink, consider restricting non-alcoholic purchases.
Health experts recommend nutritional beverages or succulent a.k.a juicy fruits that are in season (like mangoes, watermelons, grapes, tangerines), and only when it makes sense to buy.
For alcoholic drinks, moderation is crucial and highly recommended, both in consumption and cost.
In addition to this being a way to look out for your health, you can enjoy your "happy hour" without worrying about overspending.
Remember, a budget is only practical if it supports a work-life balance.
Take advantage of menu discounts such as happy hour, buy 1-get 1 free offer (etc.) - for a fun, pocket-friendly time.
Read Also: How to Go Broke in Under a Year
If you're inattentive, you can quickly get yourself into debt.
Do you indiscriminately spend to support a hobby, host parties, buy a round of drinks, dine out, travel, smoke, buy treats for your kids, or opt for online deliveries over pick-up?
These are popular habits; which encourage costly and unbeneficial patterns leading to many falling short of meeting their financial targets.
First things first, be honest about where you spend your money.
Next, you identify how much you spend.
This way, you can identify your spending triggers like emotions, environment (such as colourful promo displays) and peer pressure.
Once you identify the reason you spend impulsively (like anxiety, boredom, greed, not budgeting, ignorance), you may take practical, steady steps toward planned spending.
Making more money can be hard. Making money is generally hard. And you know what? Spending money is easy. So easy that you do not have to think!
If we go back to the argument that to get ahead financially you either have to make more money or save more money to invest, you may see why getting a good hold of your spending is an important part of your financial journey.
And you can start right here with this list. Avoid these unnecessary purchases and save yourself a lot of money that you can then invest and make even more money.
Got some more items that you think are money wasters? Tell us in the comments.
.png){kind=small}
Join 1.5M Kenyans using Money254 to find better loans, savings accounts, and money tips today.
Money 254 is a new platform focused on helping you make more out of the money you have. We've created a simple, fast and secure way to find and compare financial products that best match your needs. All of the information shown is from products available at established financial institutions that our team of experts has tirelessly collected.
