My first job was as a marketing agent. I wasn't making much money, but earning even the most negligible amounts after high school can make you feel like a millionaire. Anyway, by the time I went to college, I'd spent every penny. And the little cash that was left over went toward my school fees and upkeep for the first few weeks in Nairobi.
How to Save Money: 3 Easy Steps
Right now, I always look back and wonder if I'd known better ways to save and invest; maybe I'd have doubled or tripled my income. Better still, if I risked it all on Bitcoin. Wueh, life would be hella sweet, which brings me to my first point:
1. Research
It never hurts to go on the Internet and research all the investment options you can find. You can also ask around your parents, colleagues, and friends. Ask them what investment products they use. Information is gold, and you never have to act on it. Once you hear about an exciting venture, read more about it. Or call the company line. Or, better still, visit the branch offering the product within your area.
I recommend collecting all the information, reading more about it online, and calling the products with a company line. Then, visit the leading company, even if you have to make the trip to Nairobi. It's usually better to see the actual business location, where you'll meet a customer care agent who can explain everything you need. You can also ask them questions and get the answers on the spot.
I find physical visits the best way to get accurate information that applies to you directly. Sometimes, websites or word of mouth will generalise things. And when you're dealing with money, you want to find the most accurate information you can act on.
Remember, this is not the time to invest. You're gathering information to know which ones sound better for you.
2. Calculate your net pay.
Just Ivy Africa, a social media influencer, did a thread recently posting the payslips of her followers. Of course, there's a chance some were edited, but it was a perfect way to compare and contrast how much different people from different professions earn. Some companies must tell you you can sign up for certain services. That if you don't ask, then it's your loss. The payslips show how much people pay for tax, NHIF, NSSF, insurance, investments, loans, etc. Some of the payslips I saw had cut some pretty good deals for themselves.
But besides the monthly deductions, you must pay attention to your net pay. This is the money that you get to keep. Now, that's where you need to devise a plan for making your investments and still use them to sustain yourself.
3. Follow the 50-30-20 Rule.
One of the most popular methods proven to work well is the 50-30-20 rule. It means dedicating 50% of your net pay toward upkeep, 30% of your net income toward savings, and 20% of your net gain toward miscellaneous costs. Let's circle back.
Budgeting Basics
The 50-30-20 rule is the easiest and perfect way to ensure you make the most of your income. Set up your account so 50% of your net income goes into paying for your necessities. These essentials usually include rent, food, water, transport, and utility bills.
If the 50% doesn’t cover all your needs, the rent takes up much of your upkeep money. It means that you’re living beyond your means. Move to a cheaper apartment.
If you're paying a mortgage, that's a different story. But if you still need to buy a mortgage, consider the 50% rule first. The other bills can be controlled. If, for example, you're using too much on electricity or food, then find ways to cut costs so everything fits into the 50%.
Then, set aside 30% of your net income for your wants. Ideally, these are expenses that enhance your lifestyle. Usually, it can be things like wifi, vacations, clothes, “sherehe”, and so on. If the “math isn’t mathing,” consider cutting down items you don’t necessarily need. Perhaps you can go without some new clothes for a while. Or, you need to cut down on vacations. It can be a pain to change your lifestyle but trust me; it pays in the long run.
The remaining 20% goes directly into your savings. I find that if you can’t access the savings money, it's easier to stop yourself from spending it. It’s also the money you use to pay into your retirement plan and pay off your debts.
More Tips for Budgeting
How to Grow Money: 6 Simple Ways
1. Savings Account
At the most basic level, you can open a savings account and deposit 50% (or other) of your net pay directly into the account. Savings accounts from banks, Saccos, or others usually have annual interest rates ranging from 6% to 9%, tax included.
However, consider aspects like inflation. Sometimes, interest money barely covers how much you lose to inflation when your savings are in an account. Still, it's the method with the least or no risk.
2. Low-Risk Investment Funds
If you want to gain a higher interest, consider low-risk investment funds. These include:
By all means, do confirm the nitty-gritty of each of these options before investing. For instance, you’ll find that you cannot withdraw money invested in some options for a certain period. Or, that some products offer fake money market funds that may make a run for it with your funds. Always make sure to confirm whether MMFs have reputable insurance covers so you can recover your funds. Also, perform thorough checks on the terms and conditions of each product before investing.
3. Medium-risk investment funds
They're similar to low-risk investment funds, except they have a higher risk of losing them. With higher risk, though, comes higher chances of earning more. So, consider whether this is the right option for you. Some of the medium-risk investment funds include:
4. High-risk investment funds
These have the highest risk of losing funds, meaning they have the highest chances of earning the most. They include:
5. Assets
Buying assets is the most popular way of investing. Consider buying assets like land, cars, houses, etc. Consider, though, the asset's value over time before buying. Assets like cars tend to lose their worth over time. In contrast, land may increase in value. Assets like houses are a little tricky. You can rent them out and hence earn passive income. But you'll need to consider the costs of maintenance.
6. Starting a business
You may have an idea that you can turn into a business. Starting a business is also another popular way of investing. But it also comes with much effort to sustain the company, market it, and employ it if need be. A lot of factors go into running a business. But don't let that deter you from following your dream.
7. Diversify your income
Most people work one job throughout. But the reality is one job won’t make you rich unless you’re getting paid luge lump sums. You may be surprised that most people have more than one income. Your main job takes priority. But you also find ways to earn from other sources like part-time jobs, hobbies, Airbnb, etc. Still, on that front, it’s good also to diversify your investment portfolio. As the saying goes, never put all your eggs in one basket.
Regardless of how much you earn, you can save and grow your money with financial discipline if you adopt wise financial decisions and follow them through.
That’s it for now. Do you have other essential tips for saving and growing money over time? Share with us! And meanwhile, check out our “The Truth About Money Market: What Are They, How Do They Work, and Are They Safe?” article. Always here to help!