How to make an effective personal budget during Covid-19

A small amount of money can go a long way if you spend it wisely. In times of uncertainty like we’re living in at the moment, it’s important to make a plan on how you can stretch out your income to meet your immediate and future needs. Here are a few tips that I used to help me get started on my personal budget.

Determine the objective of your personal budgeting.

The cardinal goal of personal budgeting is to help you control your spending. Before I started my monthly personal budgeting, I would not have been able to tell you how and where I spent each and every coin that was in my account; which brings me to my second point.

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Take advantage of Technology.

Technology has made it possible to automate a lot of financial tasks wherever you are. Take Mpesa for example; it’s one of the most preferred ways when making payments and or getting paid. The low transaction charges have helped me save on money transfer expenses not to mention the convenience it gives you. I would advise that one approaches his/her paymaster e.g. your Human Resource Manager, to automate some of your monthly payments and this can be done through payroll deductions. This would work well for Sacco savings, loan repayment, insurance policy deduction or direct debit from your bank account to your landlord to pay for monthly rent. This limits your interaction with money that is not 'yours' so to speak and creates some level of discipline in managing your income.

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Review your targets against actual expenses on a regular basis.

Small and recurrent utilities are much harder to track and control. Through my personal experience, I have found out that the easiest way to track them is to maintain a list of daily expenses on an excel sheet and track them against the total budget for each item. Huge, one-off expenses such as rent and school fees are easy to review and compare against your budget. However, there’s something that you must never forget to do on a regular basis;

4. Pay yourself first.

The rule of thumb is that at least 10% of your income should go towards your savings. This should be the first payment you make from your budget. I know It sounds difficult and it’s actually harder in practice. Most of the time you will be tempted to spend money relating to savings for expenses. However, if you make it your first charge, you will learn to live within your means as you meet your financial obligations. A good way to ensure that this happens is to automate your savings through a check-off system.

Know your financial motivator.

For me, this is the desire to invest in the securities and specifically in risk-free financial assets mostly floated by the government. The desire to have one more unit i.e. on a monthly basis in quoted shares of various companies is a great motivator for me. So to have a successful personal budget, I have realized that it’s wise to identify one’s motivator, identify that one thing that stimulates you to action. Visualize that state you want to be in and let it motivate you each month or each time you feel like giving up.

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Financial discipline.

Be intentional in all the tips I have outlined above and you’ll start seeing a difference. Do it over and over again. Make your budgets monthly, review your expenses, compare and adjust where possible, save and maintain the momentum. Once you do this over several months, it will become your new normal, your habit. Subconsciously you will even find it difficult to operate without a personal budget.

Get a financial expert.

There are personal finance experts that may be ready to walk with you, to train you and keep you in check until you manage to have a good relationship with your money. I can also offer help from the personal lessons I have learnt along this journey. Do not hesitate to reach out.

Have an effective personal budget!

Timothy Njiru