Money Management
November 11, 2024
The advice to save money and do so consistently is unequivocal. And, often, most of the goals people save up for have been for what they consider major things in their lives.
Things you need like a car, a piece of land, a house, saving for a new baby that is on the way, saving for college fees, and so on.
But where is the fun stuff? The things that bring you joy, rejuvenation. The things for which a value cannot be placed on them. These things need to be saved for too otherwise you either risk not fully experiencing them or go over budget.
You need to live a little. You need to save for abstract things. In fact, these things need an account of their own separate from your current account. Let’s call them feel-good expenses.
Everyone has at least a short bucket list of activities they would want to do or places to visit. Things they do not normally do very often. It could be going on vacation, having a road trip, going skydiving, or just cycling.
“Cycling is my go-to activity whenever life wears me out,” says Brian a resident in Ruaka.
“Going for long bike rides and riding for charity are tiring but really revitalize me.”
You have to consider activities, an item, or a service that brings you joy even when you just think of it.
Of course, your budget is a limiting factor and it will determine what exactly you can afford to do. But for now, think. What would rejuvenate your spirits? What inspires you? What would take your mind off your trying times?
Designating a portion of your income for this kind of spending can help you be more intentional with your spending.
By devoting your money to a specific kind of use, be it a mortgage or luxury thing, you are creating a budget. Budgets help you avoid overspending.
Let’s say, according to your budget, you have a limit to spend Ksh5,000 each month on eat-outs with friends, and you have already spent Kshs 4,500 for the last three weekends. For this week’s eat-out you would rather just do breakfast and or a coffee date because lunch might blow over your budget by over Ksh1000.
Ideally, this plan should hedge any guilt about spending some money on yourself. Because it is put aside for that reason.
One possible way to help you arrive at a figure for which to spend is to use the 50:30:20 budgeting rule to your regular monthly income
This budget method works to split your income into 3 segments:
If you take on this budgeting method then your feel-good account should get funding from your “wants” section.
But if budgeting is not your thing there is another way around it. You can start by taking your net monthly income, then deduct all of the expenses that you consider essential, which include rent, food supplies, transportation costs, utility bills, school fees, other expenses that facilitate your ability to work, and finally your minimum loan payments if you have any.
Afterward, deduct contributions to your more essential saving goals like an emergency fund, or payments to your retirement accounts.
What you would be left with is your discretionary money. You can choose how much of that money to contribute to your feel-good fund. Whatever amount, just as long as you are saving it.
If you could organize to have these contributions made automatically, then that would be ideal. Otherwise, you may have to constantly transfer funds manually from your current account to your savings account. You could check with your bank to see if you can automate this transaction.
Keeping this money in your current account can be a bit risky. You might keep on dipping into it in case you need surplus funds. That is why it is recommended to put it in a savings account.
Where you put it varies for various reasons:
Some accounts used for savings have a very limited number of permitted withdrawals and you get levied after the maximum number of withdrawals has been exceeded. Some do not have a limit. They give infinite access to your funds as long as funds are there.
If you intend to make many withdrawals from your account for a daily expense then you can go for a current account. Choosing to open this account in the institution you are already banking with or a different one is entirely up to you. But it could be best to put the savings in a vehicle that will not easily tempt you to dip into it.
If your goal is to save money for a feel-good experience that is say two years away or more, you can go for an account that offers interest on your savings.
Then it is time for you to enjoy your money. Plan for that vacation, go for that massage, visit Lamu, book a room in a 5-star hotel. Find that thing that will act as a great distraction and go for it.
Don’t forget to frequently visit your plan throughout your saving journey. You might want to change how much to allot to this fund. You may increase contributions after getting more income or you might lessen the contributions after dealing with an emergency expense. Who knows, your preferred activity might change along the way.
What is important is that you pamper yourself every once in a while. You need it for your mental and social wellness.
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