Many sectors of the economy literally came to a standstill. With the hard times, Kenya’s working class has had to adapt to either reduced income or no income as companies let go of staff to stay afloat.
As the years come to an end, there are some financial decisions one can make to bounce back from the financial and economic rollercoaster that 2020 has been.
Dennis Walubengo, a business development manager at Fanaka Real Estate and a personal finance expert told kenyagist.com that the first place to start is to reevaluate personal financial investments and draw lessons from the pandemic.
Saving, Budget, Spending
Walubengo says that while there may be certain things that are out of your control when it comes to financial and investment decisions, you will need to make sure that you do everything you can to keep your finances on track and this can be achieved by developing a budget for your monthly income and tracking your expenditure.
The finance expert advocates for the 50/30/20 rule when budgeting for your finances where you allocate 50 percent of your income goes to essentials and necessities, 30 percent of your income goes to lifestyle choices and 20 percent of your income goes to your savings.
He added that adjusting and re-looking at the expenses will be critical if people are to bounce back in 2021. A study published in December by a real estate company revealed that a majority of Kenyans will move to a cheaper house in 2021.
Other ways to cut costs include finding cheaper or free ways to have fun, splitting entertainment costs or cutting out unnecessary TV subscriptions. One can also decide to cook instead of ordering online more often than necessary.
â€œYou will be surprised at how much you can save by budgeting and reducing spending and this amount could go to an emergency fund kitty for rainy days,â€ Walubengo notes.
He said saving money doesnâ€™t automatically mean buying lower end products, therefore you should shop for value so as to benefit from the value youâ€™ll get from them over time”
“Itâ€™ll save you money as opposed to buying less value and having to spend and replace (goods) in the short term.
Credit and Debt control
â€œControlling credit means you should not loan money you canâ€™t afford to lose,â€ Walubengo insists.
He advises that one should have a limit on how much they can borrow or lend based on on-going expenses and income.
In relation to debt control, Walubengo said that one should avoid taking unnecessary debt but focus more on smart kind of debt which have long term benefits towards essentials and necessities. Such debts should include,but not limited to mortgages, construction loans or capital for a well-thought out business.
Other loans like education loans which have a direct impact on your career or business expansion loans might make sense in the long term, but the ability to repay should be a big factor when considering these loans.
â€œAvoid debt by following the 50/30/20 and making sure youâ€™re covering your necessities before spending any money on lifestyle purchases or non-necessities,â€ Walubengo said.
Savings and wealth
It’s only the lucky few that have used the word 2020 and acquiring wealth in the same sentence but Walubengo advises that the first steps of recovering in 2021 is to know where and when your hard-earned cash should go in 2021.
While saving is one way of securing the future, it rarely leads to wealth creation unless the savings are put to productive use.
“It doesnâ€™t necessarily mean that you should turn into a miser, but you should take adequate steps towards protecting and growing the money that you earn by making smart decisions now,” said Walubengo.
“Remember, nobody has ever accumulated wealth by being liberal with their money.”
Invest in your Health
Making health a priority is health is the foundation of everything in life and a healthy body enhances creativity, energy levels and grit.
Invest in your personal health and well being as the first investment when your start the year 2021. If you have a private medical insurance cover, renew it in time and if not, register or apply for a medical cover.
â€œFor those in employment, ensure your NHIF payments are up to date to complement the private medical cover. The recent pandemic has really taught us how medication can be costly and it can really take up a big chunk of your savings if you are insured.
â€œAdopt a healthy lifestyle, staying healthy is a very underestimated way to save money as the cost of being unhealthy is staggeringly high, especially health complications arising from lifestyle diseases which end up taking up a portion of your income,” noted Walubengo.
Invest in your Career
Never think that itâ€™s impossible to switch careers despite your core training and years of experience in a particular field or industry.
Walubengo advises people to explore other career fields by researching and networking.
“You can always transition into other fields gradually and it is critically important to continue to learn skills which are marketable and keep an eye on opportunities that interest you which will help you diversify your income streams. It is therefore of paramount to invest in learning through the acquisition of knowledge either through physical or online programs.”
As seen through the layoffs during the Covid-19 pandemic period, enhancing oneâ€™s educational level or learning a new skill might just end up being the ultimate competitive advantage during such periods for both the employed and self-employed.