Have you found yourself constantly broke before the end of the month? If this is a situation you are familiar with, you could be headed for a financial ruin. It is never too late though to get out of this hole. Wahome Ngari, CEO of Personal Finance Academy, speaks to JACQUELINE MAHUGU on how you can do this.

1.       Be aware of your expenses

Be sure where your money is going. To do this, you need to be cautious and capture your expenses on a daily basis. Awareness helps you to know where you are at all times, and nip overspending in the bud before it becomes a crisis. There are many ways to do this, one being the good old notebooks, but nowadays you can also use modern tools like mobile phone apps, excel worksheets and other computer programmes to help you track your expenses.

2.       Have a budget

You have to have a way of projecting what your requirements are for a given period of time, and you do this through a budget. In it you allocate all your monies for transport, fees, food and you are able to see the bigger picture, what you can cut down and where you can save. Once you have made the budget, ensure that you stick to it. You can use budgeting apps to help you with this.

3.       Have personal financial goals. You should write down your short-term, intermediate and long-term financial goals, as this gives you a map of how to create your budget in the first place, based on where you want to end up financially. Short-term goals are those you want to achieve in a time frame of up to one year, intermediate goals are those to be achieved in two to five years while long-term goals are those to be achieved in over five years. This helps you know how much you need to save each month in order to achieve each goal, which grounds you in terms of spending.

4.       Build a safety net Have an emergency fund.

This will ensure that you do not have budget interruptions, because you will not be blind-sided by unforeseen expenses or an unforeseen reduction in income. A good safety net would be enough money to cover your current expenses for at least three months, but ideally, it should be six months. People with such contingency plans are not usually affected by sudden rises in costs, such as what recently happened with the fuel prices.

5.       Augment your income Look into ways to make more money.

If you are living paycheck to paycheck it means your current income is not covering all your expenses, which may be fixed by simply having more money. You can increase your income through utilising your talents on the side, using your specialised knowledge for ventures like consultancy or taking on other jobs in your extra time.

6.       Have the right mindset

You need to have a mind of acceptance, meaning you readily admit that there is a problem with your current financial status that needs to be fixed. You also have to have a positive mindset, that it is a solvable problem. Failure to do this means failure to take control of your personal finances. Do not take it as your employer’s responsibility to pay you. It is up to you to do what it takes to improve your financial situation. Also, practice self-control, to prevent non-mindful financial practices such as impulse buying.

7.       Cut your expenses

Having been aware of what they are and made a budget, you may find that you are living in a more expensive house than you need to, taking your children to a more expensive school than you can afford and entertaining friends beyond your means. You should down-size all these and sometimes it means examining your choice of friends, because some may be the type who dip their hands into your pocket all the time instead of helping you move towards financial freedom. It might mean waking up very early to avoid staying in traffic or paying higher fares during high-traffic hours, or moving closer to your place of work.

8.       Reduce loans

If you are crippled by debt, get into a loan-recovery plan. This requires quite some effort. Take cognisance of the number of loans that you have and their terms and conditions of repayment. Once you have identified this, check if it is possible to do debt-consolidation and take one loan to pay off all the others, so that you have only one loan to pay. You can also do debt-restructuring, where you go to all the people you owe and ask them to give you more time to pay. If you have expensive credit, you can take a cheaper one to pay off the expensive one.

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