11 life hacks for people going through tough financial situations

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Going through a financial crisis. Image from http://www.todayschristianwoman.com/articles/2010/january/fourprayersforyourfinancialcrisis.html

Over the past couple of months, the Kenyan banking sector has faced a significant amount of backlash in terms of customer confidence. In the past ten months, the country has seen three banks go under receivership by the Central Bank of Kenya. This has led to customers not having access to their accounts and funds. I personally haven’t been affected by the crisis but I can’t even imagine the horror of going to access my bank account only to be told that the financial institution has been closed – indefinitely. It’s especially a nightmare for parents who have mouths to feed, school fees to pay, rent and other bills to pay at the end of the month. The crisis has also affected small businesses with business owners and entrepreneurs not being able to access their accounts to keep their businesses afloat.

Going through a financial crisis. Image from http://www.todayschristianwoman.com/articles/2010/january/fourprayersforyourfinancialcrisis.html
Going through a financial crisis. Image from http://www.todayschristianwoman.com/articles/2010/january/fourprayersforyourfinancialcrisis.html

With this in mind, what are some of the methods or approaches that you can use in order to keep your remaining finances in check?

1. Do a quick audit of your financial situation

Make a list of priorities that need to be catered for first. Some of these should include:

  • Shelter: One of the top priorities is keeping a roof over your head. If you live alone and you feel the rent will be tough to manage, stay with a friend or go back home until the situation is over.
  • Food: You have to eat, and so do your family and children. If you don’t eat, chances are you’ll fall gravely ill and make your situation even more dire than it already is. Stick to simple, wholesome basics and save leftovers which can be re-cooked into meals once more. Just make sure you don’t go hungry.
  • Work essentials: Are you used to driving to and from work every day? Start taking the train or matatu. It may not be as convenient but it is certainly a cheaper method of getting to work.

2. Re-organize your budget

Creating a monthly plan for your spending is one of the smartest things you can do for your finances, yet it’s the most overlooked solution to most people’s financial problems.

Make a list of the non-essential items in your house and be relentless in deciding what will be paid and what will have to go. Identify products or services you no longer need but which you’re still paying for. Are the kids back to school and you don’t watch TV? Reduce the subscriptions if you aren’t going to use them. If you have access to Wi-Fi in the office, cut down on Wi-Fi subscriptions in the house. Don’t have arguments like, “But this is our only form of entertainment/luxury”. Cut down all non-essentials until things improve.

With the current situation, start cutting cut down your purchases by half. You not only get to track your spending but you also develop good money spending habits in the long term.

3. Sell the items you don’t use

Do you have items like clothes, accessories, shoes or electronics that are not being used? Make use of a service like OLX. Make some money off the items you don’t use, which are still in good condition, as you also declutter your home. Some of the things you find might as you declutter might come in very handy in the situation you are in.

4. Check your credit and debit card spending

Debit and credit cards help out a lot. They’re especially important in those times when carrying cash is not only hectic but also not as safe. But they also help many people develop bad money habits. With cash, it’s easier to tell if you can afford to pay for something or not.

Refraining from using your cards (if you have another account with another bank) and use cash to pay for necessary purchases. Using credit cards will only further your financial strain because paying it off might be strenuous at the end of the day.

5. Be aware of your spending habits

How much do you spend on things you want? Is that amount larger than the things you need? Where does it all go?
Track your spending for at least 2 weeks. Make a point of deliberately and honestly noting down where you’re spending your money. Look out for expenses e.g. the amount you use when going out; how much do you use for drinks? This gives you a very clear indication of how and where you money goes to.

After you’ve made the list, cut down on your spending. Do you go for road trips every weekend? Cut the traveling short. Are you always buying rounds of drinks for your friends every time you go out? For the next few months, try and spend your time indoors.

6. Create a plan to pay off your debt

We’ve all encountered some form of debt in our lives. It doesn’t have to be millions, even that packet of milk you didn’t pay off can be termed as debt – well, very little debt – but debts, no matter how small, are a big deal.

If you leave debt to slowly accumulate over a period of time, you need to find a way to get out of it as quickly as you can. I’ve heard of cases where people even sell their parents’ pieces of land just to clear up their debt and that isn’t even a realistic debt solution. Find solutions that work for your lifestyle, not a quick fix that comes back to haunt your account.

If paying off debt is not possible, try to make minimum payments with the money you currently have.

7. Get help

If you need help dealing with your finances, don’t be afraid to ask. Most people in Kenya are not educated on financial matters, leaving them with no options when they lose money or cant access their money.

Seek financial help in matters like selling shares. Get to find the right way and time to take advantage of the extra cash that some of your investments can bring at this time.

8. Savings

After going through your budget and settling your expenses, always make sure you put some money aside for emergencies.  It might look like a struggle especially for spendthrifts at this time when finances are sensitive but it comes in handy in tough financial situations. The money you save can be used in emergencies like a medical crisis.

9. Cut down that weight!

No, I don’t mean your body weight but your financial weight. Look for ways to decrease spending utilities. Collect rain water, turn the lights and electronic devices off if they are not in use. Wash the compound with rain water instead of clean tap water. Water your plants with rain water as well.

Many people simply let their bundled services renew from month to month, even when their needs have changed. Once you identify what you need and don’t need, your bill becomes a bit easier to bear.

10. Educate yourself on finances

Make a conscious decision to know about the financial market and the different ways you can invest. Some people are lucky to have studied financial management in school and others were lucky enough to have parents who could teach them about finance and financial management skills at an early age but that doesn’t mean you can’t learn.

Have the desire to know more. Follow business news, not just local, but internationally as well. A little knowledge can go a long way and it never hurts to know more.

11. Lean on your family and friends

During this difficult time it might be hard to know whether your next meal will come from or how you will pay the landlord. It is even more difficult when you have kids at home and they have so many demands. This would be a good time to take them to your parents for a few days as you try to figure out what to do and this would reduce the financial burden for a few days. Also if you have friends or family with kids who might be willing to take the kids for a few days this would be a good time to ask for a favour.

Also make a point of sitting down with your kids and talking to them about going on. Tell them that things will have to change and they may have to give up some things that they love like trips to the mall or movies.

If you have a great relationship you might also be able to ask for soft loan to tide you over. Make sure it is not somebody who would lord it over you that they lent you more and further stress you.

Got other tips. Please share them with us.

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