Kenya is going through turbulent economic times with high inflation rates eroding purchasing power, high unemployment rates, and heavy debts burdened on the shoulders of the common ‘mwananchi’. When economic tides shift, wise financial management is the boat that will get you to shore safe and dry. Use these tips to manage your finances wisely and weather the storm.
1. Assess Your Financial Situation.
Assessing your financial situation gives you a clear picture of your financial standing and the actions you need to take. To get a picture of your financial situation, you need to evaluate your income sources, expenses, savings, and debts. Mapping out your cash flow helps identify expenses you can cut back on or opportunities to increase your savings. Use budgeting tools or apps to track your income and expenses, making it easier to stay on top of your finances.
2. Prioritize Essential Expenses.
The rising cost of living in Kenya demands that the average citizen prioritize their expenses on necessities like food, housing, and education to avoid running short of them. Prioritizing your expenses is simply another way of spelling out budgeting. When creating this budget, you need to categorize your monthly expenses into essential and non-essential expenses. After creating a budget, make lifestyle changes to adjust to your new monthly expenditure.
An emergency fund is a financial contingency plan in the event that you need to cover unexpected expenses like medical emergencies, car repairs, or job loss. Given the current economic conditions in Kenya, having one or more emergency funds would be a wise decision. Don't feel discouraged to open an emergency fund if you do not have the whole amount you want to deposit in the account. You can gradually save money using services like Ndovu’s goal-based saving until you reach your goal.
4. Diversify Your Income Sources.
A rule of thumb you should always practice to manage your money is diversification. In any financial situation you find yourself in, there will always be risks, and diversification is the best way to mitigate them. Depending on one source of income in a volatile economy leaves you vulnerable to destabilizing unexpected events. You can diversify your income by seeking out freelance gigs, starting a business, or investing in a range of financial assets.
5. Manage Debt Wisely.
High debt levels are made worse by rising interest rates in the economy. At this time, it is crucial to manage your debt by paying off high-interest debts first because they can quickly compound. During this time, avoid taking on more debt unless it is an absolute necessity.
6. Invest in Inflation-Proof Assets.
As you invest money and save money, remember to hedge against inflation to avoid losing your purchasing power. You can protect your money by investing in inflation-hedging assets like real estate, treasury bonds, stocks, and commodities that tend to retain their value through inflation periods. Remember to do your due diligence and consult professionals before making investments. Ndovu offers in-person meetings where you can book and get expert advice for your financial goals.
7. Stay Informed and Adapt.
Stay up to beat with the trends and developments in the Kenyan and global economy to guide your investment and saving decisions. Follow news updates, financial reports, and expert analyses to understand how economic trends may impact your finances. Knowing the potential risks and opportunities will allow you to make informed decisions and adapt your financial strategy.
Every economy goes through rough patches that bring uncertainty and hysteria to unprepared people. All you need to do is assess your current financial standing, cut back on spending, save and invest more, and clear all your debts. The key to financial success is making mindful and informed decisions that align with your long-term goals.
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