- If it’s car insurance, divide it by 12 months then make a commitment to set aside that amount every month.
- Budgets are one of those good habits we’re aware of, we really want to get done but which we never seem to get around to doing.
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One of the simplicities about money is what you can do with it: you’re either spending it, saving it or investing it. Period. The cracks of these three is where the good habits about money are.
These habits can be taught, refined and mastered over the years – you can always getter at managing your money. Always. There’s no one out there who’s not hungry to pick up yet another good habit on managing their money.
I’ve mastered a few over the years. I share with you five of them:
#1. Make provisions
Making a provision is an accounting term. It even has an entire accounting standard that talks about it. (I’m a certified accountant with ACCA, that’s how I know about it.)
It simply means setting money aside in advance, for an expense you know with some certainty, will come to pass. Like, car or health insurance, NHIF, your child’s school fees.
My daughter started school a few weeks ago (whoop, whoop) so school fees is the readiest example for a provision: because we knew she’d be going to kindergarten in January 2019, GB and I set up a separate school fees account in October, and agreed to be sending to it a small respective amount every month.
This money was to cover school fees, uniform, clubs, bus and school lunch.
So when life sweeps across your financial terrain, the money for necessities such as this has safely been stashed away. Now we’re beginning to save for term two, Inshallah.
Pick up this habit. If it’s car insurance, divide it by 12 months then make a commitment to set aside that amount every month. Even better if you send it to an account you can’t access.
You could also set up a direct debit or standing order to have that cash deducted at source. Even your payroll accountant can help you manage your provisions.
#2. Never put money in your hands until you’ve budgeted for it
Budgets, oh budgets. Budgets are one of those good habits we’re aware of, we really want to get done but which we never seem to get around to doing. It’s like taking our dietary supplements, our omega 3’s and multivitamins. Or going in for an annual pap smear or prostate exam. Or keeping time.
I don’t know what else to say apart from this: never – like, don’t ever – put money in your hands until you’ve budgeted for it. Be it salary, wages, side-hustle income, investment income, old debts repaid, new debts to be repaid, money you’ve borrowed...
You’d rather let it sit where it is until you’ve come up with a plan on what you’ll do with it.
They always say that you must pay yourself first – i.e. save – before you begin to expense your income. Here’s the thing though, you don’t have to follow this suggestion with every shilling that comes your way – have a different budget for each stream of income. It simplifies how you manage your money and also managing the expectations you have of yourself, and of your money.
For example, budget to spend your salary, budget to save money you’ve lent out, and budget to invest side-hustle income.
#3. Use your investments returns to invest further
As a freelance writer, I’m paid only for what’s published. I’m not on a salary but I receive some constant figure every month. It’s a precarious way to live but it’s taught me to be smarter, sharper and more diligent.
Sometimes it frightens me... but... more on that another day.
I’ve structured my income such that I spend my entire ‘salary’, and save and invest my side-hustle and investment income.